Customer Loyalty Analysis
Regression and correlation analysis for a retail consumer goods scenario, testing which of product quality, brand awareness and negative publicity drives customer loyalty, and which combination explains the most.
The Challenge
Across 1,711 customers, product quality was the strongest correlate of loyalty (r = 0.713), well ahead of brand awareness (r = 0.18). A three-variable linear model explained 62.8% of loyalty variance on a held-out test set.
The scenario asked which lever deserves investment: product quality, brand awareness or reputation management. Intuition alone could not settle which mattered most, or how much each added once the others were accounted for.
Approach
Results
Product quality is the primary loyalty driver by a clear margin, and negative publicity has a real suppressing effect. Brand awareness showed only a weak correlation (r = 0.18).
Dropping brand awareness barely changes the model (R² 0.623 vs 0.628), while dropping quality collapses it to 0.211. Two signals, quality and negative publicity, carry almost all of the explanatory power.
What It Means
The results point to a clear priority order: product quality first, managing negative publicity second, brand awareness third. Awareness campaigns on their own are unlikely to move loyalty much without a quality story behind them.