Exploratory Research Design:

Secondary Data

Copyright © 2010 Pearson Education, Inc. 4-1

 Outline

1) Overview
2) Primary Versus Secondary Data
3) Advantages & Uses of Secondary
Data
4) Disadvantages of Secondary Data

Copyright © 2010 Pearson Education, Inc. 4-2

 Outline

5) Criteria for Evaluating Secondary Data

i. Specifications: Methodology Used to Collect
the Data
ii. Error: Accuracy of the Data
iii. Currency: When the Data Were Collected
iv. Objective(s): The Purpose for Which the
Data Were Collected
v. Nature: The Content of the Data
vi. Dependability: Overall, How Dependable
are the Data

Copyright © 2010 Pearson Education, Inc. 4-3

 Outline

6) Classification of Secondary Data

7) Internal Secondary Data
8) Published External Secondary
Sources
i. General Business Sources
a. Guides
b. Directories
c. Indexes
d. Non-governmental Statistical
Data

Copyright © 2010 Pearson Education, Inc. 4-4

 Outline

ii. Government Sources

a. Census Data
b. Other Government Publications
9) Computerized Databases
i. Classification of Computerized Databases
ii. Directories of Databases

10) Syndicate Sources of Secondary Data

Copyright © 2010 Pearson Education, Inc. 4-5

 Outline

11) Syndicated Data from Households

i. Surveys
a. Psychographics & Lifestyles
b. Advertising Evaluation
c. General Surveys
d. Uses of Surveys
e. Advantages & Disadvantages of Surveys
ii. Panels
a. Purchase Panels
b. Media Panels
c. Uses of Panels
d. Advantages & Disadvantages of Panels

Copyright © 2010 Pearson Education, Inc. 4-6

 Outline

iii. Electronic Scanner Services

a. Volume Tracking Data
b. Scanner Panels
c. Scanner Panels with Cable TV
d. Uses of Scanner Services
e. Advantages & Disadvantages
12) Syndicated Data from Institutions
i. Retailers & Wholesalers
a. Uses of Audit Data
b. Advantages & Disadvantages of Audit
Data
Copyright © 2010 Pearson Education, Inc. 4-7
 Outline

ii. Industry Services

a. Uses of Industry Services

b. Advantages & Disadvantages
of Industry Services
13) Combining Information from
Different Sources: Single-Source
Data
14) Applications of Secondary Data
i. Computer Mapping

Copyright © 2010 Pearson Education, Inc. 4-8

 Primary Vs. Secondary Data

• Primary data are originated by a

researcher for the specific purpose of
addressing the problem at hand. The
collection of primary data involves all six
steps of the marketing research process
(see earlier discussions).
• Secondary data are data that have
already been collected for purposes other
than the problem at hand. These data
can be located quickly and inexpensively.

Copyright © 2010 Pearson Education, Inc. 4-9

 A Comparison of Primary & Secondary Data

Primary Data Secondary Data

Collection purpose For the problem at hand For other problems

Collection process Very involved Rapid & easy
Collection cost High Relatively low
Collection time Long Short

Copyright © 2010 Pearson Education, Inc. 4-10

 Uses of Secondary Data

• Identify the problem

• Better define the problem
• Develop an approach to the problem
• Formulate an appropriate research design (for
example, by identifying the key variables)
• Answer certain research questions and test some
hypotheses
• Interpret primary data more insightfully

Copyright © 2010 Pearson Education, Inc. 4-11

 Criteria for Evaluating Secondary Data

• Specifications: Methodology Used to Collect

the Data
• Error: Accuracy of the Data
• Currency: When the Data Were Collected
• Objective(s): The Purpose for Which the Data
Were Collected
• Nature: The Content of the Data
• Dependability: Overall, How Dependable Are
the Data- credibility of the source

Copyright © 2010 Pearson Education, Inc. 4-12

 Criteria for Evaluating Secondary Data

Criteria Issues Remarks

Specifications Data collection method, response Data should be reliable,

& Methodology rate, quality & analysis of data, valid, & generalizable to
sampling technique & size, the problem.
questionnaire design, fieldwork.
Error & Examine errors in approach, Assess accuracy by
Accuracy research design, sampling, data comparing data from
collection & analysis, & reporting. different sources.

Currency Time lag between collection & Census data are updated
publication, frequency of updates. by syndicated firms.
Objective Why were the data collected? The objective determines
the relevance of data.
Nature Definition of key variables, units of Reconfigure the data to
measurement, categories used, increase their usefulness.
relationships examined.
Dependability Expertise, credibility, reputation, Data should be obtained
and trustworthiness of the source. from an original source.

Copyright © 2010 Pearson Education, Inc. 4-13

 A Classification of Secondary Data

Secondary Data

Internal External

Ready to Requires Published Computerized Syndicated

Use Further Materials Databases Services
Processing
Copyright © 2010 Pearson Education, Inc. 4-14
 Internal Secondary Data

Department Store Project

Sales were analyzed to obtain:
• Sales by product line
• Sales by major department (e.g., men's
wear, house wares, women’s clothes)
• Sales by specific stores (Forum mall
Koramangala vs Whitefield - others)
• Sales by geographical region(Koramangala /
whitefiled)
• Sales by cash versus credit purchases
• Sales in specific time periods- festival season
• Sales by size of purchase
• Sales trends in many of these classifications
were
Copyright © 2010 Pearson also
Education, Inc. examined 4-15
 Type of Individual/Household Level Data
Available from Syndicated Firms
I. Demographic Data- NRS and IRS in
India – WHITE BOOK
- Identification (name, address, email,
telephone)
- Sex, Marital status
- Names of family members
- Age (including ages of family members)
- Income
- Occupation
- Number of children present
- Home ownership
- Length of residence
- Number and make of cars owned
Copyright © 2010 Pearson Education, Inc. 4-16
 Type of Individual/Household Level Data
Available from Syndicated Firms
II. Psychographic Lifestyle Data
- Interest in golf
- Interest in snow skiing
- Interest in book reading
- Interest in running
- Interest in bicycling
- Interest in pets
- Interest in fishing
- Interest in electronics
- Interest in cable television
There are also firms such as Dun & Bradstreet and American
Business Information which collect demographic data on
businesses.
Copyright © 2010 Pearson Education, Inc. 4-17
 A Classification of Published Secondary
Sources

Published Secondary
Data

General Business Government

Sources Sources

Guides Directories Indexes Statistical Census Other

Data Data Government
Publications

Copyright © 2010 Pearson Education, Inc. 4-18

 InfoUSA: Here, There, Everywhere

InfoUSA ([Link]) markets subsets of its data in

a number of forms, including the professional online
services (LEXIS-NEXIS and DIALOG), the general online
services (CompuServe and Microsoft Network), the Internet
(look-ups), and on CD-ROM. The underlying database on
which all these products are based contains information on
115 million residential listings and 14 million business
listings, as of 2005. These are verified with over 17 million
phone calls annually. The products derived from these
databases include sales leads, mailing lists, business
directories, mapping products, and also delivery of data on
the Internet.
Copyright © 2010 Pearson Education, Inc. 4-19
 A Classification of Computerized
Databases

Computerized
Databases

Online Internet Off-Line

Bibliographic Numeric Full-Text Directory Special-

Databases-
Databases- Databases Databases Purpose
Yellow
Trivago travel pages Databases
sites
Copyright © 2010 Pearson Education, Inc. 4-20
 Published External Secondary Sources
Guides
• An excellent source of standard or recurring information
• Helpful in identifying other important sources of directories,
trade associations, and trade publications
• One of the first sources a researcher should consult- FICCI,
ASSOCHAM
Directories
• Helpful for identifying individuals or organizations that
collect specific data- Frost and Sullivan, Dun and
Bradstreet, Automotive Association of India
• Examples: Consultants and Consulting Organizations
Directory, Encyclopedia of Associations, FINDEX: The
Directory of Market Research Reports, Studies and
Surveys, and Research Services Directory, HR
Consultants in India
Indices
• Helpful in locating information on a particular topic in
several different publications
Copyright © 2010 Pearson Education, Inc. 4-21
 Classification of Computerized Databases

• Bibliographic databases are composed of

citations to articles
• Numeric databases contain numerical and
statistical information (Telephone
directory)
• Full-text databases contain the complete
text of the source documents comprising
the database (Frost and Sullivan)
• Directory databases provide information
on individuals, organizations, and services
(Yellow pages)
• Special-purpose databases provide
specialized information (HR consultants)
Copyright © 2010 Pearson Education, Inc. 4-22
 Syndicated Services

• Syndicated services are companies that

collect and sell common pools of data of known
commercial value designed to serve a number
of clients – NRS (National Readership
Survey), BARC / INTAM
• Syndicated sources can be classified based on
the unit of measurement
(households/consumers or institutions)
• Household/consumer data may be obtained
from surveys, diary panels, or electronic
scanner services
• Institutional data may be obtained from
retailers, wholesalers, or industrial firms
Copyright © 2010 Pearson Education, Inc. 4-23
 A Classification of Syndicated Services

Unit of
Measurement

Households/
Institutions
Consumers

Copyright © 2010 Pearson Education, Inc. 4-24

 Syndicated Services: Consumers
Households /
Consumers

Panels

Electronic
Purchase Media scanner services

Surveys Volume Scanner Scanner

Tracking Data Panels Panels with
Cable TV
Psychographic Advertising
General
& Lifestyles Evaluation
Copyright © 2010 Pearson Education, Inc. 4-25
 Syndicated Services: Institutions

Institutions

Retailers Wholesalers Industrial firms

Audits

Direct Clipping Corporate

Inquiries Services Reports
Copyright © 2010 Pearson Education, Inc. 4-26
 Overview of Syndicated Services
Type Characteristics Advantages Disadvantages Uses
Surveys Surveys conducted at Most flexible way of Interviewer errors; Market
regular intervals obtaining data; respondent errors segmentation,
information on advertising theme
underlying motives selection and
advertising
effectiveness
Purchase Households provide Recorded purchase Lack of Forecasting sales,
Panels specific information behavior can be representativeness; market share and
regularly over an linked to the response bias; trends; establishing
extended period of demographic/ maturation consumer profiles,
time; respondent psychographic brand loyalty and
asked to record characteristics switching; evaluating
specific behaviors as test markets,
they occur advertising, and
distribution
Media Panels Electronic devices Same as purchase Same as purchase Establishing
automatically panel panel advertising rates;
recording behavior, selecting media
supplemented by a program or air time;
diary establishing viewer
profiles
Copyright © 2010 Pearson Education, Inc. 4-27
 Overview of Syndicated Services

Scanner Diary Panels Scanner panels of Data reflect actual Data may not be Promotional mix
with Cable TV households that purchases; sample representative; quality analyses; copy testing;
subscribe to cable TV control; ability to link of data limited new product testing;
panel data to household positioning
characteristics

Audit services Verification of Relatively precise Coverage may be Measurement of

product movement by information at the incomplete; matching consumer sales and
examining physical retail and wholesale of data on competitive market share;
records or performing levels activity may be competitive activity;
inventory analysis difficult analyzing distribution
patterns; tracking of
new products
Industrial Product Data banks on Important source of Data are lacking in Determining market
Syndicated Services industrial information on terms of content, potential by geographic
establishments created industrial firms, quantity, and quality area; defining sales
through direct inquiries particularly useful in territories; allocating
of companies, clipping initial phases of the advertising budget
services, and corporate projects
reports

Copyright © 2010 Pearson Education, Inc. 4-28

 Single-Source Data

Single-source data provide integrated information

on household variables, including media
consumption and purchases, and marketing
variables, such as product sales, price,
advertising, promotion, and in-store marketing
effort

• Recruit a test panel of households and meter each

home's TV sets
• Survey households periodically on what they read
• Grocery purchases are tracked by UPC scanners
• Track retail data, such as sales, advertising, and
promotion

Copyright © 2010 Pearson Education, Inc. 4-29

 The NYT on the Web: A New Way To Target
Customers

To handle alternate forms of interaction and updates,

The New York Times created a separate unit, The New
York Times Electronic Media Co. The New York Times on the
Web ([Link]) has drawn over 11.4 million
national unique users as of October 2005. The database
contains demographic information, such as age, gender,
income, and zip code, that ties to an e-mail address for
each of the members. This new database marketing system
can identify and customize user groups, target Web
messages to specific segments of the population, and adjust
the message based on audience reaction. It can also
increase targeting opportunities through third-party data or
additional information supplied by the user.
Copyright © 2010 Pearson Education, Inc. 4-30
 The NYT on the Web: A New Way
To Target Customers

For example, the database enables an automobile firm to:

➢ emphasize safety to older customers,
➢ luxury to affluent ones, and
➢ roominess to families.
➢ The system is set up so that near real-time data can be
received from the Web that indicates how well ads are
performing relative to age, gender, and income
characteristics.
➢ Thus, this system allows a firm to maintain up-to-date
information on audiences in order to position its products
effectively.
Copyright © 2010 Pearson Education, Inc. 4-31
 A Classification of International Sources

International Secondary Data

Domestic International Organizations in

Organizations in Organizations in Foreign Countries
the United States the United States -
UNESCO

Government Nongovernment International Trade

Governments Organizations Associations
Sources Sources – Think
(FDA) tanks reports
(WHO,UNESCO)
Copyright © 2010 Pearson Education, Inc. 4-32
Copyright © 2010 Pearson Education, Inc. 4-33
Copyright © 2010 Pearson Education, Inc. 4-34
 Correlation and Regression – Product
Moment Calculation

Copyright © 2010 Pearson Education, Inc. 17-1

 LEARNING OBJECTIVES

1) Overview

2) Product-Moment Correlation

3) Regression Analysis

4) Bivariate Regression

5) Statistics Associated with Bivariate Regression

Analysis

Copyright © 2010 Pearson Education, Inc. 17-2

 Product Moment Correlation

• The product moment correlation, r, summarizes the

strength of association between two metric (interval or ratio
scaled) variables, say X and Y.

