1. Using marketing related variables, make a presentation on multiple regression marketing mix model.

Use practical illustrations based on IBM SPSS Statistics [100 Marks].

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and society at large. (H. Cohen
2017)

A marketing mix which is also known as 4 Ps of marketing is a combination of factors that can be
controlled by a company to influence consumers to purchase its products. They are the product, price,
place, and promotion of a good or service.

Multiple linear regression is a tool that permits us to examine the relationship (if any) between the two
types of variables is allows us to determine the effect of more than one independent variable on a
particular dependent variable.

Multiple linear regression comes with a number of assumptions which are:

1 The relationship between the dependent variable, Y, and the independent variables is linear.
2 No exact linear relation exists between two or more of the independent variables or combinations
of independent variables.
3 The expected value of the error term, conditioned on the independent variables,
is 0.
4 The variance of the error term is the same for all observations.
5 The error term is uncorrelated across observations.
6 The error term is normally distributed.

These assumptions are almost exactly the same as those for the single variable linear regression model.
Assumption 2 is modified such that no exact linear relation exists between two or more independent
variables or combinations of independent variables. If this part of Assumption 2 is violated, then we
cannot compute linear regression estimates. Also, even if no exact linear relationship exists between
two or more independent variables, or combinations of independent variables, linear regression may
encounter problems if two or more of the independent variables or combinations thereof are highly
correlated. Such a high correlation is known as multicollinearity. We will also discuss the consequences
of conducting regression analysis premised on Assumptions 4 and 5 being met when, in fact, they are
violated.

The correlation coefficient (ρ) is a measure that determines the degree to which the movement of two
different variables is associated. The most common correlation coefficient, generated by the Pearson
product-moment correlation, is used to measure the linear relationship between two variables. However,
in a non-linear relationship, this correlation coefficient may not always be a suitable measure of
dependence
Correlation coefficients are indicators of the strength of the linear relationship between two different
variables, x and y. A linear correlation coefficient that is greater than zero indicates a positive
relationship. A value that is less than zero signifies a negative relationship. Finally, a value of zero
indicates no relationship between the two variables x and y.
A negative correlation, or inverse correlation, is a key concept in the creation of diversified portfolios that
can better withstand portfolio volatility

Correlations
Sales TV Radio Newspaper
** **
Pearson Correlation 1 .782 .576 .228**
Sales Sig. (2-tailed) .000 .000 .001
N 200 200 200 200
Pearson Correlation .782** 1 .055 .057
TV Sig. (2-tailed) .000 .441 .426
N 200 200 200 200
Pearson Correlation .576** .055 1 .354**
Radio Sig. (2-tailed) .000 .441 .000
N 200 200 200 200
Pearson Correlation .228** .057 .354** 1
Newspaper Sig. (2-tailed) .001 .426 .000
N 200 200 200 200
**. Correlation is significant at the 0.01 level (2-tailed).

Given the Pearson Correlation table matrix above, Sales and Sales has got a correlation of 1 meaning that
there is a perfect linear relationship within the variable.
Sales and TV has a positive linear relationship of 0.782, which means that sales are mainly responding to
changes in TV advertising than other media.
Radio advertising is next after TV in contributing to the sales volumes of the company with a correlation
of 0.576 followed by Newspaper with a correlation of 0.228.
Given the above Pearson matrix, the company needs to invest more in Television advertising followed by
Radio adverting. The company should consider reducing its spending in Newspapers advertising since its
contributing less to its margins.

Marketing Mix Modelling is mainly is used to cover statistical methods which are suitable for
explanatory and predictive statistical modelling of variable of interest, for example company's
sales. In this case, the goal of Marketing Mix Modelling is to explain and
predict sales from various advertising media, while controlling for other factors that influence sales. As
one of the most important Marketing Mix instruments it is crucial to understand the impact of
advertising expenditures on sales.

From the above scatterplot, we can conclude that there is a linear relation ship between Sales and TV
advertisement costs. That is as we increase our investment in TV, the sales are also increasing.

On the diagram below Sales are not changing directly as Newspaper costs are changing which means
that there is no linear relationship between the two.
Lastly from the diagram above, the sales are also increasing as the radio costs are increasing implying
that there is a linear relationship between the two.
As shown below, the regression of standardized residual values shows that the error terms are not
normally distributed across observations therefore our data may not be reliable.
Multicollinearity
 Coefficientsa

Model Unstandardized Coefficients Standardized t Sig. Collinearity Statistics

B Std. Error Beta Tolerance VIF

(Constant) 2.939 .312 9.422 .000

TV .046 .001 .753 32.809 .000 .995 1.005

Newspaper -.001 .006 -.004 -.177 .860 .873 1.145

a. Dependent Variable: Sales

Vif score of less than 10 show that we do not have a problem of multicolinearity