Database Marketing ECM/MKT 436 Winter-2013

Prof. Minjae Song

Assignment 1
Team Members: Bhadra Menon Jimish Shah Kurt Johnston

II 1. Descriptive Statistics
Basic Demand Related Statistics Product Share Mean 8.3632 4.3755 4.0720 Price Median 8.4762 4.4194 4.1900 Standard Deviation 0.7600 0.4046 0.4905 Price gap between Tide 128 oz and 64 oz Standard Mean Median Deviation 3.9878 NA 4.0940 NA 0.8706 NA

Tide 128 oz Tide 64 oz Wisk 64 oz

39.46% 35.61% 24.93%

Histogram of price gap between Tide 128 oz and 64 oz across weeks

The observation is that the price gap varies from around 2.4 to 7.0, which means that there is a lot of price cut in the 128 oz or a price hike in the 64 oz. From the standard deviation of the Tide 128 oz in the Descriptive statistics table, it seems that it has more price promotion than the 64 oz. II 2. A. Demand Estimation Tide 128 oz
Variables Entered/Removed Model Variables Entered lnpwisk64, 1 lnptide64, lnptide128
b a

Variables Removed

Method

. Enter

a. Dependent Variable: lnsalesvelocitytide128 b. All requested variables entered. Model Summary Model R R Square Adjusted R Square 1 .516
a

Std. Error of the Estimate

.266

.266

.71662

a. Predictors: (Constant), lnpwisk64, lnptide64, lnptide128 ANOVA Model Regression 1 Residual Total Sum of Squares 2746.012 7570.238 10316.250 df 3 14741 14744
a

Mean Square 915.337 .514

F 1782.373

Sig. .000
b

a. Dependent Variable: lnsalesvelocitytide128 b. Predictors: (Constant), lnpwisk64, lnptide64, lnptide128 Coefficients Model Unstandardized Coefficients
a

Standardized Coefficients

Sig.

B (Constant) 1 lnptide128 lnptide64 3.224 -4.597 .287

Std. Error .167 .064 .061

Beta 19.286 -.516 .033 -72.288 4.668 .000 .000 .000

lnpwisk64

.151

.048

.023

3.126

.002

a. Dependent Variable: lnsalesvelocitytide128

Ln salesvelocitytide128 = 3.224 - 4.597lnptide128 + 0.287lnptide64 + 0.151lnpwisk64 As expected, the increase in its own price produces a decrease in sales. But, the magnitude of the increase is higher. A 1% increase in its own price produces a 4.6% decrease in its sales. In comparison, a 1% increase in the price of tide 64 and wisk 64 increases the sales by 0.3% and 0.15% respectively. Tide 64 oz
Variables Entered/Removed Model Variables Entered lnpwisk64, 1 lnptide64, lnptide128
b a

Variables Removed

Method

. Enter

a. Dependent Variable: lnsalesvelocitytide64 b. All requested variables entered. Model Summary Model R R Square Adjusted R Square 1 .471
a

Std. Error of the Estimate

.222

.222

.77867

a. Predictors: (Constant), lnpwisk64, lnptide64, lnptide128 ANOVA Model Regression 1 Residual Total Sum of Squares df 2547.658 8937.976 11485.635 3 14741 14744
a

Mean Square 849.219 .606

F 1400.579

Sig. .000
b

a. Dependent Variable: lnsalesvelocitytide64 b. Predictors: (Constant), lnpwisk64, lnptide64, lnptide128 Coefficients Model Unstandardized Coefficients
a

Standardized Coefficients

Sig.