• It is an index used to determine whether a linear or straight-

line relationship exists between X and Y.

• As it was originally proposed by Karl Pearson, it is also known

as the Pearson correlation coefficient.

It is also referred to as simple correlation, bivariate correlation,

or merely the correlation coefficient.

Copyright © 2010 Pearson Education, Inc. 17-3

 Product Moment Correlation

From a sample of n observations, X and Y, the

product moment ncorrelation, r, can be
calculated as: S ( X i - X ) ( Y i - Y )
i=1 r= n n
S (X i - X ) 2
S= 1 (Y i - Y )2
i=1 i

D iv is io n o f th e n u m er ato r an d d en o m in ato r b y ( n - 1 ) g iv es

n
( X i - X )( Y i - Y )
S
i=1
n -1
r=
n
(X i - X )2 n
(Y i - Y )2
S n -1 S= 1 n -1
i=1 i

C OV x y
=
SxSy
Copyright © 2010 Pearson Education, Inc. 17-4
 Product Moment Correlation

• r varies between -1.0 and +1.0.

• The correlation coefficient between two

variables will be the same regardless of
their underlying units of measurement.

Copyright © 2010 Pearson Education, Inc. 17-5

Explaining Attitude Toward the City of
Residence
Y X
Respondent No Attitude Toward Duration of Importance
the City Residence Attached to
Weather
1 6 10 3

2 9 12 11

3 8 12 4

4 3 4 1

5 10 12 11

6 4 6 1

7 5 8 7

8 2 2 4

9 11 18 8

10 9 9 10

11 10 17 8

12 2 2 5

Copyright © 2010 Pearson Education, Inc. 17-6

Product Moment Correlation

The correlation coefficient may be calculated as

follows:
= (10 + 12 + 12 + 4 + 12 + 6 + 8 + 2 + 18 + 9 + 17 + 2)/12
X = 9.333

= (6 + 9 + 8 + 3 + 10 + 4 + 5 + 2 + 11 + 9 + 10 + 2)/12
Y = 6.583
n = (10 -9.33)(6-6.58) + (12-9.33)(9-6.58)
S=1 (X i - X )(Y i - Y ) + (12-9.33)(8-6.58) + (4-9.33)(3-6.58)
i + (12-9.33)(10-6.58) + (6-9.33)(4-6.58)
+ (8-9.33)(5-6.58) + (2-9.33) (2-6.58)
+ (18-9.33)(11-6.58) + (9-9.33)(9-6.58)
+ (17-9.33)(10-6.58) + (2-9.33)(2-6.58)
= -0.3886 + 6.4614 + 3.7914 + 19.0814
+ 9.1314 + 8.5914 + 2.1014 + 33.5714
+ 38.3214 - 0.7986 + 26.2314 + 33.5714
= 179.6668
Copyright © 2010 Pearson Education, Inc. 17-7
Product Moment Correlation
n
S=1 (X i - X )2 = (10-9.33)2 + (12-9.33)2 + (12-9.33)2 + (4-9.33)2
i + (12-9.33)2 + (6-9.33)2 + (8-9.33)2 + (2-9.33)2
+ (18-9.33)2 + (9-9.33)2 + (17-9.33)2 + (2-9.33)2
= 0.4489 + 7.1289 + 7.1289 + 28.4089
+ 7.1289+ 11.0889 + 1.7689 + 53.7289
+ 75.1689 + 0.1089 + 58.8289 + 53.7289
= 304.6668

n
S (Y i - Y )2 = (6-6.58)2 + (9-6.58)2 + (8-6.58)2 + (3-6.58)2
i =1 + (10-6.58)2+ (4-6.58)2 + (5-6.58)2 + (2-6.58)2
+ (11-6.58)2 + (9-6.58)2 + (10-6.58)2 + (2-6.58)2
= 0.3364 + 5.8564 + 2.0164 + 12.8164
+ 11.6964 + 6.6564 + 2.4964 + 20.9764
+ 19.5364 + 5.8564 + 11.6964 + 20.9764
= 120.9168

Thus, r= 179.6668
= 0.9361
(304.6668) (120.9168)
Copyright © 2010 Pearson Education, Inc. 17-8
Decomposition of the Total Variation

2 E x p la in e d v a r ia tio n
r =
T o ta l v a r ia tio n

S S x
= Regression sums of squares / total sums of
S S y squares

= T o ta l v a r ia tio n - E r r o r v a r ia tio n
T o ta l v a r ia tio n

S S y - S S e rro r
=
S S y

Copyright © 2010 Pearson Education, Inc. 17-9

Decomposition of the Total
Variation in Bivariate Regression

Always regression line will pass

through the mean of X and Y

Y
Residual Variation
SSres
Explained Variation
SSreg
Y

X
X1 X2 X3 X4 X5

Copyright © 2010 Pearson Education, Inc. 17-10

A Nonlinear Relationship for Which r = 0

Fig. 17.1

Y6

0
-3 -2 -1 0 1 2 3

Copyright © 2010 Pearson Education, Inc.

X 17-11
 Regression Analysis

Regression analysis examines associative relationships

between a metric dependent variable and one or more
independent variables in the following ways:

• Determine whether the independent variables explain a

significant variation in the dependent variable: whether
a relationship exists.

• Determine how much of the variation in the dependent

variable can be explained by the independent variables:
strength of the relationship.

Copyright © 2010 Pearson Education, Inc. 17-12

 Regression Analysis

Regression analysis examines associative relationships

between a metric dependent variable and one or more
independent variables in the following ways:

• Determine the structure or form of the relationship: the

mathematical equation relating the independent and
dependent variables.

• Predict the values of the dependent variable.

• Control for other independent variables when

evaluating the contributions of a specific variable or set
of variables.

• Regression analysis is concerned with the nature and

degree of association between variables and does not
imply or assume any causality.

Copyright © 2010 Pearson Education, Inc. 17-13

 Statistics Associated with Bivariate
Regression Analysis

• Bivariate regression model. The basic regression

equation is Yi = b 0 + b 1 Xi + ei, where Y = dependent or
criterion variable, X = independent or predictor variable, b 0
= intercept of the line, b 1 = slope of the line, and ei is the
error term associated with the i th observation.

• Coefficient of determination. The strength of association

is measured by the coefficient of determination, r 2. It
varies between 0 and 1 and signifies the proportion of the
total variation in Y that is accounted for by the variation in X.

• Estimated or predicted value. The estimated or predicted

value of Yi is Y i = a + b x, where Y i is the predicted value
of Yi, and a and b are estimators of
b 0 and b 1 , respectively.

Copyright © 2010 Pearson Education, Inc. 17-14

Statistics Associated with Bivariate
Regression Analysis

• Regression coefficient. The estimated

parameter b is usually referred to as the non-
standardized regression coefficient.

• Scattergram. A scatter diagram, or

scattergram, is a plot of the values of two
variables for all the cases or observations.

Copyright © 2010 Pearson Education, Inc. 17-15

Statistics Associated with Bivariate
Regression Analysis

• Standard error of estimate. This statistic,

SEE, is the standard deviation of the actual Y
values from the predicted Y values.

• Standard error. The standard deviation of b,

SEb, is called the standard error.

Copyright © 2010 Pearson Education, Inc. 17-16

 Statistics Associated with Bivariate
Regression Analysis

• Standardized regression coefficient. Also termed

the beta coefficient or beta weight, this is the slope
obtained by the regression of Y on X when the data
are standardized.

• Sum of squared errors. The distances of all the

points from the regression line are squared and added
together to arrive at the sum of squared errors, which
is a measure of total error, Se 2
j
• t statistic. A t statistic with n - 2 degrees of freedom
can be used to test the null hypothesis that no linear
relationship exists between X and Y, or H0: β = 0,
where t=b /SEb

Copyright © 2010 Pearson Education, Inc. 17-17

Conducting Bivariate Regression Analysis
Plot the Scatter Diagram

• A scatter diagram, or scattergram, is a

plot of the values of two variables (between
X and Y) for all the cases or observations.

• The most commonly used technique for

fitting a straight line to a scattergram is the
least-squares procedure. In fitting the
line, the least-squares procedure minimizes
2
the sum of squared errors, S e j
• = Sigma (Yi-Yest)**2.

Copyright © 2010 Pearson Education, Inc. 17-18

 CLASS ASSIGNMENT

Please call over the phone 10 people whom you know - ask
them their height in centimeters and weight in kilograms.

For this height and weight compute correlation coefficient

Copyright © 2010 Pearson Education, Inc. 17-19

 RECAP

➢ How to calculate product moment correlation?

➢ Introduction to Regression analysis

➢ Regression terminologies

➢ Scatter diagram

Copyright © 2010 Pearson Education, Inc. 17-20

 THANKS – STOP HERE

Copyright © 2010 Pearson Education, Inc. 17-21

 Data Preparation

[Link]

Copyright © 2010 Pearson Education, Inc. 14-1

 Chapter Outline

1) Overview
2) The Data Preparation Process
3) Questionnaire Checking
4) Editing
i. Treatment of Unsatisfactory
Responses
5) Coding
i. Coding Questions
ii. Code-book

[Link] Questionnaires
Copyright © 2010 Pearson Education, Inc. 14-2
 Chapter Outline

6) Transcribing
7) Data Cleaning
i. Consistency Checks
ii. Treatment of Missing Adjusting
the
Responses Data

8) Statistically Adjusting the Data

i. Weighting
ii. Variable Respecification
iii. Scale Transformation
9) Selecting a Data Analysis
Strategy
Copyright © 2010 Pearson Education, Inc. 14-3
Chapter Outline

10) A Classification of Statistical Techniques

11) Ethics in Marketing Research
12) Summary

Copyright © 2010 Pearson Education, Inc. 14-4

 Data Preparation Process

Prepare Preliminary Plan of Data Analysis

Check Questionnaire

Edit

Code

Transcribe

Clean Data

Statistically Adjust the Data

Select Data Analysis Strategy

Copyright © 2010 Pearson Education, Inc. 14-5
 Questionnaire Checking

A questionnaire returned from the field may

be unacceptable for several reasons.
• Parts of the questionnaire may be incomplete.
• The pattern of responses may indicate that
the respondent did not understand the
questions or follow the instructions.
• The responses show little variance.
• One or more pages are missing.
• The questionnaire is received after the
preestablished cutoff date.
• The questionnaire is answered by someone
who does not qualify for participation.

Copyright © 2010 Pearson Education, Inc. 14-6

 Editing

Treatment of Unsatisfactory Results

• Returning to the Field – The questionnaires
with unsatisfactory responses may be returned
to the field, where the interviewers recontact
the respondents.
• Assigning Missing Values – If returning the
questionnaires to the field is not feasible, the
editor may assign missing values to
unsatisfactory responses.
• Discarding Unsatisfactory Respondents –
In this approach, the respondents with
unsatisfactory responses are simply discarded.

