Relationship between Variables

Marketers are often concerned about how variables relate with one another. For instance:

  • Sales and price.
  • Advertising spend vs sales. GRP (gross rating points) vs sales.
  • GRP vs advertising awareness.
  • Distribution and sales.

Marketers need to know if there is a relationship. How strong is the relationship? What is the nature and direction of the relationship?

Tools such as scatter diagrams are used to visualize the relationship, and metrics like covariance and correlation measure the strength of the relationship. The nature of the relationship may be linear, or it may change over the range of the variables (curvilinear).

Detailed knowledge and understanding of the relationship between variables, helps marketers make well informed business decisions. For instance, setting price to achieve sales objectives. Or for instance, optimizing media spend or tweaking the marketing mix.

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