B 1 (Constant) -2.354

Std. Error .182

Beta -12.959 .000

lnptide64 lnptide128 lnpwisk64

-3.749 1.448 -.876

.067 .069 .053

-.412 .154 -.123

-56.166 20.953 -16.637

.000 .000 .000

a. Dependent Variable: lnsalesvelocitytide64

Ln salesvelocitytide64 = -2.354 3.749lnptide63 + 1.448lnptide128 - 0.876lnpwisk64 As expected, the increase in its own price produces a decrease in sales. But, the magnitude of the increase is higher. A 1% increase in its own price produces a 3.5% decrease in its sales. Interestingly wisk 64s price increase also causes a decrease in the sales of the tide 64 oz. II 2.B Whether the estimates make sense. The Tide 128 oz model makes sense as the own price has a negative effect on the sales and the price of tide 64 and wisk 64 affects the sales by 0.3% and 0.15% respectively. However for the tide 64 oz model, it is counterintuitive to see that wisk 64 oz price increase of 1% actually decreases the sales of Tide 64 oz by 0.88%. The only way this can be explained is that a price increase in the 64 oz category might be causing customers to shift towards the 128 oz category as a whole. This is evident from the 1.5% increase in sales caused by a 1% price increase of the 128 oz variant. II 3 A. Time trend Tide 128 oz
Model Summary Model R R Square Adjusted R Square 1 .538
a

Std. Error of the Estimate

.290

.290

.70495

a. Predictors: (Constant), week, lnptide128, lnptide64, lnpwisk64

ANOVA Model Regression 1 Residual Total Sum of Squares 2991.226 7325.024 10316.250 df

Mean Square 4 747.807 .497

F 1504.796

Sig. .000
b

14740 14744

a. Dependent Variable: lnsalesvelocitytide128

b. Predictors: (Constant), week, lnptide128, lnptide64, lnpwisk64

a

Coefficients Model Unstandardized Coefficients

Standardized Coefficients

Sig.

B (Constant) lnptide128 1 lnptide64 lnpwisk64 week 3.178 -4.772 .293 .629 -.003

Std. Error .164 .063 .060 .052 .000

Beta 19.321 -.536 .034 .094 -.170 -75.681 4.857 12.041 -22.214 .000 .000 .000 .000 .000

a. Dependent Variable: lnsalesvelocitytide128

Ln salesvelocitytide128 = 3.178 - 4.772lnptide128 + 0.293lnptide64 + 0.629lnpwisk640.003week . This model actually explains the sales better. It is interesting to note that as we move forward in weeks, the sales decreases. Although the coefficient is small 0.3%, it is statistically significant. Tide 64 oz
Model Summary Model R R Square Adjusted R Square 1 .601
a

Std. Error of the Estimate

.361

.361

.70559

a. Predictors: (Constant), week, lnptide128, lnptide64, lnpwisk64

ANOVA Model Regression 1 Residual Total Sum of Squares 4147.216 7338.419 11485.635 df

Mean Square 4 1036.804 .498

F 2082.531

Sig. .000
b

14740 14744

a. Dependent Variable: lnsalesvelocitytide64 b. Predictors: (Constant), week, lnptide128, lnptide64, lnpwisk64

Coefficients

Model

Unstandardized Coefficients

Standardized Coefficients

Sig.

B (Constant) lnptide64 1 lnptide128 lnpwisk64 week -2.473 -3.731 1.002 .345 -.007

Std. Error .165 .060 .063 .052 .000

Beta -15.023 -.410 .107 .049 -.411 -61.699 15.878 6.602 -56.682 .000 .000 .000 .000 .000

a. Dependent Variable: lnsalesvelocitytide64

This model has actually increased the error term, and decreased the coefficient of the own price, which depicts that the variable can be omitted (Earlier it wasLn salesvelocitytide64 = -2.354 3.749lnptide63 + 1.448lnptide128 - 0.876lnpwisk64). However, the variable is statistically significant. II 3 B. Explain Time trend

We can relate the addition of a trend to the properties of the intercept. We are investigating a situation where we have good prior reason to suppose that a function is shifting, over time, due to factors other than those we are able to capture in the model we have specified. This could be represented as a repeated movement of the intercept. This will mean that the coefficient on week is an estimate of the amount by which the function is shifting in each period. It can of course be positive or negative depending on whether the function is shifting upwards or downwards. Statistically the coefficient of week seems significant. It seems to improve the Tide 128 oz model, whereas with the 64 oz model it decreased the coefficient of its own price and increased the error term. II 4 A. Base sales. Now create a new dataset that only includes store-weeks in which none of the products were promoted. In the data, weeks without promotions correspond to store-weeks for which proflag=0. Re-estimate the log-log demand models with a time-trend for the 2 Tide products, on the new data-set containing only the non-promoted store-weeks. Present and briefly discuss your statistical results.