Session 10 1

▪ Tests concerning two population means - Z and t tests (Two

independent/paired sample)
▪ Tests concerning more than two population means -> ANOVA

▪ Basic Principle-
▪ Total variation in dependent variable = Variation attributed to specific cause +
Variation attributed to chance
▪ Variation between samples - variation attributed to specific cause
▪ Variation within samples- variation attributed to chance
▪ E.g. sales because of differences in in-store promotion
▪ Independent variable/Treatment/ Factor -> Whose effects are measured
▪ Variables that are manipulated
▪ E.g. -> Advertising in in-store advertising example
▪ Test units -> individuals or entities whose response to the treatment /
independent variable is being examined
▪ E.g. -> Customers in in-store advertisement
▪ Dependent variable -> On these the effect of independent variable is tested
▪ E.g. -> Sale in in-store advertisement example
▪ Extraneous variables ->
▪ All variables other than independent variable that affect response to
dependent variable
▪ Dependent variable -> interval or ratio scale (e.g. sales)
▪ Independent variable (factors) -> categorical scale
▪ Promotion (low, medium, high)

▪ One way ANOVA -> One independent (factor) variable with different categories
▪ E.g. impact of in-store promotion (low, medium, high) on sales

▪ Two-way or two factor ANOVA- Two factors divided into various categories
▪ E.g. impact of in-store promotion (low, medium, high) and coupon (Given:
Yes/No) on sales
▪ If two or more factors are involved, the analysis is termed n-way analysis of
variance.

▪ Independent variables - both categorical and metric variables, the technique is

called analysis of covariance (ANCOVA).
▪ In this case, the categorical independent variables are still referred to as
factors, whereas the metric-independent variables are referred to as
covariates. Example?
 Metric Dependent Variable

One Independent
Variable Independent Variables

Categorical: Categorical
Binary Interval
Factorial and Interval

ANOVA ANCOVA Regression

t Test

More than
One Factor One Factor

One-Way ANOVA N-Way ANOVA

▪ Do the various segments differ in terms of their volume of product
consumption?
▪ Do the brand evaluations of groups exposed to different commercials vary?
▪ What is the effect of consumers' familiarity with the store (measured as high,
medium, and low) on preference for the store?
▪ eta2 ( 2). The strength of the effects of X (independent variable or factor) on Y
(dependent variable) is measured by eta2 ( 2). The value of 2 varies between
0 and 1.

▪ F statistic. The null hypothesis that the category means are equal in the
population is tested by an F statistic based on the ratio of mean square
related to X and mean square related to error.

▪ Mean square. This is the sum of squares divided by the appropriate degrees
of freedom.
The total variation in Y, denoted by SSy, can be decomposed into two
components:
SSy = SSbetween + Sswithin
SSbetween -> the variation in Y related to the variation in the means of the
categories of X. Denoted as SSx.
SSwithin is the variation in Y related to the variation within each category of X.
SSwithin is not accounted for by X. It is referred to as SSerror.
 Independent Variable X
Total
Categories Sample
Within X1 X2 X3 … Xc
Category Y1 Y1 Y1 Y1 Y1 Total
Variation Variation
Y2 Y2 Y2 Y2 Y2 =SSy
=SSwithin : :
: :
Yn Yn Yn Yn YN
Category Y1 Y2 Y3 Yc Y
Mean
Between Category Variation = SSbetween
SSy = SSbetween + Sswithin

N
S S y = S (Y i - Y 2 )
i =1
c
S S x = S n (Y j -Y )2
j =1
c n
SS error= S Si (Y ij -Y j )2
j
The strength of the effects of X on Y are measured as follows:

2 = SSx/SSy = (SSy - SSerror)/SSy

The value of2 varies between 0 and 1.

 variation in Y that is explained by X

i.e. 2
H0: µ1 = µ2 = µ3 = ........... = µc

MSx = SSx/(c - 1) S S x /(c - 1) MS X

= Mean square due to X F= =
S S erro r/(N - c) MS erro r

MSerror = SSerror/(N - c)
= Mean square due to error
Identify the Dependent and Independent Variables

Decompose the Total Variation

Measure the Effects

Test the Significance

Interpret the Results

The department store is attempting to determine the effect of in-store promotion
(high - 1, medium - 2, low - 3) and coupon (value:$20, given - 1, not given - 2) on
sales (Y).

Design 3X2 ~ six cells.

Total 30 stores randomly selected and five stores were randomly assigned to
each treatment condition.