Copyright © 2010 Pearson Education, Inc. 14-7

 Coding
Coding means assigning a code, usually a number, to each
possible response to each question. The code includes an
indication of the column position (field) and data record it will
occupy.

Coding Questions

• Fixed field codes, which mean that the number of

records for each respondent is the same and the same
data appear in the same column(s) for all respondents, are
highly desirable.
• If possible, standard codes should be used for missing
data. Coding of structured questions is relatively simple,
since the response options are predetermined.
• In questions that permit a large number of responses, each
possible response option should be assigned a separate
column.
Copyright © 2010 Pearson Education, Inc. 14-8
 Coding
Guidelines for Coding Unstructured
Questions:Category codes should be mutually
exclusive and collectively exhaustive.(age < 15
years, … >55 years)

• Only a few (10% or less) of the responses should

fall into the “other” category.

• Category codes should be assigned for critical

issues even if no one has mentioned them (looking
for Orissa person in Bangalore- do in a area where it is
cosmopolitan, can’t find Oriya’s in traditional areas like
Malleswaram).

• Data should be coded to retain as much detail as

possible.
Copyright © 2010 Pearson Education, Inc. 14-9
 Codebook
A codebook contains coding instructions and
the necessary information about variables in the
data set. A codebook generally contains the
following information:
• column number
• record number (serial number or respondent name)

• variable number
• variable name (gender – male or females
or others)
• question number- Q 39 a
• instructions for coding
Copyright © 2010 Pearson Education, Inc. 14-10
 Coding Questionnaires

• The respondent code and the record number

appear on each record in the data.

• The first record contains the additional codes:

project code, interviewer code, date and time
codes, and validation code.

• It is a good practice to insert blanks between

parts.

Copyright © 2010 Pearson Education, Inc. 14-11

 Restaurant Preference

ID PREFER. QUALITY QUANTITY VALUE SERVICE INCOME

1 2 2 3 1 3 6
2 6 5 6 5 7 2
3 4 4 3 4 5 3
4 1 2 1 1 2 5
5 7 6 6 5 4 1
6 5 4 4 5 4 3
7 2 2 3 2 3 5
8 3 3 4 2 3 4
9 7 6 7 6 5 2
10 2 3 2 2 2 5
11 2 3 2 1 3 6
12 6 6 6 6 7 2
13 4 4 3 3 4 3
14 1 1 3 1 2 4
15 7 7 5 5 4 2
16 5 5 4 5 5 3
17 2 3 1 2 3 4
18 4 4 3 3 3 3
19 7 5 5 7 5 5
20 3 2 2 3 3 3
Copyright © 2010 Pearson Education, Inc. 14-12
 SPSS Variable View of the Data of Table 14.1

Copyright © 2010 Pearson Education, Inc. 14-13

 Codebook Excerpt
Column Variable Variable Question Coding
Number Number Name Number Instructions
1 1 ID 1 to 20 as coded

2 2 Preference 1 Input the number circled.

1=Weak Preference
7=Strong Preference
3 3 Quality 2 Input the number circled.
1=Poor
7=Excellent
4 4 Quantity 3 Input the number circled.
1=Poor
7=Excellent
5 5 Value 4 Input the number circled.
1=Poor
7=Excellent
6 6 Service 5 Input the number circled.
1=Poor
7=Excellent
Copyright © 2010 Pearson Education, Inc. 14-14
 Codebook Excerpt (Cont.)
Column Variable Variable Question Coding
Number Number Name Number Instructions
7 7 Income 6 Input the number circled.
1 = Less than $20,000
2 = $20,000 to 34,999
3 = $35,000 to 49,999
4 = $50,000 to 74,999
5 = $75,000 to 99,999
6 = $100,00 or more

Copyright © 2010 Pearson Education, Inc. 14-15

Example of Questionnaire Coding

Finally, in this part of the questionnaire we would like to ask you some background information for
classification purposes.

PART D Record #7

1. This questionnaire was answered by (29)

1. _____ Primarily the male head of household
2. _____ Primarily the female head of household
3. _____ Jointly by the male and female heads of household

2. Marital Status (30)

1. _____ Married
2. _____ Never Married
3. _____ Divorced/Separated/Widowed

3. What is the total number of family members living at home? _____ (31 - 32)

4. Number of children living at home:

a. Under six years _____ (33)
b. Over six years _____ (34)

5. Number of children not living at home _____ (35)

6. Number of years of formal education which you (and your spouse, if

applicable) have completed. (please circle)

College
High School Undergraduate Graduate

a. You 8 or less 9 10 11 12 13 14 15 16 17 18 19 20 21 22 or more (36-37)

b. Spouse 8 or less 9 10 11 12 13 14 15 16 17 18 19 20 21 22 or more (37-38)

7. a. Your age: (40-41)

b. Age of spouse (if applicable) (42-43)

8. If employed please indicate your household's occupations by checking the

appropriate category.
44 45
Male Head Female Head
1. Professional and technical
2. Managers and administrators
3. Sales workers
4. Clerical and kindred workers
5. Craftsman/operative /laborers
6. Homemakers
7. Others (please specify)
8. Not applicable

9. Is your place of residence presently owned by household? (46)

1. Owned _____
2. Rented _____

10. How many years have you been residing in the greater Atlanta area?
years. (47-48)

Copyright © 2010 Pearson Education, Inc. 14-16

 Data Transcription

Raw Data

CATI/ Keypunching via Optical Digital Bar Code &

CAPI CRT Terminal Recognition Tech. Other
Technologies
Verification: Correct
Keypunching Errors

Computer Other
Disks
Memory Storage

Transcribed Data
Copyright © 2010 Pearson Education, Inc. 14-17
Data Cleaning Consistency Checks

Consistency checks identify data that are out of

range, logically inconsistent, or have extreme
values. (person tells has 2 kids while marital
status is missing)

• Computer packages like SPSS, SAS, EXCEL

and MINITAB can be programmed to identify
out-of-range values for each variable and print
out the respondent code, variable code,
variable name, record number, column
number, and out-of-range value.(marital
status 20)

• Extreme values should be closely examined.

Copyright © 2010 Pearson Education, Inc. 14-18
Data Cleaning Treatment of Missing Responses

• Substitute a Neutral Value – A neutral value,

typically the mean response to the variable, is
substituted for the missing responses.
• Substitute an Imputed Response – The
respondents' pattern of responses to other questions
are used to impute or calculate a suitable response to
the missing questions.
• In casewise deletion, cases, or respondents, with any
missing responses are discarded from the analysis.
• In pairwise deletion, instead of discarding all cases
with any missing values, the researcher uses only the
cases or respondents with complete responses for each
calculation.

Copyright © 2010 Pearson Education, Inc. 14-19

 Statistically Adjusting the Data Weighting

• In weighting, each case or respondent in the

database is assigned a weight to reflect its
importance relative to other cases or
respondents.

• Weighting is most widely used to make the

sample data more representative of a target
population on specific characteristics.

• Yet another use of weighting is to adjust the

sample so that greater importance is attached
to respondents with certain characteristics.

Copyright © 2010 Pearson Education, Inc. 14-20

 Statistically Adjusting the Data

Use of Weighting for Representativeness

Years of Sample Population

Education Percentage Percentage Weight

Elementary School
0 to 7 years 2.49 4.23 1.70
8 years 1.26 2.19 1.74

High School
1 to 3 years 6.39 8.65 1.35
4 years 25.39 29.24 1.15

College
1 to 3 years 22.33 29.42 1.32
4 years 15.02 12.01 0.80
5 to 6 years 14.94 7.36 0.49
7 years or more 12.18 6.90 0.57

Totals 100.00 100.00

Copyright © 2010 Pearson Education, Inc. 14-21

Statistically Adjusting the Data – Variable
Respecification

• Variable respecification involves the

transformation of data to create new variables or
modify existing variables.

• e.g., the researcher may create new variables

that are composites of several other variables.
(income < Rs. 50000 or > Rs 50000)

• Dummy variables are used for respecifying

categorical variables. The general rule is that to
respecify a categorical variable with K categories,
K-1 dummy variables are needed.

Copyright © 2010 Pearson Education, Inc. 14-22

Statistically Adjusting the Data – Variable
Respecification

Product Usage Original Dummy Variable Code

Category Variable
Code X1 X2 X3
Nonusers 1 1 0 0

Light users 2 0 1 0
Medium users 3 0 0 1
Heavy users 4 0 0 0

Note that X1 = 1 for nonusers and 0 for all others. Likewise, X2

= 1 for light users and 0 for all others, and X3 = 1 for medium
users and 0 for all others. In analyzing the data, X1, X2, and
X3 are used to represent all user/nonuser groups.

Copyright © 2010 Pearson Education, Inc. 14-23

Statistically Adjusting the Data –
Scale Transformation and Standardization

Scale transformation involves a manipulation of

scale values to ensure comparability with other
scales or otherwise make the data suitable for
analysis – height measured in inches and weight
measured in KGs.

A more common transformation procedure is

standardization. Standardized scores, Zi, may be
obtained as: Zi = (Xi - )/sx
X

Copyright © 2010 Pearson Education, Inc. 14-24

 Selecting a Data Analysis Strategy

Earlier Steps (1, 2, & 3) of the Marketing Research Process

Known Characteristics of the Data-categorical variable

Properties of Statistical Techniques-regression-interval scale

Background and Philosophy of the Researcher

Data Analysis Strategy

Copyright © 2010 Pearson Education, Inc. 14-25

 A Classification of Univariate Techniques

Univariate Techniques

Metric Data Non-numeric Data

One Sample Two or More One Sample Two or More

Samples Samples
* t test * Frequency
* Z test * Chi-Square
* K-S
* Runs
* Binomial
Independent Related
Independent Related
* Two- Group test * Paired
* Z test t test * Chi-Square * Sign
* One-Way * Mann-Whitney * Wilcoxon
ANOVA * Median * McNemar
* K-S * Chi-Square
Copyright © 2010 Pearson Education, Inc. * K-W ANOVA 14-26
A Classification of Multivariate Techniques

Multivariate Techniques

Dependence Interdependence
Technique Technique

One Dependent More Than One Variable Interobject

Variable Dependent Interdependence Similarity
Variable
* Cross-Tabulation * Multivariate Analysis * Factor Analysis * Cluster Analysis
* Analysis of of Variance * Confirmatory * Multidimensional
Variance and * Canonical Correlation Factor Analysis Scaling
Covariance * Multiple Discriminant
* Multiple Analysis
Regression * Structural Equation
* 2-Group Modeling
Discriminant/Logit and Path Analysis
* Conjoint Analysis
Copyright © 2010 Pearson Education, Inc. 14-27
Nielsen’s Internet Survey:
Does It Carry Any Weight?

The Nielsen Media Research Company, a longtime player

in television-related marketing research, has come under
fire from the various TV networks for its surveying
techniques. Additionally, in another potentially large, new
revenue business, Internet surveying, Nielsen is
encountering serious questions concerning the validity of
its survey results. Due to the tremendous impact of
electronic commerce on the business world, advertisers
need to know how many people are doing business on the
Internet in order to decide if it would be lucrative to place
their ads online.
Nielsen performed a survey for CommerceNet, a group of
companies that includes Sun Microsystems and American
Express, to help determine the number of total users on
the Internet.

Copyright © 2010 Pearson Education, Inc. 14-28

 Nielsen’s Internet Survey:
Does It Carry Any Weight?

Statisticians believe the numbers reported by

Nielsen may be incorrect in that the weighting
used to help match the sample to the population
may be flawed. Weighting must be used to
prevent research from being skewed toward one
demographic segment. Nielsen weighted for
gender but not for education which may have
skewed the population toward educated adults.

Copyright © 2010 Pearson Education, Inc. 14-29

 Nielsen’s Internet Survey:
Does It Carry Any Weight?

Nielsen then weighted the survey by age and income

after they had already weighted it for gender.
Statisticians also feel that this is incorrect because
weighting must occur simultaneously, not in separate
calculations. Nielsen does not believe the concerns
about their sample are legitimate and feel that they
have not erred in weighting the survey. However, due
to the fact that most third parties have not endorsed
Nielsen’s methods, the validity of their research remains
to be established.

