Mark Ritson on Branding: Why Regression Can Mean Progress

Article excerpt

If there was a prize for the greatest marketing cliche of all time it would probably go to John Wanamaker. It was Wanamaker, followed by about 40,000 marketing executives giving boring presentations, who uttered the immortal words: 'I know I waste half the money I spend on advertising, the problem is I don't know which half.'

It was a fair statement for a 19th-century department-store baron. Advertising back then was a wonderful combination of art, sales and skulduggery. Today's marketing executives may also query which of their investments drive brand equity, sales and market share, but they have little excuse to be as ignorant or sanguine on the matter as Wanamaker was.

Multiple regression analysis is a marketing manager's dream calculation because it addresses the classic investment question that so many organisations find impossible to answer. Multiple regression analysis examines the relationship between a series of independent variables (the inputs) and a single dependent variable (the output). For example, it can enable marketers to study the impact of different media investments on the sales of a particular item. Alternatively, it can explore the relationship between various sales promotions and their impact on brand equity. Regression analysis can turn on the light in the darkened cupboard of marketing decision-making and apply rigour and strategy where before there was just instinct and inertia.

Regression analysis has been around for a century but its adoption in marketing has been severely limited by the relatively poor analytical skills of marketers. It is all too easy as a marketer to dismiss the power of techniques such as regression analysis on the basis that they are too complex and that, ultimately, predicting marketing success is impossible.

The reality is that a growing number of advanced marketers are turning to regression analysis to help guide their decision-making. It may not provide an absolutely perfect prediction of sales growth or complete guidance on marketing decisions, but it is eminently superior to blubbering on about marketing being an art not a science while ploughing another million pounds into a campaign based on gut feeling and the assurances of your ad manager that 'we need to be out there'.

It is something that Andrew Challier has seen first hand. …