Chapter 1

The Where, Why,

and How of Data
Collection

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1.1 What is Business Statistics?

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1.1 What is Business Statistics?
• A collection of procedures and techniques
used to convert data into meaningful
information in a business environment

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Data
Independent Textbook Publishing, Inc. publishes 15 college-level texts in the
business and social sciences areas. Figure 1.1 shows an Excel spreadsheet
containing data for each of these 15 textbooks.

Variables
Figure 1.1

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Statistical Procedures
• Descriptive Statistics
– Procedures and techniques designed to
describe data
• Inferential Statistics
– Tools and techniques that help decision
makers to draw inferences from a set of data

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Descriptive Statistics
• Descriptive statistics can be used to
organize data into a meaningful form
• You can summarize data and provide
information that is easy to understand
DESCRIPTIVE STATISTICS Methods of organizing, summarizing,
and presenting data in an informative way.

• Example
– There are a total of 46,837 miles of interstate
highways in the U.S. The interstate system
represents 1% of the nations roads but carries
more than 20% of the traffic. Texas has the most
interstate highways and Alaska doesn’t have any.
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Descriptive Procedures
• Charts, graphs, and
tables

• Numerical measures
N

x i
Sum of all data values
Average = i =1
=
N Number of data values
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Inferential Statistics
• Inferential statistics can be used to estimate
properties of a population
• You can make decisions based on a limited set
of data
INFERENTIAL STATISTICS The methods used to estimate a
property of a population on the basis of a sample.

• Example
– TV networks constantly monitor the popularity of their
programs by hiring Nielsen to sample the preferences
of TV viewers. For example, NCIS was the most
watched show during the week of March 13-19, 2017.
A total of 14.16 million viewers watched this show.
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Inferential Procedures
POPULATION The entire set of individuals or objects of interest
or the measurements obtained from all individuals or objects of
interest.

SAMPLE A portion, or part, of the population of interest.

All Customers in the Market Area A Subset of the Customers

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1.2 Procedures for Collecting Data

Data Collection Techniques

Experiments

Telephone surveys

Written
questionnaires and
surveys

Direct observation
and personal
interview

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Other Data Collection Techniques

• Bar Codes

• RFID (Radio Frequency Identification

Device)
– Transmitting Devices Attached to a Product

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1.3 Populations, Samples, and
Sampling Techniques
• Population
– The set of all objects or individuals of interest
or the measurements obtained from all objects
or individuals of interest
• Sample
– A subset of the population
• Census
– An enumeration of the entire set of
measurements taken from the whole population
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Parameters
• Parameters
– Descriptive numerical measures, such as an
average or a proportion, that are computed
from an entire population
• Examples:
The average yards gained per play by all
NFL teams in the 2016 season
The proportion of all university students in
California who have more than $40,000 in
student loans
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Statistics

• Statistics
– Descriptive numerical measures, such as an
average or a proportion, that are computed
from a sample selected from a population
• Examples:
The average credits taken by a sample of
students at a university
The proportion of defective parts in a sample
of parts selected from the parts made by a
automotive supply company
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Sampling Techniques
• Statistical
– Sampling methods that use selection
techniques based on chance selection
• Nonstatistical
– Methods of selecting samples that use
convenience, judgment, or other non-chance
processes

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Sampling Techniques
Sampling Techniques

Nonstatistical Sampling Statistical Sampling

Convenience Judgment Ratio Simple Systematic

Random

Stratified Cluster

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Nonstatistical Sampling
• Convenience
– Collected in the most convenient manner for the
researcher
• Judgment
– Based on judgments about who in the population
would be most likely to provide the needed
information
• Ratio
– A sample in which the sample size selected from a
given segment of the population is proportional to the
number of items in the population belonging to that
segment.

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Statistical Sampling
• Items of the sample are chosen based on
known or calculable probabilities.

Statistical Sampling
(Probability Sampling)

Simple Random Stratified Systematic Cluster

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Statistical Sampling
• Also called probability (or random)
sampling
• Allows every item in the population to
have a known or calculable chance of
being included in the sample

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Main Types of Statistical Sampling
• Simple Random Sampling
• Stratified Random Sampling
• Systematic Random Sampling
• Cluster Random Sampling

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Simple Random Sampling

• Every possible sample of a given size has

an equal chance of being selected
• Selection may be with replacement or
without replacement
• The sample can be obtained using a table
of random numbers or computer random
number generator

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Simple Random Sampling
• Example
– There were 750 Major League Baseball
players at the end of the 2017 season. A
committee of 10 players is to be formed to
study the issue of concussions. To make sure
every player has an equal chance of being
selected, write each name on a piece of
paper, place the names in a box and mix
them up, then draw 10 names.