Copyright © 2010 Pearson Education, Inc. 14-30

SPSS Windows

• Using the Base module, out-of-range values can be selected using

the SELECT IF command. These cases, with the identifying
information (subject ID, record number, variable name, and variable
value) can then be printed using the LIST or PRINT commands. The
Print command will save active cases to an external file. If a
formatted list is required, the SUMMARIZE command can be used.
• SPSS Data Entry can facilitate data preparation. You can verify
respondents have answered completely by setting rules. These rules
can be used on existing datasets to validate and check the data,
whether or not the questionnaire used to collect the data was
constructed in Data Entry. Data Entry allows you to control and
check the entry of data through three types of rules: validation,
checking, and skip and fill rules.
• While the missing values can be treated within the context of the
Base module, SPSS Missing Values Analysis can assist in diagnosing
missing values and replacing missing values with estimates.
• TextSmart by SPSS can help in the coding and analysis of open-
ended responses.

Copyright © 2010 Pearson Education, Inc. 14-31

 SPSS Windows: Creating Overall Evaluation

1. Select TRANSFORM.

2. Click on COMPUTE.

3. Type “overall” in the TARGET VARIABLE

box.

4. Click on “quality” and move it to the

NUMERIC EXPRESSIONS box.

5. Click on the “+” sign.

6. Click on “quantity” and move it to the

NUMERIC EXPRESSIONS box.

7. Click on the “+” sign.

Copyright © 2010 Pearson Education, Inc. 14-32
 Creating Overall Evaluation

8. Click on “value” and move it to the

NUMERIC EXPRESSIONS box.

9. Click on the “+” sign.

10. Click on “service” and move it to the

NUMERIC EXPRESSIONS box.

11. Click on TYPE & LABEL under the

TARGET VARIABLE box and type
“Overall Evaluation.” Click on
CONTINUE.

12. Click OK.

Copyright © 2010 Pearson Education, Inc. 14-33
SPSS Windows: Recoding Income

1. Select TRANSFORM.

2. Click on RECODE and select INTO DIFFERENT VARIABLES…

3. Click on income and move it to NUMERIC VARIABLE OUTPUT

VARIABLE box.

4. Type “rincome” in OUTPUT VARIABLE NAME box.

5. Type “Recode Income” in OUTPUT VARIABLE LABEL box.

6. Click OLD AND NEW VAULES box.

7. Under OLD VALUES on the left, click RANGE. Type 1 and 2 in the
range boxes. Under NEW VALUES on the right, click VALUE and
type 1 in the value box. Click ADD.
Copyright © 2010 Pearson Education, Inc. 14-34
 Recoding Income

8. Under OLD VALUES on the left, click VALUE. Type 3 in the

value box. Under NEW VALUES on the right, click VALUE and
type 2 in the value box. Click ADD.
9. Under OLD VALUES on the left, click VALUE. Type 4 in the
value box. Under NEW VALUES on the right, click VALUE and
type 3 in the value box. Click ADD.
10. Under OLD VALUES on the left, click RANGE. Type 5 and 6 in
the range boxes. Under NEW VALUES on the right, click VALUE
and type 4 in the value box. Click ADD.
11. Click CONTINUE.
12. Click CHANGE.
13. Click OK.

Copyright © 2010 Pearson Education, Inc. 14-35

SAS Enterprise Guide: Creating Overall Evaluation

1. Select DATA.

2. Click on FILTER AND QUERY.

3. Select the COMPUTED COLUMNS button.

4. Click on NEW.

5. Select BUILD EXPRESSION.

6. Select “QUALITY” and click on ADD TO

EXPRESSION.

7. Click on the “+” sign.

8. Select “QUANTITY” and click on ADD TO

EXPRESSION.

9. Click on the “+” sign.

Copyright © 2010 Pearson Education, Inc. 14-36
 Creating Overall Evaluation

10. Select “VALUE” and click on ADD TO

EXPRESSION.
11. Click on the “+” sign.
12. Select “SERVICE” and click on ADD TO
EXPRESSION.
13. Click OK.
14. Select “CALCULATION1” and click on
RENAME.
15. Type OVERALL.
16. Click on CLOSE.
17. Select RUN.
Copyright © 2010 Pearson Education, Inc. 14-37
SAS Enterprise Guide: Recoding Income

1. Select DATA.

2. Click on FILTER AND QUERY.

3. Right click on INCOME.

4. Select RECODE.

5. In NEW COLUMN NAME box, type “RINCOME.”

6. Click ADD.

7. Under REPLACE VALUES, enter 2.

8. Under WITH THIS VALUE, enter 1.

9. Click OK.

10. Click ADD.

Copyright © 2010 Pearson Education, Inc. 14-38
 Recoding Income

11. Under REPLACE VALUES enter 3.

12. Under WITH THIS VALUE enter 2.

13. Click OK.

14. Click ADD.

15. Under REPLACE VALUES enter 4.

16. Under WITH THIS VALUE enter 3.

17. Click OK.

18. Click ADD.

19. Select the REPLACE A RANGE tab.

Copyright © 2010 Pearson Education, Inc. 14-39

20. .
 Recoding Income

20. Check SET A LOWER LIMIT and enter 5.

21. Check SET AN UPPER LIMIT and enter 6.

22. Under WITH THIS VALUE enter 4.

23. Click OK.

24. Click OK.

25. Click RUN.

Copyright © 2010 Pearson Education, Inc. 14-40

Copyright © 2010 Pearson Education, Inc. 14-41
 Factor Analysis

Copyright © 2010 Pearson Education, Inc. 19-1

 Chapter Outline

1) Overview

2) Basic Concept

3) Factor Analysis Model

4) Statistics Associated with Factor

Analysis

Copyright © 2010 Pearson Education, Inc. 19-2

 Chapter Outline

5) Conducting Factor Analysis

i. Problem Formulation
ii. Construction of the Correlation Matrix
iii. Method of Factor Analysis
iv. Number of Factors
v. Rotation of Factors
vi. Interpretation of Factors
vii. Factor Scores
viii. Selection of Surrogate Variables
ix. Model Fit

Copyright © 2010 Pearson Education, Inc. 19-3

 Chapter Outline

6) Applications of Common Factor

Analysis

7) Summary

Copyright © 2010 Pearson Education, Inc. 19-4

 Factor Analysis

• Factor analysis is a general name denoting a class of

procedures primarily used for data reduction and summarization.
• Factor analysis is an interdependence technique in that an
entire set of interdependent relationships is examined without
making the distinction between dependent and independent
variables.
• Factor analysis is used in the following circumstances:
• To identify underlying dimensions, or factors, that explain
the correlations among a set of variables.
• To identify a new, smaller, set of uncorrelated variables to
replace the original set of correlated variables in subsequent
multivariate analysis (regression or cluster analysis).
• To identify a smaller set of salient variables from a larger set
for use in subsequent multivariate analysis.
Copyright © 2010 Pearson Education, Inc. 19-5
 Factors Underlying Selected Psychographics
and Lifestyles

Fig. 19.1
Factor 2

Football Baseball

Evening at home
Factor 1
Go to a party
Home is best place

Plays
Movies

Copyright © 2010 Pearson Education, Inc. 19-6

 Factor Analysis Model

Mathematically, each variable is expressed as a linear combination

of underlying factors. The covariation among the variables is
described in terms of a small number of common factors plus a
unique factor for each variable. If the variables are standardized,
the factor analysis model may be represented as:

Xi = Ai 1F1 + Ai 2F2 + Ai 3F3 + . . . + AimFm + ViUi

where

Xi = i th standardized variable
Aij = standardized multiple regression coefficient of
variable i on common factor j
F = common factor
Vi = standardized regression coefficient of variable i on
unique factor i
Ui = the unique factor for variable i
m = number of common factors

Copyright © 2010 Pearson Education, Inc. 19-7

 Factor Analysis Model

The unique factors are uncorrelated with each other and

with the common factors. The common factors themselves
can be expressed as linear combinations of the observed
variables.

Fi = Wi1X1 + Wi2X2 + Wi3X3 + . . . + WikXk

Where:

Fi = estimate of i th factor
Wi = weight or factor score coefficient
k = number of variables

Copyright © 2010 Pearson Education, Inc. 19-8

Factor Analysis Model

• It is possible to select weights or factor score

coefficients so that the first factor explains the
largest portion of the total variance.

• Then a second set of weights can be selected, so

that the second factor accounts for most of the
residual variance, subject to being uncorrelated
with the first factor.

• This same principle could be applied to selecting

additional weights for the additional factors.

Copyright © 2010 Pearson Education, Inc. 19-9

Graphical Illustration of Factor Analysis

Fig. 19.2 Fi = Wi1 X1+Wi2X2

X2

X1

Copyright © 2010 Pearson Education, Inc. 19-10

Statistics Associated with Factor Analysis

• Bartlett's test of sphericity. Bartlett's test of sphericity is a

test statistic used to examine the hypothesis that the
variables are uncorrelated in the population.

• In other words, the population correlation matrix is an

identity matrix; each variable correlates perfectly with itself
(r = 1) but has no correlation with the other variables (r =
0).

• Correlation matrix. A correlation matrix is a lower triangle

matrix showing the simple correlations, r, between all
possible pairs of variables included in the analysis. The
diagonal elements, which are all 1, are usually omitted.

Copyright © 2010 Pearson Education, Inc. 19-11

Statistics Associated with Factor Analysis

• Communality. Communality is the amount of variance a

variable shares with all the other variables being considered.
This is also the proportion of variance explained by the
common factors.
• Eigenvalue. The eigenvalue represents the total variance
explained by each factor.
• Factor loadings. Factor loadings are simple correlations
between the variables and the factors.
• Factor loading plot. A factor loading plot is a plot of the
original variables using the factor loadings as coordinates.
• Factor matrix. A factor matrix contains the factor loadings of
all the variables on all the factors extracted.

Copyright © 2010 Pearson Education, Inc. 19-12

Statistics Associated with Factor Analysis

• Factor scores. Factor scores are composite scores estimated

for each respondent on the derived factors.
• Kaiser-Meyer-Olkin (KMO) measure of sampling
adequacy. The Kaiser-Meyer-Olkin (KMO) measure of
sampling adequacy is an index used to examine the
appropriateness of factor analysis. High values (between 0.5
and 1.0) indicate factor analysis is appropriate. Values below
0.5 imply that factor analysis may not be appropriate.
• Percentage of variance. The percentage of the total
variance attributed to each factor.
• Residuals are the differences between the observed
correlations, as given in the input correlation matrix, and the
reproduced correlations, as estimated from the factor matrix.
• Scree plot. A scree plot is a plot of the Eigenvalues against
the number of factors in order of extraction.
Copyright © 2010 Pearson Education, Inc. 19-13
Conducting Factor Analysis

Table 19.1
RESPONDENT
NUMBER V1 V2 V3 V4 V5 V6
1 7.00 3.00 6.00 4.00 2.00 4.00
2 1.00 3.00 2.00 4.00 5.00 4.00
3 6.00 2.00 7.00 4.00 1.00 3.00
4 4.00 5.00 4.00 6.00 2.00 5.00
5 1.00 2.00 2.00 3.00 6.00 2.00
6 6.00 3.00 6.00 4.00 2.00 4.00
7 5.00 3.00 6.00 3.00 4.00 3.00
8 6.00 4.00 7.00 4.00 1.00 4.00
9 3.00 4.00 2.00 3.00 6.00 3.00
10 2.00 6.00 2.00 6.00 7.00 6.00
11 6.00 4.00 7.00 3.00 2.00 3.00
12 2.00 3.00 1.00 4.00 5.00 4.00
13 7.00 2.00 6.00 4.00 1.00 3.00
14 4.00 6.00 4.00 5.00 3.00 6.00
15 1.00 3.00 2.00 2.00 6.00 4.00
16 6.00 4.00 6.00 3.00 3.00 4.00
17 5.00 3.00 6.00 3.00 3.00 4.00
18 7.00 3.00 7.00 4.00 1.00 4.00
19 2.00 4.00 3.00 3.00 6.00 3.00
20 3.00 5.00 3.00 6.00 4.00 6.00
21 1.00 3.00 2.00 3.00 5.00 3.00
22 5.00 4.00 5.00 4.00 2.00 4.00
23 2.00 2.00 1.00 5.00 4.00 4.00
24 4.00 6.00 4.00 6.00 4.00 7.00
25 6.00 5.00 4.00 2.00 1.00 4.00
26 3.00 5.00 4.00 6.00 4.00 7.00
27 4.00 4.00 7.00 2.00 2.00 5.00
28 3.00 7.00 2.00 6.00 4.00 3.00
29 4.00 6.00 3.00 7.00 2.00 7.00
30 2.00 3.00 2.00 4.00 7.00 2.00

Copyright © 2010 Pearson Education, Inc. 19-14

 Conducting Factor Analysis

Fig. 19.3
Problem Formulation

Construction of the Correlation Matrix

Method of Factor Analysis

Determination of Number of Factors

Rotation of Factors

Interpretation of Factors

Calculation of Selection of
Factor Scores Surrogate Variables

Determination of Model Fit

Copyright © 2010 Pearson Education, Inc. 19-15
Conducting Factor Analysis: Formulate the
Problem

• The objectives of factor analysis should be

identified.

