Promotion response is a key measure of the success of a firm’s advertising expenditures. It is essential that money spent to promote sales earns a good return. There’s little benefit in advertising if each dollar spent on commercials contributes only a $1 to the bottom line. As important as it is, promotion response is hard to measure, particularly in the competitive marketplace.
The challenge in this exercise is to measure the impact of promotions in the pharmaceutical industry. We’ll call the drug “Nosorr” here. Advertising Nosorr includes both the classic visit to the doctor’s office by salespeople promoting the drug (detail reps) as well as local television ads intended to get patients to ask for Nosorr by name.
Sending a detail rep to visit the doctor is expensive. Does it work? The response of interest in this problem is the number of new Nosorr prescriptions written per eligible patient visit (NRx/Visit) by 323 doctors who were randomly sampled in 17 communities around the United States. The amount of direct-to-consumer advertising for Nosorr varies over these locations.
Motivation
(a) Managers are concerned because a simple regression of NRx/Visit on the number of details for Nosorr is not statistically significant. Does that mean details promoting Nosorr have no effect on the number of prescriptions written?
(b) Anecdotal reports from detail reps indicate that detail reps who are promoting the main rival of Nosorr (called “Paenex”) follow the Nosorr reps delivering their own story at the expense of Nosorr. If this is so, what should be evident in the data?
Method
(c) Explain why a multiple regression of NRx/Visit on the number of details for Nosorr, the number of details for Paenex, and the local level of direct-to-consumer advertising might contradict results from the simple regression described in (a).
Mechanics
(d) Verify the claim in (a) and the observation in (b) using a scatterplot, regression, or correlation.
(e) Fit and summarize the model described in (c).
(f) Does the multiple regression in (e) meet the conditions of the MRM?
Message
(g) Summarize the results of the multiple regression: Do detail visits for Nosorr affect the number of new prescriptions of this medication?