Regression Analysis — Interaction Effects

Intended to achieve common imperatives, the elements of the marketing mix often interact synergistically to produce an effect greater than the sum of their individual effects.

Take consumer promotions for instance. Discounts, displays and co-op ads, often have a synergistic impact lifting sales more than the sum of their individual impact on sales.

Similarly, theme advertising strengthen a brand’s equity, resulting in the lowering of consumers’ sensitivity to changes in price.

These interaction effects where one element of the marketing mix affects the sensitivity of one or more other elements, can be captured in response functions by the inclusion of an additional term, x1 × x2, formed by the product of the two variables that interact.

$$ y = b_0 + b_1 x_1 + b_2 x_2 + b_3 x_1 x_2 $$

In this example, the overall effect of x1 for any value of x2 is equal to: b1-total = b1 + b3 x2.

To determine the presence of the moderator effect (b3x1x2), compare the unmoderated R2 with the moderated R2. A statistically significant difference would imply the existence of the interaction effect between the variables.

Previous     Next

Use the Search Bar to find content on MarketingMind.

Marketing Analytics Workshop

Marketing Analytics Workshop

In an analytics-driven business environment, this analytics-centred consumer marketing workshop is tailored to the needs of consumer analysts, marketing researchers, brand managers, category managers and seasoned marketing and retailing professionals.

Digital Marketing Workshop

Digital Marketing Workshop

Unlock the Power of Digital Marketing: Join us for an immersive online experience designed to empower you with the skills and knowledge needed to excel in the dynamic world of digital marketing. In just three days, you will transform into a proficient digital marketer, equipped to craft and implement successful online strategies.