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You are on page 1of 54

Hypothesis Formulation, Chi-Square

Market Intelligence

Julie Edell Britton

Session 2

August 8, 2009

Todays Agenda

Announcements

Southwestern Conquistador Beer Case

Backward Market Research

Secondary data quality

Measure types

Hypothesis Testing and Chi-Square

Announcements

National Insurance Case for Sat. 8/22

Download National.sav from platform

SPSS on machines in MBA PC Lab and see

installation direction on the platform on how to install

on your machine

Do tutorial to familiarize with SPSS

Use handout in course pack to answer questions: 1-6

Stephen will do a tutorial on Friday, 8/21 from 1:00

-2:15 in the MBA PC Lab and be available on 8/21

from 7 9 pm in the MBA PC Lab to answer

questions

Submit slides by 8:00 am on Sat. 8/22

3

SWCB Objectives

Feasibility decisions

Problem formulation, information needs

Role of secondary data

Role of research and time budgets

Quality, cost, speed

SWCB Questions

What should Mr. Gomez do?

Consumer behavior?

What information do we need to make

decision?

Which reports allow that information to be

estimated?

What decision do these reports suggest?

SWCB Conclusions

Feasibility studies need data on: industry demand,

market share, investment, costs, margins. Break

even analysis common.

Conceptualize data before doing research

Effort at problem formulation stage reduces later

costs of doing research

Secondary data is the place to start

6

Cost of information is real; research budget

typically constrained

Cheap info may not be most economical if it is

unreliable

Just because budget has funds does not mean

you should conduct extraneous research.

Todays Agenda

Announcements

Southwestern Conquistador Beer Case

Backward Market Research

Secondary data quality

Measure types

Hypothesis Testing and Chi-Square

Obvious? Psychology of why so hard to do.

Imagine the end of the process:

What will the final report look like? DUMMY TABLES

What decision alternatives might be implemented?

What analyses can support a choice between

alternatives?

Do they already exist?

If not, may need to commission a study.

Analyze data & make recommendation

Consumers Consumers

Upbeat

Learning of

Feelings

Ad Claims

Consumers

Attitude

toward the

Ad

Consumers

Attitude

toward the

Brand

Ad A

Ad B

Ad Score = .25 UpF +.20 Claims + .15 AAd + .40 AB

Action Standard - Run the Ad with the Higher Ad Score

Agree on Research Purpose AmEx

Research Objectives (hypotheses, bounds)

Value of Information (the clairvoyant, p. 59)

Design Research

Collect Data & Analyze

Report Results & Make Recommendations

Agree on Research Purpose AmEx

Research Objectives (hypotheses, bounds)

Value of Information (the clairvoyant, p. 59)

Design Research

Collect Data & Analyze

Report Results & Make Recommendations

(To Be filled out by End User)

Marketing Background - Describe the current information or

environment what are the issues that precipitated the need for the

research? What business units will be impacted?

Business Decisions - What decisions will be made and what actions will

be taken as a result of the research? (If appropriate, specify alternatives

being considered). What other data or business considerations will impact

the decision?

information) that must be answered in order to make the decision?

Timing - When must the research be completed to make the marketing

decision?

Budget How much money has been budgeted for this research? To

Requested by ________________ Manager

Requested by ________________ Director

Requested by ________________ Vice President

(To Be filled out by Marketing Research)

Job # __ Project Title _________ Budget Line ___ Business Unit___

Marketing Background

Business Decisions To Be Made

Research Objectives

Research Design

Action Standards

Existing Sources of Information Consulted (e.g. syndicated and/or

previous research)

Research Firm

Timing

Cost

Market Research Department Travel Cost

Approval ________________ if between $100,000 and $500,000 - Sr. VP

Approval ________________ if over $500,000 - Exec. Committee Member

(To Be filled out by End User)

Project Name

End User Name

1.

of this research? If none, explain why.

Were any Actions Taken or are any actions being considered

that are in conflict with the research learning? If so, why?

In retrospect, is there anything that could have been done

differently to improve the actionability of the research

investment? If so, what?

Relevant Populations - Who do we need to talk to and why?

2.

3.

4.

