Correlation in Sales Forecasting

Flashcards covering key concepts of correlation as a sales forecasting method, including scatter diagrams and lines of best fit.

What is Correlation?

Correlation is a method of sales forecasting that looks at the strength of a relationship between two variables.

In marketing, what factors might show a predictable relationship with sales through correlation?

Factors such as advertising, weather, and consumer income.

How is correlation usually measured?

By using a scatter diagram on which data points are plotted.

On a scatter diagram, which axis displays the independent variable?

The x-axis.

What is an independent variable?

The factor that causes the dependent variable to change.

On a scatter diagram, which axis displays the dependent variable?

The y-axis.

What is a dependent variable?

The variable being influenced by the independent variable.

What is used to make sense of data points plotted on a scatter diagram?

A 'line of best fit,' also known as the regression line.

What is the purpose of a 'line of best fit' (regression line)?

It attempts to plot the mathematical relationship between variables based on the data points.