On the last slide we talked about rules and the close relationships between

penetration, share & loyalty.

We have a database of nearly 500 categories with consumer panel data from a
variety of Unilever categories and countries, and all show this pattern: a close
correlation between penetration and share - almost but not quite a straight line.
The message is simple - the more buyers you have, the bigger your share.
Penetration is the most important driver of share.
But penetration without loyalty is unsustainable.
The fact that there are almost no points away from the line means that this is
unusual - most categories, most markets behave in highly predictable ways. If
brands move away from the line, this is an unstable situation and tends to resolve
itself by the brand increasing or decreasing share until it moves back in line.
This doesnt mean that you cant break the rules and for example make your
existing buyers more loyal. It just means that no-one else has managed to do it. So
its going to be hard.
Note that in many cases, the market leader is just below the line. As share equals
penetration times loyalty, this means that market leaders have higher than average
loyalty.

Correlation Analysis
Correlation identifies how close the relationship between two variables. It can indicate which
variables appear to have common sets of movement in the market. Although it does not imply
causation, it could show a relationship, and those relationships can helps marketer as a basis to
describe or predict future behavior so they can prepare a plan for the business.

for further predictive use. Take an example between

A numeric value ranging from -1 to +1 is used to indicate if the correlation between the two
variables is positive or negative and the strength of the relationship. The closer the correlation is
to negative or positive one the stronger the relationship. A correlation of zero would indicate that
absolutely no relationship exists.

One of the more common uses of correlation in marketing research is customer satisfaction
studies or employee satisfaction studies.

to examine the relationship among quantitative variables.

The technique is used to predict the value of one variable (the dependent
variable - y)based on the value of other variables (independent variables x 1,
x2,xk.)

Regression Analysis predicting the future

09/01/2013 by Michael Leave a Comment

Lets start with the definition of regression: Regression is a prediction equation that relates the
dependent (response) variable (Y) to one or more independent (predictor) variables (X1, X2).
In marketing, the regression analysis is used to predict how the relationship between two
variables, such as advertising and sales, can develop over time. Business managers can draw the
regression line with data (cases) derived from historical sales data available to them.
The purpose of regression analysis is to describe, predict and control the relationship between at
least two variables. The basic principle is to minimise the distance between the actual data and
the perditions of the regression line. Regression analysis is used for variations in market share,
sales and brand preference and this is normally done using variables such as advertising, price,
distribution and quality.

Regression analysis is used:

To predict the values of the dependent variable

To determine the independent variables

To explain significant variation in the dependent variable and whether a relationship

between variables exists

To measure strength of the relationship

To determine structure or form of the relationship

Example:
An online t-shirt sales company invested in Google AdWords advertising:

1000 in January

1000 in February

1000 in March

Their sales grew steadily in this period:

5000 in January

5500 in February

6000 in March

The managers can predict by looking at the regression line that with current level of advertising
spent (1000 per month) the sales in April will be 6500. This obviously would be the case if all
other things remain equal but in reality they never do. The sales managers should use the
prediction data from the regression analysis as an additional managerial tool but should not
exclusively rely on it. The level of sales can be affected by elements other than the level of
advertising. This includes, but is not limited to, factors such as weather conditions or the central
banks increase or decrease of base interest rates. Regression analysis is concerned with the
nature and degree of association between variables but does not assume causality (does not
explain why there is relationship between variables). Other good examples of how regression
analysis can be used to test marketing relevant hypothesis are: Can variation in demand be
explained in terms of variation in fuel prices? Are consumers perceptions of quality determined
by their perceptions in price? For a simple tutorial about the regression analysis for beginners
please view the video below: