Statistical models help us describe and summarize relationships between variables. Understanding how process variables relate to each other helps businesses predict and improve performance. A marketing manager wants to understand the relationship between advertising and sales. When a new advertising campaign rolls out, they will look at the impact on total sales to determine if it is having a positive influence on sales, and if the cost is truly making a big enough difference.
Review the Advertising vs. Sales chart. Note the scatter plot and the regression equation in the chart. You can review the same data and chart in Excel, if desired.
Respond to the following:
- Do you observe a relationship between both variables?
- What does the slope tell us? Is the slope significant?
- What is the intercept? Is it meaningful?
- What is the value of the regression coefficient, r? What is the value of the coefficient of determination, r^2? What does r^2 tell us?
- Share a business scenario in which using a model could be beneficial.