This example is dedicated to the dilemma of where to invest the company money... in more sales personnel or advertising? 

What is the driving force behind the company's sales numbers?

Background: My client, Company ABC sells medical equipment throughout the country. They have collected data on the company sales, the amount spent on advertising in each region and the sales bonus paid out to each region. They are interested in knowing whether there is a correlation between sales, advertising and regional bonus payouts.

Analysis:  A sample of data from 25 regions was used to produce a mathematical estimate of sales. The  regression analysis produces the following equation: SALES = -516 + 2.47 ADV + 1.86 BONUS. Both advertising (ADV) and bonus payout (BONUS) are found to be significant in the prediction.

What does this mean in plain English? This equation can now provide the company with an estimate of expected sales for a given level of advertising and bonus payouts. Moreover, if the advertising investment is held constant, the sales trend tends to rise $1160 for each bonus dollar paid out. Similarly, if the bonus payout is held constant, the sales tends to rise $2470 for every extra dollar spent on advertising. Both advertising and bonus payouts will drive sales, but advertising appears to have a greater ROI if extra funds are available.