HALO EFFECTS and MULTICOLLINEARITY:
Several marketing and media efforts often take place at the same time (e.g.: coupons may coincide with magazine and TV ads). Since combinations of marketing activities often work better than individual campaigns, marketers frequently use multiple campaigns simultaneously to take advantage of halo / interaction effects. However, this also means that the influence of one variable may be difficult to separate from that of another. This is known as the problem of collinearity and the two variables are said to be correlated with each other. When this happens, we may end up estimating only a joint effect for two or more media variables that are very highly correlated. Similar difficulties arise from the common practice of the various different media efforts coinciding with seasonal peaks making it more difficult to separate the effects of seasonality from those of marketing. Some concurrent occurrence of marketing campaigns is, of course, essential, in order to take advantage of, as well as measure halo effects. However, since we also want to measure the effects of each campaign separately, care should be taken during implementation to avoid simultaneous occurrence of two or more campaigns over an extended period of time.
Guest Contributor Pat Bhattacharya, Managing Principal, Thinkalytics
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