Research Topics:

Data Analysis | Quantitative Research

Content Type:

Glossary

Coefficient of Determination Definition

The percent of the variability in the dependent variable explained by the independent variable.

The coefficient of determination, known as R², measures the proportion of the variance in a dependent variable – in marketing research that’s usually sales or customer behavior – that can be explained by the independent variables, i.e., marketing efforts advertising spend, for example, in a regression model. It ranges from 0 to 1, in which 1 signifies that all the variance is explained by the model and 0 indicates no explanatory power. The coefficient of determination evaluates the strength of the relationship between marketing inputs and outputs. In other words, it gauges the relevance of marketing strategies and identifies areas that might need improvement.

Who relies on the coefficient of determination?

The coefficient of determination assesses the effectiveness of marketing strategies and campaigns, making it of value to marketing professionals, researchers and marketing research. The measure spells out how well chosen independent variables explain the variations in the desired outcomes, which enhances data-driven decision-making.

Why should I care about the coefficient of determination?

The coefficient of determination assists in making informed marketing decisions because it measures whether a company’s marketing efforts are impacting on desired outcomes. A higher R² indicates whether the chosen variables are explaining more of the outcome's variance, thus implying that marketing strategies are more effective.