Marketing Analytics Report: Linear Regression and Segmentation

This marketing analytics report addresses key concepts in marketing. It begins by exploring the application of linear regression to measure the relationship between customer purchase intention and product price, acknowledging and discussing the limitations of this model, such as its assumption of linearity and its failure to consider external factors, and suggesting mitigation strategies. The report then delves into the intuitive rationale of segmentation analysis within a marketing context, highlighting its importance in targeting specific customer needs, and the various bases and approaches used for segmentation. The report also provides a comprehensive overview of the segmentation process, including its phases, and how companies can use it to improve their marketing efforts. The document also covers advertising budget allocation and the application of the Bass model. The report uses examples and references to support its analysis.

Marketing Analytics
Reports

Contents
Questions..........................................................................................................................................3
1) How can we use the linear regression model to measure the relationship between
customers’ purchase intention and product price? What are the limitations for the linear
regression model for this task? If possible, what would you propose to mitigate these
limitations...............................................................................................................................3
3) What is the intuitive rationale of the segmentation analysis in the marketing analytics
approach?................................................................................................................................4
REFERENCES................................................................................................................................6

Questions
1) How can we use the linear regression model to measure the relationship between customers’
purchase intention and product price? What are the limitations for the linear regression
model for this task? If possible, what would you propose to mitigate these limitations
The linear regression model is being used to predict the relationship among two variables
or among two factors. The factors for which the prediction is made are known as dependent
variable while on the basis it is predicted it becomes the independent variable. This model is
often used by the marketer for determining the prices of the products by establishing relationship
with the purchase intention of the customers. For the marketer it is crucial to identify the factors
that affect the buying behaviour of the customers and the value that they are getting from their
products because the customers are willing to pay more for the products that offers them better
value. As the name suggest, the linear regression is directly associated with the mathematical
implication for determining the value of one dependent variable for the other. It is dependent
upon the linear equation which is given below:
Y= a + bX
Where, y is considered to be the dependent variable, b is the slope of the line and a, is the
intercept, X is the explanatory variable. For determining the prices of the products the customers
purchase intention must be identified along with their relation among the two. To support this,
the data regarding the factors that are considered by the customer while making purchase will be
gathered. On the basis of the past data it will be identified that to what extend the product offered
by the company satisfied the need of the customer or to which category it belongs to such as
necessity goods, comfort or luxury good or habitual good because the intention of buying is
directly related to it. With the identification of the type of products the need of the product for
the customer can be identified and this will facilitate them to understand the reactions of the
customer while making purchase in context of prices of the product. For example, to determine
the relationship between the intention of buying and prices of the chocolate with the help of
linear regression, with equation y= a + bX it can be identified that the demand for the chocolate
is constant but if the prices of the chocolate decreases the demand will increase and if the prices
will increase the demand may not decrease than the existing level. This is because of the
intention of buying the chocolate which can be to satisfy the need to it or to use it as gift but with

the decrease the prices its use can be increased as it is preferred gift to the people over other
item. So in this case the relation can be considered as positively correlated.
Another case of the luxury products such as branded clothes can be taken in which with
the help of equation y = a + bX, it can be identified that the prices does not has major impact on
the purchase intention as their intension is to procure better value out of the clothes in context of
unique designs, better quality etc. or to utilise their money for showing off. In such case with
increase and decrease in the prices the impact on the demand of the product will not be much and
this reflects that there is negative correlation among the two variables.
Limitations for the linear regression
Every model has some benefits or the limitations but for this task it is crucial for the
marketer to determine the limitation as it can affect their pricing strategy and thus their sales.
Various limitations are given below:
 One of the major limitations is that it is based on the assumption of linearity among the
two variables such as the impact prices of chocolate may have different impact as the
perception and taste of the consumers are changing with increasing health consciousness
due to which the straight line relationship may not exist.
 Use of this model practically for real situation is not recommended as it does not consider
the other related factors which impact two various taken into consideration.
Such limitation can be mitigated by analysing the related factors as well that has impact on
the purchase decision such as the purchasing power of the customer as well as the value the
customer avail from the products as their wiliness affect their purchases.
3) What is the intuitive rationale of the segmentation analysis in the marketing analytics
approach?
In the marketing strategy the segmentation plays crucial role as with the help of this they
marketer determines the customer what need of the customers they want to satisfy with the
resources available to them. It enables them to focus upon specific set of desire of the customer
as they lay their emphasis on them. There are various concepts which are related with the
segmentation that marketer needs to consider as with the help of this the importance of this can
be analytics in the market analytic approach. It enables the marketer to ensure that they cater the
need of specific group of people that have similar needs and wants which can be done on the
basis of common characteristics that are possessed by them because it is not possible to satisfy

