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Identifying and Quantifying time-related, psychological, and environmental factors that predictably
influence sales lets us build statistical
models that:
- Provide insight into the decision-making process and behavior of customers
-
Identify general, time-related, and seasonal sales trends
- Accurately estimate
short-term, future demand
- Allow us to properly answer questions such as, "How
effective was the Marketing Campaign?"
To stay competitive, companies must frequently assess different advertising strategies
in order to determine the best way to invest their marketing dollars. In order to
directly compare the effectiveness of diverse advertising approaches, many companies
use a measure known as return-on-investment (ROI). The measure indicates how
many dollars were returned via increased sales for each dollar spent on advertising.
To figure out a ROI for marketing dollars spent, it is necessary to estimate how
many additional items were sold because of the marketing
campaign's influence on customer behavior.
Attempts to estimate the impact of a marketing campaign on sales by comparing the
number of sales made before and after introduction of the campaign
ignores other important factors that may also have also influenced sales,
and frequently leads to faulty assessment of the campaign's
effectiveness. Therefore, if we want to assess the direct
impact of a marketing campaign, we need to isolate and remove other predictable
factors that concurrently influenced sales over the duration of the marketing campaign.
To do this, we must establish a direct link between Marketing
and Sales.
The figure to the right illustrates concurrent influences on sales: seasonality,
current market trends, weather and environmental influences, and marketing. Each
one of these may influence customer preference and behavior (and may be influenced
by customer preference and behavior) through different paths, as illustrated.
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