INDIAN INSTITUTE OF MANAGEMENT BANGALORE

RMD; PGP – IV (2021-2022)

Analysis of variance (ANOVA)
Basic concept
Analysis of variance (ANOVA) is a dependence technique. It is used to check the
differences in the mean values of dependent variable associated with the effect of
controlled independent variables, after taking into account the influence/impact of the
controlled independent variables. Essentially, ANOVA is used as a test of means for two or
more populations. The null hypothesis, typically, is that all means are equal (Ho= µ1 = µ2 = µ3)
and the alternative hypothesis is at least one pair of means is unequal. For example, suppose
a marketing research consultant is interested to examine whether heavy, medium, light, and
nonusers of cold drink differ in their preference for cold drink Coca-Cola, measured in a 7-
point Likert-type scale. The null hypothesis that the four groups are not different in
preference, whereas alternative is that at least one pair of groups is different.
ANOVA must have a dependent variable (DV) that is metric and one or more
independent variables that are nonmetric. The nonmetric independent variable (IV) is called
factor. When an ANOVA involves in only ONE metric DV and ONE nonmetric IV, it is
called One-way ANOVA. If two or more IVs are involved, the analysis is termed as n-way
ANOVA. See Table 1 for different types of ANOVA.
Table 1: ANOVA – a dependence technique

No. & Nature of IV No. & Nature of DV Types of test

One categorical One metric One-way ANOVA
Two Categorical One metric Two-way ANOVA
One categorical and one non-categorical (covariate) One metric ANCOVA
One or more categorical Two or more metric MANOVA

Application of ANOVA
Marketing managers are often interested in examining the differences in the mean
values of the dependent variable for several categories of single independent variable. For
example:

 Do the various segments differ in terms of their volume of product

consumptions?
 Do the brand evaluations of groups exposed to different commercials vary?
 Do retailers, wholesalers, and agents differ in their attitudes toward the firm’s
distribution systems?
 How does consumers’ intention to buy a brand vary with different price
levels?
The answer to these and similar questions can be determined by conducting one-way
ANOVA.