• The variables to be included in the factor analysis

should be specified based on past research,
theory, and judgment of the researcher.

• It is important that the variables be appropriately

measured on an interval or ratio scale.

• An appropriate sample size should be used. As a

rough guideline, there should be at least four or
five times as many observations (sample size) as
there are variables.
Copyright © 2010 Pearson Education, Inc. 19-16
Correlation Matrix

Table 19.2
Variables V1 V2 V3 V4 V5 V6
V1 1.000
V2 -0.530 1.000
V3 0.873 -0.155 1.000
V4 -0.086 0.572 -0.248 1.000
V5 -0.858 0.020 -0.778 -0.007 1.000
V6 0.004 0.640 -0.018 0.640 -0.136 1.000

Copyright © 2010 Pearson Education, Inc. 19-17

Conducting Factor Analysis:
Construct the Correlation Matrix

• The analytical process is based on a matrix of correlations

between the variables.
• Bartlett's test of sphericity can be used to test the null
hypothesis that the variables are uncorrelated in the
population:
• in other words, the population correlation matrix is an identity
matrix. If this hypothesis cannot be rejected, then the
appropriateness of factor analysis should be questioned.
• Another useful statistic is the Kaiser-Meyer-Olkin (KMO)
measure of sampling adequacy. Small values of the KMO
statistic indicate that the correlations between pairs of
variables cannot be explained by other variables and that
factor analysis may not be appropriate.

Copyright © 2010 Pearson Education, Inc. 19-18

Conducting Factor Analysis:
Determine the Method of Factor Analysis

• In principal components analysis, the total variance in the

data is considered. The diagonal of the correlation matrix
consists of unities, and full variance is brought into the factor
matrix.
• Principal components analysis is recommended when the
primary concern is to determine the minimum number of
factors that will account for maximum variance in the
data for use in subsequent multivariate analysis. The factors
are called principal components.

• In common factor analysis, the factors are estimated based

only on the common variance. Communalities are inserted in
the diagonal of the correlation matrix. This method is
appropriate when the primary concern is to identify the
underlying dimensions and the common variance is of
interest. This method is also known as principal axis factoring.
Copyright © 2010 Pearson Education, Inc. 19-19
Results of Principal Components Analysis

Table 19.3
Communalities
Variables Initial Extraction
V1 1.000 0.926
V2 1.000 0.723
V3 1.000 0.894
V4 1.000 0.739
V5 1.000 0.878
V6 1.000 0.790

Initial Eigen values

Factor Eigen value % of variance Cumulat. %
1 2.731 45.520 45.520
2 2.218 36.969 82.488
3 0.442 7.360 89.848
4 0.341 5.688 95.536
5 0.183 3.044 98.580
6 0.085 1.420 100.000

Copyright © 2010 Pearson Education, Inc. 19-20

Results of Principal Components Analysis

Table 19.3, cont.

Extraction Sums of Squared Loadings
Factor Eigen value % of variance Cumulat. %
1 2.731 45.520 45.520
2 2.218 36.969 82.488
Factor Matrix
Variables Factor 1 Factor 2
V1 0.928 0.253
V2 -0.301 0.795
V3 0.936 0.131
V4 -0.342 0.789
V5 -0.869 -0.351
V6 -0.177 0.871

Rotation Sums of Squared Loadings

Factor Eigenvalue % of variance Cumulat. %
1 2.688 44.802 44.802
2 2.261 37.687 82.488

Copyright © 2010 Pearson Education, Inc. 19-21

Results of Principal Components Analysis

Table 19.3, cont.

Rotated Factor Matrix
Variables Factor 1 Factor 2
V1 0.962 -0.027
V2 -0.057 0.848
V3 0.934 -0.146
V4 -0.098 0.845
V5 -0.933 -0.084
V6 0.083 0.885

Factor Score Coefficient Matrix

Variables Factor 1 Factor 2
V1 0.358 0.011
V2 -0.001 0.375
V3 0.345 -0.043
V4 -0.017 0.377
V5 -0.350 -0.059
V6 0.052 0.395
Copyright © 2010 Pearson Education, Inc. 19-22
Results of Principal Components Analysis

Table 19.3, cont.

The lower-left triangle contains the reproduced

correlation matrix; the diagonal, the communalities;
the upper-right triangle, the residuals between the
observed correlations and the reproduced
correlations.
Factor Score Coefficient Matrix
Variables V1 V2 V3 V4 V5 V6
V1 0.926 0.024 -0.029 0.031 0.038 -0.053
V2 -0.078 0.723 0.022 -0.158 0.038 -0.105
V3 0.902 -0.177 0.894 -0.031 0.081 0.033
V4 -0.117 0.730 -0.217 0.739 -0.027 -0.107
V5 -0.895 -0.018 -0.859 0.020 0.878 0.016
V6 0.057 0.746 -0.051 0.748 -0.152 0.790

Copyright © 2010 Pearson Education, Inc. 19-23

Conducting Factor Analysis:
Determine the Number of Factors
• A Priori Determination. Sometimes, because of prior
knowledge, the researcher knows how many factors to
expect and thus can specify the number of factors to be
extracted beforehand.
• Determination Based on Eigenvalues. In this
approach, only factors with Eigenvalues greater than
1.0 are retained.
• An Eigenvalue represents the amount of variance
associated with the factor. Hence, only factors with a
variance greater than 1.0 are included. Factors
with variance less than 1.0 are no better than a single
variable, since, due to standardization, each variable
has a variance of 1.0. If the number of variables is
less than 20, this approach will result in a
conservative number of factors.
Copyright © 2010 Pearson Education, Inc. 19-24
Conducting Factor Analysis:
Determine the Number of Factors

• Determination Based on Scree Plot. A scree plot is a

plot of the Eigenvalues against the number of factors in
order of extraction.
• Experimental evidence indicates that the point at which the
scree begins denotes the true number of factors. Generally,
the number of factors determined by a scree plot will be one
or a few more than that determined by the Eigenvalue
criterion.

• Determination Based on Percentage of Variance. In

this approach the number of factors extracted is determined
so that the cumulative percentage of variance extracted by
the factors reaches a satisfactory level.
• It is recommended that the factors extracted should account
for at least 60% of the variance.

Copyright © 2010 Pearson Education, Inc. 19-25

 Scree Plot

3.0
Fig. 19.4

2.5

Eigenvalue 2.0

1.5

1.0

0.5

0.0
1 2 3 4 5 6
Component Number
Copyright © 2010 Pearson Education, Inc. 19-26
 Conducting Factor Analysis:
Determine the Number of Factors

• Determination Based on Split-Half

Reliability. The sample is split in half and
factor analysis is performed on each half. Only
factors with high correspondence of factor
loadings across the two subsamples are retained.

• Determination Based on Significance Tests.

It is possible to determine the statistical
significance of the separate Eigenvalues and
retain only those factors that are statistically
significant. A drawback is that with large
samples (size greater than 200), many factors
are likely to be statistically significant, although
from a practical viewpoint many of these account
for only a small proportion of the total variance.
Copyright © 2010 Pearson Education, Inc. 19-27
Conducting Factor Analysis: Rotate Factors

• Although the initial or unrotated factor matrix

indicates the relationship between the factors and
individual variables, it seldom results in factors that
can be interpreted, because the factors are
correlated with many variables.
• Therefore, through rotation, the factor matrix is
transformed into a simpler one that is easier to
interpret.
• In rotating the factors, we would like each factor to
have nonzero, or significant, loadings or
coefficients for only some of the variables.
Likewise, we would like each variable to have
nonzero or significant loadings with only a few
factors, if possible with only one. The rotation is
called orthogonal rotation if the axes are
maintained
Copyright at right
© 2010 Pearson Education, Inc. angles. 19-28
 Conducting Factor Analysis: Rotate Factors

• The most commonly used method for rotation is

the varimax procedure. This is an orthogonal
method of rotation that minimizes the number of
variables with high loadings on a factor, thereby
enhancing the interpretability of the factors.
Orthogonal rotation results in factors that
are uncorrelated.
• The rotation is called oblique rotation when the
axes are not maintained at right angles, and the
factors are correlated. Sometimes, allowing for
correlations among factors can simplify the factor
pattern matrix. Oblique rotation should be used
when factors in the population are likely to be
strongly correlated.
Copyright © 2010 Pearson Education, Inc. 19-29
Factor Matrix Before and After Rotation

Fig. 19.5

Factors Factors
Variables 1 2 Variables 1 2
1 X 1 X
2 X X 2 X
3 X 3 X
4 X X 4 X
5 X X 5 X
6 X 6 X
(a) (b)
High Loadings High Loadings
Before Rotation After Rotation
Copyright © 2010 Pearson Education, Inc. 19-30
Conducting Factor Analysis: Interpret Factors

• A factor can then be interpreted in terms of

the variables that load high on it.

• Another useful aid in interpretation is to plot

the variables, using the factor loadings as
coordinates. Variables at the end of an axis
are those that have high loadings on only
that factor, and hence describe the factor.

Copyright © 2010 Pearson Education, Inc. 19-31

 Factor Loading Plot

Rotated Component Matrix

Fig. 19.6 Component 2
Component Plot in Component
Rotated Space Variable 1 2
Component 1
1.0 V4
  V6 V1 0.962 -2.66E-02
V2
V2 -5.72E-02 0.848
0.5
V3 0.934 -0.146

0.0 
V1 V4 -9.83E-02 0.854
 V5 V3  V5 -0.933 -8.40E-02
-0.5
V6 8.337E-02 0.885

-1.0

1.0 0.5 0.0 -0.5 -1.0

Copyright © 2010 Pearson Education, Inc. 19-32
 Conducting Factor Analysis:
Calculate Factor Scores

The factor scores for the ith factor may be

estimated as follows:

Fi = Wi1 X1 + Wi2 X2 + Wi3 X3 + . . . + Wik Xk

Copyright © 2010 Pearson Education, Inc. 19-33

 Conducting Factor Analysis:
Select Surrogate Variables

• By examining the factor matrix, one could

select for each factor the variable with the
highest loading on that factor.
• That variable could then be used as a
surrogate variable for the associated factor.
• However, the choice is not as easy if two or
more variables have similarly high loadings.
In such a case, the choice between these
variables should be based on theoretical and
measurement considerations.

Copyright © 2010 Pearson Education, Inc. 19-34

Conducting Factor Analysis:
Determine the Model Fit

• The correlations between the variables can be

deduced or reproduced from the estimated
correlations between the variables and the
factors.

• The differences between the observed

correlations (as given in the input correlation
matrix) and the reproduced correlations (as
estimated from the factor matrix) can be
examined to determine model fit. These
differences are called residuals.

Copyright © 2010 Pearson Education, Inc. 19-35

Results of Common Factor Analysis

Table 19.4
Communalities
Bartlett test of sphericity
Variables Initial Extraction
V1 0.859 0.928 • Approx. Chi-Square = 111.314
V2 0.480 0.562 • df = 15
V3 0.814 0.836
• Significance = 0.00000
V4 0.543 0.600
V5 0.763 0.789 • Kaiser-Meyer-Olkin measure of
V6 0.587 0.723 sampling adequacy = 0.660

Initial Eigenvalues
Factor Eigenvalue % of variance Cumulat. %
1 2.731 45.520 45.520
2 2.218 36.969 82.488
3 0.442 7.360 89.848
4 0.341 5.688 95.536
5 0.183 3.044 98.580
6 0.085 1.420 100.000

Copyright © 2010 Pearson Education, Inc. 19-36

 Results of Common Factor Analysis

Table 19.4, cont.