Agree on Research Purpose AmEx

Research Objectives (hypotheses, bounds)

Value of Information (the clairvoyant, p. 59)

Design Research

Collect Data & Analyze

Report Results & Make Recommendations

Exploratory

Generate ideas on alternatives & criteria to

evaluate the alternatives

Descriptive

1-way: frequencies, proportions, means,

medians

2-way: correlations, crosstabs

Causal

Assess cause-effect relationships

Todays Agenda

Announcements

Southwestern Conquistador Beer Case

Backward Market Research

Secondary data quality

Measure types

Hypothesis Testing and Chi-Square

3 Key Skills

Backward market research (1, 2)

Getting data and judging its quality

Secondary data (2)

Exploratory research (3)

Descriptive research (4,5)

Causal research (6)

marketing problems (7-10)

Primary -- collected anew for current purposes

Secondary -- exists already, was collected for

some other purpose

Finding Secondary Data Online @ Fuqua

http://library.fuqua.duke.edu

Evaluating Sources of

Secondary Data

If you cant find the source of a number,

dont use it. Look for further data.

Always give sources when writing a report.

Applies for Focus Group write-ups too

Be skeptical.

Advantages

cheap

quick

often sufficient

Disadvantages

there is a lot of data out there

numbers sometimes conflict

categories may not fit your needs

KAD p. 120 & Whats Behind the Numbers?

Data consistent with other independent sources?

What are the classifications? Do they fit needs?

When were numbers collected? Obsolete?

Who collected the numbers? Bias, resources?

Why were the data collected? Self-interest?

How were the numbers generated? Exter:

Sample size

Sampling method (Sessions 5&6)

Measure type

Causality (MBA Marketing Timing & Internship)

Secondary Data

Took Core

Marketing

Got Desired

Marketing

Internship

Marketing Internship

Term 1

76%

24%

Term 3

51%

49%

Evaluating Sources of

Secondary Data

If you cant find the source of a number,

dont use it. Look for further data.

Always give sources when writing a report.

Applies for Focus Group write-ups too

Be skeptical.

Be Skeptical

MBAs May Be A Marketing Liability

A master of Business Administration degree is not only worthless, it

can work against a marketer, according to a survey of marketing

executives from 32 consumer-products companies by consulting firm

Ken Coogan & Partners...Marketing executives from 18

underperforming companies which had sales grow 7% less than their

categories on average in the last two years ended August 2005 were

twice as likely to have been recruited out of MBA programs than

marketing executives from out-performing companies, which averaged

growth 6.2% faster than their categories over the two years.

Source: AdAge.com, March 21, 2006

Mktg. Executive

had an MBA

have an MBA

Overperformers (n = 9)

55.5%

44.5%

Underperformers (n = 18)

88.9%

11.1%

Todays Agenda

Announcements

Southwestern Conquistador Beer Case

Secondary data quality

Measure types

Hypothesis Testing and Chi-Square

Measure Types

Nominal: Unordered Categories

Male=1; Female = 2;

cant be assumed to be equal.

I-95 is east of I-85; I-80 is north of I-40; Preference data

arbitrary and units arbitrary.

Fahrenheit temperature each degree is equal

scale means 0 of underlying quantity.

$ , Age

Permissible Transformations

The mean is a meaningless statistic when a variable

is ordinal or nominal.

That is because different permissible

transformations lead to different conclusions

Example on next slide: Male and female speed to

finish quiz (lower # means faster finish)

Measure 1 implies males faster, but measure 2

implies females faster.

In contrast, median is meaningful for ordinal data,

because different permissible transformations lead to

same conclusion

Median female faster than median male in measure

1, measure 2, or any permissible transform

Gender

Measure 1

Measure 2

Medians

107

Measure 1

108

109

Measure 2

10

110

Todays Agenda

Southwestern Conquistador Beer Case

Backward Market Research

Secondary data quality

Measure types

Hypothesis Testing and Chi-Square

A.

Raw Frequencies

Accept

Reject

140

860

1000

60

740

800

200

1600

B.

Cell Percentages

Accept

Reject

.078

.478

.556

.033

.411

.444

.111

.889

1.0

M

F

C.

Row Percentages

D.

Column Percentages

Accept

Reject

140/200

= .700

60/200

=.300

1.00

860/1600

= .538

740/1600

= .462

1.00

Rule of Thumb

If a potential causal interpretation exists, make

numbers add up to 100% at each level of the

causal factor.