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 Stratified Random Sampling
• Divide population into subgroups (called strata) according
to some common characteristic
– e.g., gender, income level
• Select a simple random sample from each subgroup
• Combine samples from subgroups into one

Population
divided
into 4
strata

Sample
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Stratified Sampling Example

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Stratified Sampling

• Advantage:
If the strata are correctly determined, the
data of interest will be fairly homogeneous
within each stratum.

If so, then the sum of the sample sizes

needed from each stratum will be less than
would have been needed had a simple random
sample been selected. Thus sampling costs
are reduced using stratified random sampling.
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Systematic Random Sampling
• Student council officers at a state university
decided to survey fellow students. To determine
the opinion of its 20,000 students, the council
sent a questionnaire to a sample of 500
students.
• The university’s systematic random sampling
plan called for sending the questionnaire to
every 40th student (20,000 / 500 = 40) from an
alphabetic list of all students.

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 Systematic Random Sampling
• Decide on sample size: n
• Divide ordered (e.g., alphabetical) frame of N
individuals into groups of k individuals: k = N / n
• Randomly select one individual from the 1st
group (e.g., 3rd)
• Select every kth individual thereafter
N = 20000 First Group
n = 500
k = 40

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Cluster Sampling
• A population is divided into “clusters” using
naturally occurring geographic or other
boundaries.
– Each representative of the population (e.g., county)
• Select a simple random sample of clusters

Population
divided into
16 clusters
Randomly selected
clusters for sample

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Sampling Methods - Summary

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1.4 Data Types and Data
Measurement Levels
Data Types
• Quantitative:
– measurements whose values are inherently
numerical
• discrete (e.g. number of children)
• continuous (e.g. weight, volume)
• Qualitative:
– data whose measurement scale is inherently
categorical (e.g. marital status, political
affiliation, eye Copyright
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Data Types
• Time-Series:
– a set of consecutive data values observed at
successive points in time (e.g. stock price on
daily basis for a year)
• Cross-Sectional:
– A set of data values observed at a fixed point
in time (e.g. bank data about its loan
customers)

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Data Timing Example

Sales (in $1000s)

2009 2010 2011 2012 Time
Series
Atlanta 435 460 475 490 Data
Boston 320 345 375 395
Cleveland 405 390 410 395
Denver 260 270 285 280

Cross Sectional
Data

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Data Measurement Levels

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Nominal Level

• Nominal is the lowest level of

measurement
• Examples
– Student ID Number
– Color
– Gender
– Marital Status

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Ordinal Level
• The next level of measurement is the
ordinal level
• The rankings are known but not the
magnitude of differences between groups

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Ordinal Data Examples

• College Class Standing (UG =1, Grad = 2)

• Age Group
– Under 18 =1
– 18-30 = 2
– 31-60 = 3
– Over 60 =4
• Satisfaction Level
– VS=1, S=2 Neutral=3, D=4, VD=5

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Interval Level
• The next level of measurement is the
interval level
• This data has all the characteristics of
ordinal level data plus the differences
between the values are meaningful
• There is no natural 0 point

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Interval Data Examples

• Temperature (220, 870, 00, 320, 45.920,etc)

Note: Temperature is interval scale because there
is no true zero value - 00, is like any other
temperature because 00 does not imply that there
is no temperature.

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Ratio Level

• The highest level of measurement is the

ratio level
• The data has all the characteristics of the
interval scale and ratios between numbers
are meaningful
• The 0 point represents the absence of the
characteristic

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Ratio Data Examples

• Weight (1.35 oz., 14.5 lbs., 306 tons, etc.)

• Time (33.05 sec., 1.2 hrs., 7 weeks, etc.)
• Pay Rate per Hour ($33.50, $8.42, $15.45, etc.)
• Interest Rates (4.05%, 7.70%, 5.25%, etc.)

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Categorizing Data
• Identify each factor in the data set.
• Determine whether the data are time-
series or cross-sectional.
• Determine which factors are quantitative
data and which are qualitative data.
• Determine the level of data measurement
for each factor.

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Data Categorization Example
Cross-sectional data

Qualitative, nominal-level data Quantitative, ratio-level data

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Data Types and Data
Measurement Levels - Summary

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