Extraction Sums of Squared Loadings

Factor Eigenvalue % of variance Cumulat. %
1 2.570 42.837 42.837
2 1.868 31.126 73.964

Factor Matrix
Variables Factor 1 Factor 2
V1 0.949 0.168
V2 -0.206 0.720
V3 0.914 0.038
V4 -0.246 0.734
V5 -0.850 -0.259
V6 -0.101 0.844

Rotation Sums of Squared Loadings

Factor Eigenvalue % of variance Cumulat. %
1 2.541 42.343 42.343
2 1.897 31.621 73.964

Copyright © 2010 Pearson Education, Inc. 19-37

 Results of Common Factor Analysis

Table 19.4, cont.

Rotated Factor Matrix
Variables Factor 1 Factor 2
V1 0.963 -0.030
V2 -0.054 0.747
V3 0.902 -0.150
V4 -0.090 0.769
V5 -0.885 -0.079
V6 0.075 0.847

Factor Score Coefficient Matrix

Variables Factor 1 Factor 2
V1 0.628 0.101
V2 -0.024 0.253
V3 0.217 -0.169
V4 -0.023 0.271
V5 -0.166 -0.059
V6 0.083 0.500

Copyright © 2010 Pearson Education, Inc. 19-38

Results of Common Factor Analysis

Table 19.4, cont.

The lower-left triangle contains the reproduced

correlation matrix; the diagonal, the communalities;
the upper-right triangle, the residuals between the
observed correlations and the reproduced correlations.

Factor Score Coefficient Matrix

Variables V1 V2 V3 V4 V5 V6
V1 0.928 0.022 -0.000 0.024 -0.008 -0.042
V2 -0.075 0.562 0.006 -0.008 0.031 0.012
V3 0.873 -0.161 0.836 -0.005 0.008 0.042
V4 -0.110 0.580 -0.197 0.600 -0.025 -0.004
V5 -0.850 -0.012 -0.786 0.019 0.789 0.003
V6 0.046 0.629 -0.060 0.645 -0.133 0.723

Copyright © 2010 Pearson Education, Inc. 19-39

 SPSS Windows

To select this procedure using SPSS for

Windows, click:

Analyze>Data Reduction>Factor …

Copyright © 2010 Pearson Education, Inc. 19-40

 SPSS Windows: Principal Components

1. Select ANALYZE from the SPSS menu bar.

2. Click DATA REDUCTION and then FACTOR.
3. Move “Prevents Cavities [v1],” “Shiny Teeth [v2],” “Strengthen Gums
[v3],” “Freshens Breath [v4],” “Tooth Decay Unimportant [v5],” and
“Attractive Teeth [v6]” into the VARIABLES box
4. Click on DESCRIPTIVES. In the pop-up window, in the STATISTICS box
check INITIAL SOLUTION. In the CORRELATION MATRIX box, check
KMO AND BARTLETT’S TEST OF SPHERICITY and also check
REPRODUCED. Click CONTINUE.
5. Click on EXTRACTION. In the pop-up window, for METHOD select
PRINCIPAL COMPONENTS (default). In the ANALYZE box, check
CORRELATION MATRIX. In the EXTRACT box, check EIGEN VALUE OVER
1(default). In the DISPLAY box, check UNROTATED FACTOR SOLUTION.
Click CONTINUE.
6. Click on ROTATION. In the METHOD box, check VARIMAX. In the
DISPLAY box, check ROTATED SOLUTION. Click CONTINUE.
7. Click on SCORES. In the pop-up window, check DISPLAY FACTOR
SCORE COEFFICIENT MATRIX. Click CONTINUE.
8. Click OK.

Copyright © 2010 Pearson Education, Inc. 19-41

 SAS Learning Edition Windows

To select this procedure using SAS

Learning Edition, click:

Analyze > Multivariate > Factor

Analysis

Copyright © 2010 Pearson Education, Inc. 19-42

SAS Learning Edition: Principal Components

1. Select ANALYZE from the SAS Learning Edition menu bar.

2. Click Multivariate and then Principal Components.
3. Move V1-V6 to the Analysis variables task role.
4. Click Factoring Method and change the Smallest
Eigenvalue to 1.
5. Click on Rotation and Plots and select Orthogonal varimax
as the Rotation method and the scree plot under the Plots
to show.
6. Click on Results and select Eigenvectors, Factor scoring
coefficients under Factor results, and Means and standard
deviations of input columns, Correlation matrix of input
columns, and Kaiser’s measure of sampling adequacy
under Related Statistics.
7. Click OK.

Copyright © 2010 Pearson Education, Inc. 19-43

Copyright © 2010 Pearson Education, Inc. 19-44
CONSUMER INSIGHT PROPOSAL

By

SHODH
AUG 2010
 PREAMBLE

• USE MARKET RESEARCH SYSTEM TO BUILD COMPETITIVE

ADVANTAGE IN YOUR MARKET !
PROBLEM DEFINITION

Sales & Market share not picking up despite resource

commitment

Are we addressing the right segment of consumers?

How to position our brands in consumer’s mind?

PROBLEM DEFINITION- TRACKING

Are marketing variables yielding desired performance?

What is the optimal spend on 4 P’s of marketing?

Understand impact and efficiency of marketing spends

How to monitor marketing performance and do mid

course correction of strategies?
PROBLEM DEFINITION- FUTURE

What are the goals, opportunities and threats to our

brands and business?

What price premium or price differential to charge

based on our current brand equity?

How to engender channel members’ cooperation for

business success?.

How to do line extensions for growth oriented

strategies?
TYPES OF CONSUMER INSIGHT RESEARCH

Time wise continuous tracking research-

Brand equity, advertising, sales promotion, brand
premium and market mix modeling

Ad Hoc Research –
New product testing and demand forecasting

Satisfaction Research –
Customer, dealer and employees

General Research –
U & A survey, Segmenting and positioning study
WHY DO WE NEED TRACKING RESEARCH?

For proper / optimal allocation of resources to brands?

To leverage Brand Equity to build, sustain and reap

sales, MS and price premium

To reduce channel loss and engender growth oriented

strategies and line extensions
BRAND EQUITY RESEARCH

Relate MS/ PP to BE, communication effectiveness and

loyalty states of consumers

Look at our opportunities and threats to our brands

Assess short term and long term impact of BE on sales

WHY DO WE NEED ADVERTISING TRACKING?

Compare executional and promotional outcomes of

several players in a market

Compare performance of incumbent's multiple

executions

Facilitate image correction based on positioning,

branding, pricing and targeting decisions

How much to spend for achieving desired objectives?

OUTCOMES OF TRACKING RESEARCH

Find gaps in communication and promotional effects

Assess impact of positioning changes on MS / SALES

& Price premium

Perform what if? Analysis of marketing resources

spent

Simulate future marketing outcomes based on plans

OUTCOMES OF ADVERTISING TRACKING
RESEARCH
Relate communication outcomes to advertising
expenditure and media related variables

Impute cost benefit analysis for brands and loyalty

segments

Understand and Reveal brand – consumer relationship

patterns
OBJECTIVES OF SALES PROMOTIONAL
RESEARCH
Increase market share from competitors and switchers

Target price sensitive and value driven consumers

Change brand perceptions for motivating customers to

buy our products and brands
OUTCOMES OF SALES PROMOTIONAL
RESEARCH
To navigate success of a brand to consummate larger
sales volumes

To assess effectiveness of our SP programs vis-à-vis

competitors?

To assess performance of tactical strategies on trial,

repeat purchase rates and loyalty relationships

To increase productivity of marketing spends

SATISFACTION RESEARCH

Find drivers of satisfaction, loyalty, advocacy, retention

and brand commitment

Identify important variables affecting satisfaction

based on performance grid

To identify priority areas for correction and process

mapping for service delivery improvements
SATISFACTION RESEARCH

Assess satisfaction levels amongst consumers,

dealers and employees

Manage dealer and consumer expectations for better

performance delivery

Identify strengths and weaknesses of our products in

the consumer and dealer channel

Generate performance standards and training

requirements of employees and dealers
DEALER SATISFACTION RESEARCH

Better channel control and reduced channel loss

Better dealer development and management strategies

Aligning dealer BE programs in line with consumer

equity programs
WHY DEALER SATISFACTION RESEARCH?

Maximize sales and MS realization in the channel

Enhance channel penetration and reduce channel loss

Assess success of product lines extensions in the

channel

Prioritize resource commitment for better dealer

branding strategies
OUTCOMES OF DEALER SATISFACTION
RESEARCH?
How am I servicing my dealers in relation to rivals?

Where can I grow my business and how to leverage

channel equity for success?

What commercial terms, trade support and relationship

dimensions lead to success in the channel?
HOW TO BUILD COMPETITIVE ADVANTAGE BASED
ON SATISFACTION RESEARCH?
Build a consumer centric firm and effective marketing
planning based on consumer orientation

Link service performance standards to bonus and

reward programs of employees and dealers

Proactively measure perception gaps between

expectations and service delivery of consumers
SEGMENTATION AND POSITIONING STRATEGIES

Create competitive advantage based on distinct

marketing mix elements to different segments

Lead to segment dominance and better financial

returns over rivals

Differentiate and position the brand for success

POSITIONING STRATEGIES

Find how our brands are positioned in the minds of

consumers relative to competitors?

What are the consumer perceptions, beliefs,

preferences, life style and demographic parameters
affecting our brand?

What happens to brand positions dynamically

changing over time?
DEMAND FORECASTING - OUTPUTS

Sizing the category demand and brand level demand

Determine optimal price – volume relationship

Project market share over time (NEW PRODUCT

TRACKER) in test marketing

Assess cannibalization of existing products by new

products.
DEMAND FORECASTING - OUTPUTS

Plan product volumes and product mix decisions

Find technology and product assortment strategies

Monitor demand of a new evolving market segment

Monitor new consumer trends for product planning

DEMAND FORECASTING

New product forecasting versus existing product

demand forecasting

Timing of introduction of new products and

technologies

Deciding market entry strategies based on price –

volume relationships
DEMAND FORECASTING METHODS

Lab testing and product placement testing to assess

purchase intention
For new products use Assessor type pre test market
models or virtual product – market models on
computers with simulated data
Cross sectional and time series econometric
forecasting models, trend extrapolation with Box
Jenkins models

Macro-economic and micro economic forecasting

models based on resource commitment strategies
Consumer innovation – diffusion based models for
forecasting durables and new products demand
THANK YOU
 Defining the Marketing
Research Problem and
Developing an Approach

Copyright © 2010 Pearson Education, Inc. 2-1

 Outline

1) Overview
2) Importance of Defining a Problem
3) The Process of Defining the Problem and
Developing an Approach
4) Tasks involved in Problem Definition
i. Discussions with Decision Makers
ii. Interviews with Industry Experts
iii. Secondary Data Analysis
iv. Qualitative Research

Copyright © 2010 Pearson Education, Inc. 2-2

 Outline

5) Environmental Context of the Problem

i. Past Information and Forecasts
ii. Resources and Constraints
iii. Objectives
iv. Buyer Behavior
v. Legal Environment
vi. Economic Environment
vii. Marketing and Technological Skills
6) Management Decision Problem and
Marketing Research Problem

Copyright © 2010 Pearson Education, Inc. 2-3

 Outline

7) Defining the Marketing Research Problem

8) Components of an Approach
i. Objective / Theoretical Foundations
ii. Analytical Model
iii. Research Questions
iv. Hypothesis
v. Specification of Information Needed
9) International Marketing Research
10) Ethics in Marketing Research
11) Summary, Managerial recommendations

Copyright © 2010 Pearson Education, Inc. 2-4

 Chain Restaurant Study

One day I received a

phone call from a
research analyst who
introduced himself as
one of our alumni.
He was working for a
restaurant chain in town
and wanted help
analyzing the data he
had collected while
conducting a marketing
research study.

Copyright © 2010 Pearson Education, Inc. 2-5

 Chain Restaurant Study

When we met, he presented me with a copy of the

questionnaire and asked how he should analyze
the data. My first question to him was,

Copyright © 2010 Pearson Education, Inc. 2-6

 Chain Restaurant Study

When he looked
perplexed, I
explained that data
analysis is not an
independent
exercise.

