The Big Loki's Burger

Big Loki's Burger is operating for quite a while and has a huge following of customers for its generous and tasty hamburger servings. However, the market for burgers in various towns where it operates has become a little more competitive with the entry of upstart competitors. In order for Big Loki's to stay competitive and profitable, important decisions have to be made by the management with respect to its pricing policy for different products and how much to spend on advertising. To assess the effect of different price structures and different levels of advertising expenditure, Big Loki's Burger sets different prices, and spends varying amounts on advertising, in different cities.

Of particular interest to management is how sales revenue changes as the level of advertising expenditure changes. As a consultant for the firm, you are tasked to analyze the monthly data accumulated through a period of 75 months. Does an increase in advertising expenditure lead to an increase in sales? If so, is the increase in sales sufficient to justify the increased advertising expenditure? Management is also interested in pricing strategy. Will reducing prices lead to an increase or decrease in sales revenue? To answer these questions, you developed the following model for you to evaluate and provide insights on the firm's pricing and advertising strategies.

Sales = ₁ + ₂PRICE + ₃ADVERT