Extraneous factors: store size, traffic etc. (sales normalized and converted to 1-
10 scale)
Store Num ber Coupon Level In-Store Prom otion Sales Clientele Rating
1 1.00 1.00 10.00 9.00
2 1.00 1.00 9.00 10.00
3 1.00 1.00 10.00 8.00
4 1.00 1.00 8.00 4.00
5 1.00 1.00 9.00 6.00
6 1.00 2.00 8.00 8.00
7 1.00 2.00 8.00 4.00
8 1.00 2.00 7.00 10.00
9 1.00 2.00 9.00 6.00
10 1.00 2.00 6.00 9.00
11 1.00 3.00 5.00 8.00
12 1.00 3.00 7.00 9.00
13 1.00 3.00 6.00 6.00
14 1.00 3.00 4.00 10.00
15 1.00 3.00 5.00 4.00
16 2.00 1.00 8.00 10.00
17 2.00 1.00 9.00 6.00
18 2.00 1.00 7.00 8.00
19 2.00 1.00 7.00 4.00
20 2.00 1.00 6.00 9.00
21 2.00 2.00 4.00 6.00
22 2.00 2.00 5.00 8.00
23 2.00 2.00 5.00 10.00
24 2.00 2.00 6.00 4.00
25 2.00 2.00 4.00 9.00
26 2.00 3.00 2.00 4.00
27 2.00 3.00 3.00 6.00
28 2.00 3.00 2.00 10.00
29 2.00 3.00 1.00 9.00
30 2.00 3.00 2.00 8.00
 EFFECT OF IN-STORE PROMOTION (X) ON SALES (Y)
Store Level of In-store Promotion (Sales given)
No. High Medium Low
1 10 8 5
2 9 8 7
3 10 7 6
4 8 9 4
5 9 6 5
6 8 4 2
7 9 5 3
8 7 5 2
9 7 6 1
10 6 4 2

Column Totals 83 62 37
Category means: Yj 83/10 62/10 37/10
= 8.3 = 6.2 = 3.7
Grand mean, Y = (83 + 62 + 37)/30 = 6.067
SSy = 185.867
SSx = 106.067
SSerror = 79.80
2 = SSx/SSy
= 106.067/185.867
= 0.571

In other words, 57.1% of the variation in sales (Y) is accounted for by in-
store promotion (X), indicating a modest effect.

F = SSx/(c-1) / SSerror/(N-c)
c = 3, N = 30
F = 17.944
F = 17.944

Critical value of F is 3.35 for 95% significance level.

Reject or accept the null hypothesis?

What does it mean?

Which groups have significant difference?

Analyze -> Compare means –> One-way ANOVA

Test of homogeneity
Levene’s test : p should be > 0.05

Post hoc test ~ Tukey HSD

• How do advertising levels (high, medium, and low) interact with price levels
(high, medium, and low) to influence a brand's sale?

• Do educational levels (less than high school, high school

graduate, some college, and college graduate) and age (less than 35, 35-55,
more than 55) affect consumption of a brand?

• What is the effect of consumers' familiarity with a department store (high,

medium, and low) and store image (positive, neutral, and negative) on
preference for the store?
The department store is attempting to determine the effect of in-store promotion
(high - 1, medium - 2, low - 3) and coupon (value:$20, given - 1, not given - 2) on
sales (Y).

Design 3X2 ~ six cells.

Total 30 stores randomly selected and five stores were randomly assigned to
each treatment condition.

Extraneous factors: store size, traffic etc. (sales normalized and converted to 1-
10 scale)
Analyze -> General linear model –> Univariate

Test of homogeneity
Levene’s test : p should be > 0.05

Post hoc test ~ Tukey HSD

• In determining how different groups exposed to different commercials
evaluate a brand, it may be necessary to control for prior knowledge.
• In determining how different price levels will affect a household's cereal
consumption, it may be essential to take household size into account.
• Suppose that we wanted to determine the effect of in-store promotion and
couponing on sales while controlling for the effect of clientele.
• Independent variables – categorical + interval
The department store is attempting to determine the effect of in-store promotion
(high - 1, medium - 2, low - 3) and coupon (20$ given 1, not given 2) on sales
(Y).

Design 3X2 ~ six cells.

Total 30 stores randomly selected and five stores were randomly assigned to
each treatment condition.

Extraneous factors: store size, traffic etc. (sales normalized and converted to 1-
10 scale)

Affluence of clientele: 1-10 scale

Analyze -> General linear model –> Univariate, Add Clientele to covariate
box

Test of homogeneity
Levene’s test : p should be > 0.05

Post hoc test ~ Tukey HSD

 Possible Interaction Effects

No Interaction Interaction
(Case 1)

Ordinal
Disordinal
(Case 2)

Noncrossover Crossover
(Case 3) (Case 4)
 Case 1: No Interaction Case 2: Ordinal Interaction
X 22 X 22

Y X 21 Y X 21

X X X X X X
11 12 13 11 12 13
Case 3: Disordinal Interaction: Case 4: Disordinal Interaction:
Noncrossover Crossover
X X 22
22
Y X 21 Y

X21

X X X X X X
11 12 13 11 12 13
▪ More than one dependent variable?

▪ Example – Effect of technology type on Productivity and Employee satisfaction

▪ Same respondent – paired sample?

▪ Analyze -> General linear model –> Multivariate

▪ Analyze -> General linear model –> Repeated measures

▪ ANOVA, n-way ANOVA

▪ ANCOVA
▪ MANOVA
▪ MANCOVA