Rather, the goal of data analysis is to PROVIDE

INFORMATION RELATED TO THE PROBLEM
COMPONENTS.
Copyright © 2010 Pearson Education, Inc. 2-7
 Chain Restaurant Study

I was surprised to learn that he

did not have a clear
understanding of the marketing
research problem and that a
written definition did not exist. So
before going any further, I had to
define the marketing research
problem.
Once that was done, I found that
much of the data collected was not
relevant to the problem. In this
sense, the whole study was a waste
of resources. A new study had to be
designed and implemented to
address the problem defined.
Copyright © 2010 Pearson Education, Inc. 2-8
 The Problem Definition Process

Tasks Involved
Fig. 2.1
Discussion Interviews Secondary Qualitative
with with Data Research
Decision Maker(s) Experts Analysis

Environmental Context of the Problem

Step I: Problem Definition

Management Decision Problem

Marketing Research Problem

Step II: Approach to the Problem

Analytical Specification
Objective/ Research of
Theoretical Model: Verbal, Hypotheses
Questions
Foundations Graphical, Information
Mathematical Needed

Step III: Research Design

Copyright © 2010 Pearson Education, Inc. 2-9

 Tasks Involved in Problem Definition

• Discussions with Decision

Makers
• Interviews with Industry
Experts
• Secondary Data Analysis
• Qualitative Research

Copyright © 2010 Pearson Education, Inc. 2-10

 The Problem Audit

The problem audit is a comprehensive examination of a

marketing problem with the purpose of understanding its
origin and nature.
1. The events that led to the decision that action is needed,
or the history of the problem
2. The alternative courses of action available to the DM
3. The criteria that will be used to evaluate the alternative
courses of action
4. The potential actions that are likely to be suggested
based on the research findings
5. The information that is needed to answer the DM's
questions
6. The manner in which the DM will use each item of
information in making the decision
7. The corporate culture as it relates to decision making

Copyright © 2010 Pearson Education, Inc. 2-11

 The Seven Cs of Interaction

The interaction between the DM and the

researcher should be characterized by the
seven Cs:
1. Communication
2. Cooperation
3. Confidence
4. Candor
5. Closeness
6. Continuity
7. Creativity

Copyright © 2010 Pearson Education, Inc. 2-12

 Factors to be Considered in the
Environmental Context of the Problem

PAST INFORMATION AND

FORECASTS

RESOURCES AND CONSTRAINTS

OBJECTIVES

BUYER BEHAVIOR

LEGAL ENVIRONMENT

ECONOMIC ENVIRONMENT
MARKETING AND TECHNOLOGICAL
SKILLS
Copyright © 2010 Pearson Education, Inc. 2-13
 Management Decision Problem Vs. Marketing Research
Problem

Management Decision Problem Marketing Research Problem

Should a new product be To determine consumer preferences

introduced? and purchase intentions for the
proposed new product

Should the advertising To determine the effectiveness

campaign be changed? of the current advertising
campaign

Should the price of the To determine the price elasticity

brand be increased? of demand and the impact on sales
and profits of various levels
of price changes

Copyright © 2010 Pearson Education, Inc. 2-14

 Proper Definition of the Research Problem

Marketing Research
Problem

Broad Statement

Specific Components

Copyright © 2010 Pearson Education, Inc. 2-15

 Department Store Project

Problem Definition
In the department store project, the marketing research
problem is to determine the relative strengths and
weaknesses of WEST SIDE, vis-à-vis other major
competitors, with respect to factors that influence store
patronage. Specifically, research should provide information
on the following questions.

1. [Link] criteria do households use when selecting

department stores?
2.
2. How do households evaluate WEST SIDE and
competing stores (Shopper's Stop, Life style and Max ) in
terms of the choice criteria identified in question above?

Copyright © 2010 Pearson Education, Inc. 2-16

 Department Store Project

Problem Definition

3. Which stores are patronized when shopping for specific

product categories?

4. What is the market share of West Side and its

competitors for specific product categories?

5. What is the demographic and psychological profile of

the customers of West Side? Does it differ from the
profile of customers of competing stores?
Copyright © 2010 Pearson Education, Inc. 2-17
 Components of an Approach

▪ Objective/Theoretical Foundations
▪ Analytical Model
▪ Research Questions
▪ Hypotheses
▪ Specification of the Information
Needed

Copyright © 2010 Pearson Education, Inc. 2-18

 The Role of Theory in Applied Marketing
Research

Research Task Role of Theory

1. Conceptualizing Provides a conceptual foundation and understanding of the basic processes
and identifying underlying the problem situation. These processes will suggest key dependent
key variables and independent variables.
2. Operationalizing Theoretical constructs (variables) can suggest independent and dependent
key variables variables naturally occurring in the real world.
3. Selecting a Causal or associative relationships suggested by the theory may indicate whether
research design a causal or descriptive design should be adopted.
4. Selecting a The theoretical framework may be useful in defining the population and
sample suggesting variables for qualifying respondents, imposing quotas, or stratifying
the .
5. Analyzing and population
The theoretical framework (and the models, research questions and hypotheses
interpreting data based on it) guide the selection of a data analysis strategy and the interpretation
of results.
6. Integrating The findings obtained in the research project can be interpreted in the light of
findings previous research and integrated with the existing body of knowledge.

Copyright © 2010 Pearson Education, Inc. 2-19

 Models

An analytical model is a set of variables

and their interrelationships designed to
represent, in whole or in part, some real
system or process.

In verbal models, the variables and their

relationships are stated in prose form.
Such models may be mere restatements of
the main tenets of a theory.

Copyright © 2010 Pearson Education, Inc. 2-20

 Graphical Models

Graphical models are visual. They are used to

isolate variables and to suggest directions of
relationships but are not designed to provide
numerical results.

Awarenes
s

Understanding:
Evaluation

Preferenc
e

Patronag
Copyright © 2010 Pearson Education, Inc. e 2-21
 Mathematical Models

Mathematical models explicitly specify

the relationships among variables, usually
in equation form.

∑a x
n
y = a
0
+ i i
i =1

Where
y = degree of preference

a=,amodel parameters to be estimated

0 i

statistically

Copyright © 2010 Pearson Education, Inc. 2-22

 Development of Research
Questions and Hypotheses

Components of the
Marketing Research Problem
Objective/
Theoretical
Framework
Research Questions
Analytical
Model
Hypotheses

Copyright © 2010 Pearson Education, Inc. 2-23

 Research Questions and Hypotheses

• Research questions (RQs) are

refined statements of the specific
components of the problem.

• A hypothesis (H) is an unproven

statement or proposition about a factor
or phenomenon that is of interest to the
researcher. Often, a hypothesis is a
possible answer to the research question.

Copyright © 2010 Pearson Education, Inc. 2-24

 Department Store Project

• RQ: Do the customers of West Side

exhibit store loyalty?
• H1: Customers who are store-loyal are
less knowledgeable about the shopping
environment and competing stores.
• H2: Store-loyal customers are more
risk-averse than are non-loyal customers.

Copyright © 2010 Pearson Education, Inc. 2-25

Department Store Project- Specification of Information Needed

Component 1
• The researcher identified the following factors as part of the
choice criteria:
• quality of merchandise,
• variety and assortment of merchandise,
• returns and adjustment policy,
• service of store personnel,
• prices,
• convenience of location,
• layout of store,
• credit and billing policies.
• The respondents should be asked to rate the importance of
each factor as it influences their store selection.

Copyright © 2010 Pearson Education, Inc. 2-26

 Department Store Project

importance of each factor as it influences their store selection.

Component 2
• The researcher identified four department stores as competitors
to West Side based on discussions with management.
• The respondents should be asked to evaluate West Side and
its four competitors on the eight choice criteria factors.

Copyright © 2010 Pearson Education, Inc. 2-27

 Department Store Project

Component 3
• 16 different product categories were selected, including
• women's dresses, women's sportswear, lingerie and
body fashion,
• junior merchandise, men's apparel,
• cosmetics, jewelry,
• shoes, sheets and towels,
• furniture and bedding, and
• draperies.
• The respondents should be asked whether they shop at each
of the 4 stores for each of the 16 product categories.

Copyright © 2010 Pearson Education, Inc. 2-28

 Department Store Project

Component 4
• No additional information needs to be obtained from the
respondents.

Component 5
• Information should be obtained on the
• standard demographic characteristics and
• the psychographic characteristics of store loyalty,
• credit use,
• appearance consciousness, and
• combining shopping with eating.

Copyright © 2010 Pearson Education, Inc. 2-29

 At INdigo Airways, Food Is Uniting the Airline
with Travelers

Indigo Airways, as other major airlines, had to deal with

passenger loyalty (management decision problem: how
to attract more and more loyal passengers). The broad
marketing research problem was to identify the factors
that influence loyalty of airline travelers.
Copyright © 2010 Pearson Education, Inc. 2-30
 At Indigo Airways, Food Is Uniting the Airline
with Travelers

The basic answer is to improve service. Exploratory

research, theoretical framework, and empirical evidence
revealed that the consumers’ choice of an airline is
influenced by: safety, price of the ticket, frequent-flyer
program, convenience of scheduling, and brand name.

Copyright © 2010 Pearson Education, Inc. 2-31

 At Indigo Airways, Food Is Uniting the Airline
with Travelers

A graphical model stipulated that

consumers evaluate competing
airlines based on factors of the choice
criteria to select a preferred airline.
The problem was that major airlines
were quite similar on these factors.
Indeed, "airlines offer the same
schedules, the same service, and the
same fares.”
Consequently, Indigo Airways had to
find a way to differentiate itself. Food
turned out to be the solution.

Copyright © 2010 Pearson Education, Inc. 2-32

 At Indigo Airways, Food Is Uniting the
Airline with Travelers

Secondary data, like the J. D Power & Associates'

survey on "current and future trends in the airline
food industry," indicated that "food service is a major
contributor to customers’ loyalty." This survey also
emphasized the importance of food brands.
Copyright © 2010 Pearson Education, Inc. 2-33
 At Indigo Airways, Food Is Uniting the Airline
with Travelers

The airline's Marketrak survey told Indigo Airways that

"customers wanted more varied and up-to-date food.”
The following research questions and hypotheses may be
posed.
RQ1 How important is food for airline customers?
H1: Food is an important factor for airline travelers.
H2: Travelers value branded food – Darjeeling Tea. Coke
H3: Travelers prefer larger food portions, but with
consistent quality.
H4: Travelers prefer exotic food.
Copyright © 2010 Pearson Education, Inc. 2-34
 At Indigo Airways, Food Is Uniting the Airline
with Travelers
Characteristics that influence the research design
included the identification of competing airlines
(Indigo, Spice Jet, Air Asia etc.), factors of the choice
criteria (already identified), measurement of airline
travel, and loyalty.

Copyright © 2010 Pearson Education, Inc. 2-35

 At Indigo Airways, Food Is Uniting the Airline
with Travelers
This kind of research helped Indigo Airways define their marketing
research problem and develop the approach. Focus groups and
surveys were conducted to check customers' perceptions of food in
Jet Airways' aircraft. The results provided support for all the
hypotheses (H1 to H4). Indigo Airways then made a few changes:
new "culinary menus," larger portions of food, new coffee, and
branded products (e.g Cadbury’s chocolates). This resulted in better
service, increasing customer satisfaction and fostering loyalty.

