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# 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:

##  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

## 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

## 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?

## ▪ Same respondent – paired sample?

▪ Analyze -> General linear model –> Multivariate

▪ ANCOVA
▪ MANOVA
▪ MANCOVA