Above: it is possible that gender (row) causes

or influences acceptance (column), but not that

acceptance influences gender. Hence, row

percentages (format C) would be desirable.

Hypothesis

Hypothesis: What you believe the relationship is between the

measures.

Theory

Empirical Evidence

Beliefs

Experience

Here: Believe that acceptance is related to gender

Null Hypothesis: Acceptance is not related to gender

Logic of hypothesis testing: Negative Inference

The null hypothesis will be rejected by showing that a given

observation would be quite improbable, if the hypothesis was true.

Want to see if we can reject the null.

1. State the hypothesis in Null and Alternative Form

Ho: There is no relationship between gender

and MBA acceptance

Ha1: Gender and Acceptance are related

(2-sided)

Ha2: Fewer Women are Accepted (1-sided)

2. Choose a test statistic

3. Construct a decision rule

Chi-Square Test

Used for nominal data, to compare the observed

frequency of responses to what would be expected

under some specific null hypothesis.

Two types of tests

Contingency (or Relationship) tests if the variables

are independent i.e., no significant relationship

exists between the two variables

Goodness of fit test Compare whether the data

sampled is proportionate to some standard

Chi-Square Test

(Oi Ei )

Ei

i 1

2

2

With (r-1)*(c-1)

degrees of freedom

number in cell i

Oi Observed number in cell i Ei Expected

under independence

i

number of cells

number of rows

number of columns

A.

Observed Frequencies

C.

B.

Cell Percentages

Accept

Reject

.078

.478

.556

.033

.411

.444

.111

.889

1.0

Expected Frequencies

Accept

Reject

.111*.556*1800=111

.889*.556*1800=890

.111*.444*1800= 89

.889*.444*1800=710

Chi-Square Test

(Oi Ei )

Ei

i 1

2

2

With (r-1)*(c-1)

degrees of freedom

2

=(140-111)2/111 + (860-890)2/890 + (60-89)2/89 + (740-710)2/710

= 19.30 So?

i

Decision Rule

1. Significance Level -

.05

2. Degrees of freedom - number of unconstrained data used in

calculating a test statistic - for Chi Square it is (r-1)*(c-1), so

here that would be 1. When the number of cells is larger, we

need a larger test statistic to reject the null.

3. Two-tailed or One-tailed test Significance tables are (unless

otherwise specified) two tailed tables. Chi-Sq is on pg 517

Ha1: Gender and Acceptance are related (2-sided) Critical Value =

3.84

Ha2: Fewer Women are Accepted (1-sided) Critical Value = 2.71

4.

>

the test critical value (3.84) for Ha1 or (2.71) for Ha2

Chi-Square Table

Chi-Square Test

Used for nominal data, to compare the observed

frequency of responses to what would be expected

under some specific null hypothesis.

Two types of tests

Contingency (or Relationship) tests if the variables

are independent i.e, no significant relationship

exists

Goodness of fit test Compare whether the data

sampled is proportionate to some standard

Ho: Car Color Preferences have not shifted

Ha: Car color Preferences have shifted

Data

Red

680

Green 520

Black

675

White

625

Total(n) 2500

30%

25%

25%

20%

750

625

625

500

Chi-Square Test

(Oi Ei )

Ei

i 1

2

2

With (k-1)

degrees of freedom

2

=(680-750)2/750 + (520-625)2/625 + (675-625)2/625 + (625-500)2/500

= 59.42

i

So?

3. Construct a decision rule

Decision Rule

1. Significance Level -

.05

2. Degrees of freedom - number of unconstrained data used in

calculating a test statistic - for Chi Square it is (k-1), so here that

would be 3. When the number of cells is larger, we need a larger

test statistic to reject the null.

3. Two-tailed or One-tailed test Significance tables are (unless

otherwise specified) two tailed tables. Chi-Sq is on pg 517

Ha: Preference have changed (2-sided) Critical Value = 7.81

4.

the test critical value (7.81).

Chi-Square Table

Recap

Finding & Evaluating Secondary Data

Measure Types

permissible transformations

Meaningful statistics

Index #s

Crosstabs

Casting right direction

Chi-square statistic

Contingency Test

Goodness of Fit Test

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