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K's Brewery is selling its famous beers (K Lager, K-IPA, and K's Black Belt Ale) in four sales regions throughout Germany. These four regions are Northeast, Northwest, Southeast and Southwest. Due to cultural, as well as historic and political differences, demand in the four regions differs. The firm uses two general marketing tools: advertisements and promotions (determined by the marketing budget) and signing up restaurants as contract distributors that exclusively sell K beers. Regional managers are allowed to employ varying emphasis on these two strategies, depending on what they think works best in a given region. The table includes sales data for the past 12 months, as well as marketing budgets and number of contracted restaurants for each region (also per month). Also included is the proposed marketing budget for each region for the next month, and the number of restaurants that are expected to be under contract in the next month.
K's brewery's management wants to develop a model to forecast future demand. Which of the three possible predicting variables (marketing budget, number of contracted restaurants, or time) alone or in any possible combination represents the best forecasting model? Choose your preferred model, explain your choice, and forecast demand for the next month (Note: although beer sales may be subject to seasonality, you do not need to consider this to solve this problem). Further hints: The forecasts are done by each of the four regional managers, i.e. demand for each region is forecasted separately. The best forecasting model may not be based on the same predicting variable for each region.
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