Question

What is Correlation Analysis, give an example of how it can be used in marketing. Cite and reference any sources.

Answer 1

Correlation Analysis identifies that how closely two variable are related to each other. It helps in measuring the strength of relationship between the two variables. It is indicated by the value ranging from -1 to +1.

+1 indicates the strongest positive and -1 indicates the strongest negative correlation. A correlation of zero would indicate that no relationship exists between them.

Correlation analysing is used in marketing because it helps in doing the good market research. It helps in finding the correlation between two sets of data and the resultant coefficient helps in predicting the future trends.

Example – ABC ltd is a leading marketer of Curtains and they conducted a survey to know the level of satisfaction of customers. For that made a questionnaire with many questions as variables and answers were marked as Satisfied and Dissatisfied.

Correlation analysis between overall satisfaction and each of the answer will allow us to measure the strength of the relation between them to know which variable have the higher impact on overall satisfaction. This helps the company to know the area where they need more concentration so that marketing can be improved.

Reference – Correlation and Regression Analysis by Johnson Vogt