diversify means of different people. To support this various basis are taken into consideration
such as the demographic factors the customer, their behaviour patterns, psychographic factors
etc. so that similarity determined and a particular group can be identified. For this profile is
created for the people with the help of surveys as it will enable to understand the mindset of the
people. For example: When the customer visit to the restaurant the perception of each customer
varies from each other as they may analyse different aspect like the food, ambience, services
offered to them, parking facilities etc. The reason for liking and disliking the particular restaurant
will vary among different customers. Here, with the help of segmentation the marketer can group
the people on the basis of their similar characteristics. The marketer consider segmentation and
targeting as one of the crucial strategy for analysing the market as with the help of this they can
specifically target a particular segment that can be most profitable for them.
Various such approaches to segmentation of marketing are taken into consideration as they
offer a systematic manner that can facilitate better segmentation process. Different approaches
that can be used by the marketer includes segmentation on the basis of organisational constraints
which includes segmentation on the basis of quantitative survey, creation of segment from
existing customer classification and classification of segment on the basis of qualitative research;
based on the choice of the segmentation variable and this approach is considered to be a
systematic approach that provide a technical way for segmenting the market by determining
consumer characteristics on the basis of various variables such as age group, gender, motive etc.
The market segmentation analysis is done step by step so that they can understand each and
every factor related to the market and the segment they want to serve.
The segmentation and targeting process has five phases which are given below:
Phase 1: In this phase entire market is divided into different segments on the basis of various
variables which can be related to need and want of the customer, solutions to the problem etc. In
this phase 5 steps are included that facilities to define the problem identify the variables,
selection of the mathematical and statistical procedure that can facilitate to measure the
similarity or dissimilarity among the preferences of the customer, identify the number of
segments and lastly allocation of the customer to different segment. With this different segment
are identified along with the customers.
Phase 2: In this the profile of the customers are developed on the basis of their shopping
pattern, size of the family, their attitude etc.

Phase 3: In this phase the attractiveness of each and every segment is identified from the
company's perspective the cost of serving different segment is identified along with the cost of
production of the product that can satisfy the need of different segments. Also the similarity of
the product with that of the competitor is also analysed.
Phase 4: On the basis of fit between the core competencies of the organisation and the
requirement of the specific segment identified, target market for the company can be determined.
Phase 5: The target market so identified in the previous phase is approached with the help of
various promotional techniques such as direct mail, sales force, digital promotion etc.
Segmentation is ongoing process which the organisation has to keep on undertaking to ensure
their efficiency in the market.
REFERENCES
Books and Journal
Dietrich, T., Rundle-Thiele, S. and Kubacki, K., 2017. Segmentation in social marketing.
Springer Singapore:.
Hayes, A.F. and Montoya, A.K., 2017. A tutorial on testing, visualizing, and probing an
interaction involving a multicategorical variable in linear regression
analysis. Communication Methods and Measures. 11(1). pp.1-30.
Hollensen, S., 2019. Marketing management: A relationship approach. Pearson Education.
Li, J.J., Bonn, M. and Kim, J.H., 2020. A latent class segmentation analysis of gamblers in a
gambling destination. Journal of Destination Marketing & Management. 16. p.100433.
Olive, D.J., 2017. Linear regression. Heidelberg: Springer.