Newfood Case
1) The correlation between price and sales is large and negative for all three time periods. What does this say about how price works?
The negative relation shows that there is an inverse relation between price and sales. If price rises, sales go down and vice versa.
2) Explain the correlations between advertising and sales. What is happening to the advertising effect over time?
In the first two periods advertising is effective and has a positive correlation with sales. This implies that sales increased as advertising increased. However, in the last period the correlation is negative which implies if advertising increases sales will actually fall. Consumers tend to get bored with the marketing message over time.
3) Note that the intercorrelations between advertising location and price are all zero. Why?
This just means that there is no linear correlation between all three variables advertising/location/price.
4) Run regressions for each sales variable (s1, s2, s3) using P, A, L and independent variables. What do the regressions imply about the effect on price? Of advertising? Of location?
In sales period one the coefficients table of the regression reveals that there is statistical significance between the price variable and sales. It is a negative correlation which implies that if price is raised there is a statistical significant chance that sales will decrease. The other variables of advertising and location have a positive correlation with sales but it is not statistical significant.
In sales period two the regression shows the same effects of price on sales as in period one. While the other two variables are again not statistical significant they are not both positive to sales in the period. The value of location actually has a negative effect on sales.
In sales period three the regression shows very similar results to that of period two. However, in this period price has an even greater negative effect on sales as a statistically
The negative relation shows that there is an inverse relation between price and sales. If price rises, sales go down and vice versa.
2) Explain the correlations between advertising and sales. What is happening to the advertising effect over time?
In the first two periods advertising is effective and has a positive correlation with sales. This implies that sales increased as advertising increased. However, in the last period the correlation is negative which implies if advertising increases sales will actually fall. Consumers tend to get bored with the marketing message over time.
3) Note that the intercorrelations between advertising location and price are all zero. Why?
This just means that there is no linear correlation between all three variables advertising/location/price.
4) Run regressions for each sales variable (s1, s2, s3) using P, A, L and independent variables. What do the regressions imply about the effect on price? Of advertising? Of location?
In sales period one the coefficients table of the regression reveals that there is statistical significance between the price variable and sales. It is a negative correlation which implies that if price is raised there is a statistical significant chance that sales will decrease. The other variables of advertising and location have a positive correlation with sales but it is not statistical significant.
In sales period two the regression shows the same effects of price on sales as in period one. While the other two variables are again not statistical significant they are not both positive to sales in the period. The value of location actually has a negative effect on sales.
In sales period three the regression shows very similar results to that of period two. However, in this period price has an even greater negative effect on sales as a statistically