You have been asked to analyze the impact of advertising on Price Chomper’s sale

Question

You have been asked to analyze the impact of advertising on Price Chomper’s sales.

a) Does our advertising affect sales? Is paper or TV more effective? If advertising does impact sales, what is the magnitude of the impact?

b) Are our sales impacted by Hannafood’s ? Are our sales different depending upon the level of advertising Hannafood’s does?

Date Sales Paper TV Compete Apr-13 4250750 75253 114433 2 May-13 3153050 15036 63599 3 Jun-13 4321010 134440 64988 2 Jul-13 3571910 119740 66842 2 Aug-13 3478740 135590 39626 2 Sep-13 4355290 189636 107503 2 Oct-13 2994030 9308 97129 3 Nov-13 2965050 41099 56404 3 Dec-13 4267010 9391 260576 2 Jan-14 3297220 942 243523 1 Feb-14 2817830 1818 75473 2 Mar-14 1663910 672 19037 3 Apr-14 6294040 548704 1000 1 May-14 2634670 52819 78799 3 Jun-14 4686120 2793 175906 2 Jul-14 3132210 27749 49616 3 Aug-14 4444040 21887 119720 2 Sep-14 3869860 1110 114293 2 Oct-14 4143140 436 177370 2 Nov-14 2534930 1407 11345 3 Dec-14 4843650 376650 7020 1 Jan-15 3059890 122906 27880 2 Feb-15 3154070 15138 66800 1 Mar-15 1827840 5532 88576 3 Apr-15 6557480 544807 166178 1 May-15 2704830 43704 134206 1 Jun-15 4294800 5740 137890 1 Jul-15 2604580 9614 37520 1 Aug-15 5282100 1507 145200 2 Sep-15 3798560 13620 108770 2 Oct-15 4720580 101179 90286 2 Nov-15 2545160 80309 24461 2 Dec-15 5513540 335768 7593 2 Jan-16 3358260 91710 37581 1 Feb-16 3204080 9856 73261 2 Mar-16 2769010 107172 40697 3 Apr-16 4551360 299781 8133 2 May-16 2475700 21218 5867 2 Jun-16 7320050 157 1125864 2 Jul-16 3571070 12961 125226 1 Aug-16 4531560 333529 1000 1 Sep-16 3201030 178105 1000 1 Oct-16 4517790 315564 11526 2 Nov-16 2494820 80206 23063 3 Dec-16 7445830 5940 1217488 2 Jan-17 4211860 36819 94139 1 Feb-17 3973670 234562 94139 1 Mar-17 2690960 71881 138134 3

Explanation / Answer

First find regression output.
The regression equation is, Sales=3329941+5.22(Paper)+4.1(TV)-274931(Compete)

Part A:

a) Advertising affects sales. Clearly, it can be seen from the regression equation that Sales is positively correlated to Advertisement by Paper and TV. The respective coefficients are 5.22 and 4.1. Also, the P-values are very small. They are very significant even at 99% Confidence level

Paper advertising is more effective in this case. The magnitude of Paper and TV advertising are 5.22 and 4.1, the respective correlation coefficients.

b) Yes, sales depends on Hannafood's level of advertising. Looking at the P-value, it is even significant at 90% confidence level. The strong negative correlation is given by the coefficient, -274931.8

Part b)
If spend on TV and Paper is 50000$ then Sales as per the regression equation for a medium level of advertising by Hannafoods(2) is-

Sales= 3329941+5.22*50000+4.1*50000-274931*2

= 3246079

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