Effective market spending creates multiplier effect – Adelusi
By Abimbola Mohammed
Dr. Femi Adelusi, former president of Media Independent Practitioners Association of Nigeria (MIPAN) /CEO of Brandeye Media, has said that the significance of concept of GDP multiplier effect, well-known among economists, cannot be overstated in the marketing communication industry. According to him, “Understanding the GDP multiplier is crucial for businesses and policymakers seeking to stimulate economic growth.”
Additionally, he said companies invest in marketing to drive revenue growth, creating more opportunities for jobs and supporting industries that rely on advertising, such as media, technology, and production. As companies see higher returns from these marketing investments, he noted, they may reinvest in their workforce or in expanding operations, further boosting GDP.
The media guru made this known on his LinkedIn page where he shared that when people spend more, the multiplier effect increases, leading to a greater impact on GDP.
“The GDP multiplier measures how initial spending in an economy leads to a larger overall impact on Gross Domestic Product (GDP). This cascading effect occurs as money flows through the economy, creating additional rounds of income and spending.”
Explaining the formula and factors that influence the multiplier effect, Adelusi said, “The GDP multiplier can be represented by the formula: Multiplier = 1/1- MPC, where MPC is the marginal propensity to consume. The higher the MPC, the higher the multiplier effect.”
Explaining further on how marketing expenditures can contribute to GDP growth through this multiplier effect, he noted, “Effective marketing expenditures can significantly contribute to GDP growth through the multiplier effect. Marketing spend drives economic growth in several key ways. Firstly, marketing boosts demand for goods and services, leading to increased spending. This initial increase in spending then ripples through the economy, as businesses respond to increased demand by hiring more employees, purchasing more materials, or investing in new products.”
He added that marketing also shapes consumer perceptions and confidence. “High levels of consumer confidence lead people to spend more freely, which feeds into the multiplier effect. For example, a successful marketing campaign for a new product can lead to higher sales and increased spending throughout the supply chain.”
In conclusion, Dr. Adelusi noted that marketing spending, when effective, can create a multiplier effect by boosting demand, driving investment, and circulating income through various sectors of the economy. This activity, he averred, amplifies GDP beyond the initial marketing expenditure.
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