Logit analysis in marketing

Logit analysis is a mathematical technique used by marketers to assess the scope of customer acceptance of a product, particularly a new product. It attempts to determine the intensity or magnitude of customers' purchase intentions and translates that into a measure of actual buying behaviour. It assumes that you have already detected an unmet need in the marketplace and that you have designed a product to meet that need: It tries to quantify the potential sales of that product. It takes survey data on consumers purchase intentions and converts it into actual purchase probabilities.

Logit analysis defines the functional relationship between stated purchase intentions and preferences, and the actual probability of purchase. A preference regression is performed on the survey data. This is then modified with actual historical observations of purchase behavior. The resultant functional relationship defines purchase probability.

This is the most useful of the purchase intention/rating translations because explicit measures of confidence level and statistical significance can be calculated. Other purchase intention/rating translations include the preference-rank translation and the intent scale translation. The main disadvantage is that the software is not easy to find.

See also

• marketing research
• New Product Development
• marketing
• preference regression
• logit