Copyright © 2010 Pearson Education, Inc. 2-36

Copyright © 2010 Pearson Education, Inc. 2-37
Copyright © 2010 Pearson Education, Inc. 2-38
 Chapter 1

Introduction and Early

Phases of Marketing
Research

Copyright © 2010 Pearson Education, Inc. 1-1

 Chapter Outline

1) Overview
2) Definition of Marketing Research
3) A Classification of Marketing Research
4) Marketing Research Process
5) The Role of Marketing Research in
Marketing Decision Making
6) Marketing Research and Competitive
Intelligence
7) The Decision to Conduct Research

Copyright © 2010 Pearson Education, Inc. 1-2

 Chapter Outline

8) Marketing Research Suppliers and Services

9) Selecting a Research Supplier
10) Careers in Marketing Research
11) The Role of Marketing Research in MIS and
DSS
12) The Department Store Project
13) International Marketing Research
14) Ethics in Marketing Research
15) Summary

Copyright © 2010 Pearson Education, Inc. 1-3

 Marketers Need Information

Data Information Action

Copyright © 2010 Pearson Education, Inc. 1-4

 Marketers Need Information

• Marketers need information about the

environments in which they operate

• It is easy to confuse data with information

• Data – the raw facts, recorded measures of
certain phenomena
• Information – transformed and organized facts
in a form suitable for managers to base
decisions

Copyright © 2010 Pearson Education, Inc. 1-5

 Marketing Research Defined

• The organization’s formal communication link

with the environment

• Through marketing research, the organization

gathers and interprets data from the environment
for use in developing, implementing, and
monitoring the firm’s marketing plans

Copyright © 2010 Pearson Education, Inc. 1-6

 Redefining Marketing Research

The American Marketing Association (AMA)

redefined Marketing Research as:

The function that links the consumer, the

stakeholders, and public to the marketer
through INFORMATION

Copyright © 2010 Pearson Education, Inc. 1-7

 Redefining Marketing Research

Used to identify and

define market
opportunities and
problems
Generate, refine, and
evaluate marketing
performance
Monitor marketing
performance

Improve understanding
of marketing as a
process
Copyright © 2010 Pearson Education, Inc. 1-8
 Definition of Marketing Research

Marketing research is the systematic and objective

▪ identification
▪ collection
▪ analysis
▪ dissemination
▪ and use of information
For the purpose of improving decision making related to the
▪ identification and
▪ solution of problems and opportunities in marketing

Copyright © 2010 Pearson Education, Inc. 1-9

 Market Research

• Specifies the information necessary to

address these issues
• Manages and implements the data
collection process
• Analyzes the results
• Communicates the findings and their
implications
• Helps managers use this information to
make decisions

Copyright © 2010 Pearson Education, Inc. 1-10

 Who Does Marketing Research?

• Producers of Products and Services

• Advertising Agencies

• Marketing Research Companies

• Management consultants

• Government agencies- Census Bureau of INDIA,

NCAER-Delhi

Copyright © 2010 Pearson Education, Inc. 1-11

 Who Does Marketing Research?

• Producers of Products and Services

• Organizations that produce products or deliver
services for businesses or consumers often
conduct research designed to develop and
market their products and services
• Examples include

Kraft Foods NPR Unilever

Copyright © 2010 Pearson Education, Inc. 1-12
 Who Does Marketing Research?

• Advertising Agencies
• Often conduct research designed to help
• Create and measure the effectiveness of
advertising campaigns
• Determine the market potential of a
proposed new product or the client’s market
share
• Better understand consumers, their interests
and behaviors

Copyright © 2010 Pearson Education, Inc. 1-13

 Who Does Marketing Research?
• Advertising Agencies
• Media agency MEC conducted an extensive
project to better understand women shoppers
in 542 smaller Chinese cities
• The segmentation study uncovered five (5)
distinct segments:
• The Pressure Cooker (20%)
• The Traditional (5%)
• The Practical (48%)
• The Achiever (58%)
• The Undecided (35%)
• Numbers in parentheses indicate the
percentage that had accessed the
Internet
Copyright © 2010 Pearson Education, Inc. 1-14
 Who Does Marketing Research?

• Marketing Research Companies

• Specialize in conducting marketing research

Worldwide
Rank/Organization Parent Country Revenue
(U.S. $, in mil)
1. The Nielsen USA $4,628.0
Company
2. Kantar UK $2,823.2
3. IMS Health Inc. USA $2,198.7
4. GfK SE Germany $1,622.8
5. Ipsos SA France $1.315.0

Copyright © 2010 Pearson Education, Inc. 1-15

 Why Study Marketing Research?

• Marketing research can be rewarding and fun

• All of us are consumers of marketing and public

opinion research

• Managers need to know the research process,

including what to expect marketing research to
be able to deliver

Copyright © 2010 Pearson Education, Inc. 1-16

 Why Study Marketing Research?

• Stages in the Research Process

Formulate
Problem
Determine
Determine Data Research Identify
Collection Method
Design Data Source

Secondary Data
Design Data
Primary Data

Collection Aggregate Data

Forms
Design
Sample
Collect Analyze and
Data Interpret Data
Prepare the
Research
Report
Copyright © 2010 Pearson Education, Inc. 1-17
 Classification of Marketing Research

Problem-Identification Research
• Research undertaken to help identify problems which are
not necessarily apparent on the surface and yet exist or
are likely to arise in the future. Examples: market
potential, market share decline, image, market
characteristics, sales analysis, forecasting, and trends
research.

Problem-Solving Research
• Research undertaken to help solve specific marketing
problems. Examples: segmentation, product, pricing,
promotion, and distribution research.
Copyright © 2010 Pearson Education, Inc. 1-18
 A Classification of Marketing Research

Fig. 1.1
Marketing Research

Problem Problem-Solving
Identification Research Research

Market Potential Research Segmentation Research

Market Share Research Product Research
Market Characteristics Research
Pricing Research
Sales Analysis Research
Forecasting Research Promotion Research
Business Trends Research Distribution Research
Copyright © 2010 Pearson Education, Inc. 1-19
 Problem-Solving Research

Table 1.1

SEGMENTATION RESEARCH
▪ Determine the basis of segmentation
▪ Establish market potential and
responsiveness for various
PRODUCT RESEARCH
segments
▪ Test concept
▪ Select target markets
▪ Determine optimal product design
▪ Create lifestyle profiles:
demography, media, and ▪ Package tests
product image characteristics ▪ Product modification
▪ Brand positioning and repositioning
▪ Test marketing
▪ Control score tests
Copyright © 2010 Pearson Education, Inc. 1-20
 Problem-Solving Research

Table 1.1 cont. PROMOTIONAL RESEARCH

▪ Optimal promotional budget
0.00% APR
▪ Sales promotion relationship
▪ Optimal promotional mix
▪ Copy decisions
▪ Media decisions
▪ Creative advertising testing
▪ Evaluation of advertising effectiveness
PRICING RESEARCH
▪ Claim substantiation
▪ Pricing policies
▪ Importance of price in brand selection
▪ Product line pricing
▪ Price elasticity of demand
▪ Initiating and responding to price changes
$ALE
Copyright © 2010 Pearson Education, Inc. 1-21
 Problem-Solving Research

Table 1.1 cont.

DISTRIBUTION RESEARCH
Determine…
▪ Types of distribution
▪ Attitudes of channel members
▪ Intensity of wholesale & resale coverage
▪ Channel margins
▪ Location of retail and wholesale outlets

Copyright © 2010 Pearson Education, Inc. 1-22

 Marketing Research Process

Step 1 : Problem Definition

Step 2 : Development of an Approach to the Problem
Step 3 : Research Design Formulation
Step 4 : Fieldwork or Data Collection
Step 5 : Data Preparation and Analysis
Step 6 : Report Preparation and Presentation

Copyright © 2010 Pearson Education, Inc. 1-23

 Marketing Research Process

Step 1: Defining the Problem

Step 2: Developing an Approach to the Problem

Step 3: Formulating a Research Design

Step 4: Doing Field Work or Collecting Data

Step 5: Preparing and Analyzing Data

Step 6: Preparing and Presenting the Report

Copyright © 2010 Pearson Education, Inc. 1-24

 The Role of Marketing Research

Fig. 1.2 Customer Groups

• Consumers
• Employees
• Shareholders
• Suppliers
Uncontrollable
Controllable Environmental
Marketing Factors
Variables
• Economy
Marketing
•Product • Technology /
Research competition
•Pricing
• Laws &
•Promotion Regulations
•Distribution • Social & Cultural
Assessing Marketing Factors
Providing
Information Decision • Political Factors
Information
Needs Making

Marketing Managers

• Market Segmentation
•Target Market Selection
• Marketing Programs
• Performance & Control
Copyright © 2010 Pearson Education, Inc. 1-25
 Power Decisions’ Methodology
Fig. 1.3

Opportunity scan
Option generation
Solve Problem
Refine options
Decision
Client
Needs Find Seek Plan Act

Achieve Goal

Research Evaluate Market Advise

How We Clarify
Recommend Plan Assist
Decisions Analysis Interpret
Help Facilitate Research Execution

Copyright © 2010 Pearson Education, Inc. 1-26

 Marketing Research Suppliers & Services
Fig. 1.4

INTE RESEARCH
RNA SUPPLIERS EXTE
L RNAL

FULL LIMITED
SERVICE SERVICE
Field Other
Syndicate Internet
Services Services
Services Services

Standardized Customized Focus Groups

Services Services Technical
and Qualitative and Analytical
Services Services
Copyright © 2010 Pearson Education, Inc. 1-27
 LEADING RESEARCH AGENCIES IN INDIA

IMRB – KANTAR GROUP

AC Nielsen

TNS

IPSOS

HAMSA

GFK / ORG Retail Audit

NCAER

Copyright © 2010 Pearson Education, Inc. 1-28

Table 1.2 Top 50 U.S. Marketing Research Firms
U.S. Rank Organization Headquarters Website U.S. Global Non-U.S.
2007 2006

1 1 The Nielsen Co. New York [Link] $2,173.0 $4,220.0 48.5%

2 2 IMS Health Inc. Norwalk, Conn. [Link] 801.0 2,192.6 63.5

3 3 Kantar Group* Fairfield, Conn. [Link] 526.8 1,551.4 66.0

4 5 Westat Inc. Rockville, MD [Link] 467.8 467.8 —

5 4 IRI Chicago [Link] 441.0 702.0 37.2

6 6 TNS U.S. New York [Link] 379.8 2,137.2 82.2

7 7 Arbitron Inc. New York [Link] 338.5 352.1 3.9

8 8 GfK AG USA Nuremberg, Germany [Link] 319.7 1,603.00 80.1

9 9 Ipsos New York [Link] 281.2 1,270.30 77.9

10 10 Synovate London [Link] 250.4 867.0 71.1

11 11 Maritz Research Fenton, Mo. [Link] 187.4 223.3 16.1

12 13 J.D. Power and Associates* Westlake Village, Calif. [Link] 184.5 260.5 29.2

13 12 Harris Interactive Inc. Rochester, N.Y. [Link] 161.0 227.0 29.1

14 14 The NPD Group Inc. Port Washington, N.Y. [Link] 160.4 211.1 24.0
Opinion Research/
15 — Guideline Group Omaha, Neb. [Link] 124.7 206.7 39.7

15 Opinion Research Corp. Princeton, N.J. [Link] 97.5 179.5 45.7

Copyright © 2010 Pearson Education, Inc. 1-29
Table 1.2 Top 50 U.S. Marketing Research Firms (Cont…)
U.S. Rank Organization Headquarters Website U.S. Global Non-U.S.
2007 2006

38 Guideline Inc. New York [Link] 26.8 26.8 —

16 18 comScore Inc. Reston, Va. [Link] 77.0 87.2 11.7

17 20 Market Strategies Inc. Livonia, Mich. [Link] 75.7 80.4 5.8

20 Market Strategies Inc. Livonia, Mich. [Link] 53.4 58.1 8.1

Flake-Wilkerson Market
37 Insights Little Rock, Ark. [Link] 22.3 22.3 —

18 17 Lieberman Research Worldwide Los Angeles [Link] 71.0 87.4 18.8

19 — Abt Associates Inc. Cambridge, Mass. [Link] 55.1 55.1 —

19 Abt Associates Inc. Cambridge, Mass. [Link] 33.0 33.0 —

41 Abt SRBI Inc. New York [Link] 22.1 22.1 —

20 23 OTX Los Angeles [Link] 50.8 54.5 6.8

21 21 Burke Inc. Cincinnati [Link] 47.0 53.1 11.5

22 22 MVL Group Inc. Jupiter, Fla. [Link] 42.3 42.3 —

23 26 Knowledge Networks Inc. Menlo Park, Calif. [Link] 37.3 37.3 —

23 25 National Research Corp. Lincoln, Neb. [Link] 37.3 41.3 9.7

25 24 Directions Research Inc. Cincinnati [Link] 37.2 37.2 —

26 40 Phoenix Marketing International Rhineback, N.Y. [Link] 33.5 34.9 4.0

Copyright © 2010 Pearson Education, Inc. 1-30
Table 1.2 Top 50 U.S. Marketing Research Firms (Cont…)
U.S. Rank Organization Headquarters Website U.S. Global Non-U.S.
2007 2006

27 34 Lieberman Research Group Great Neck, N.Y. [Link] 30.1 30.1 —

ICR/Int'l Communications
28 27 Research Media, Pa. [Link] 28.8 29.7 3.0

Farmington Hills,
29 28 Morpace Inc. Mich. [Link] 28.7 33.2 13.6

30 33 MarketCast Los Angeles [Link] 25.1 25.1

31 36 Data Development Worldwide New York [Link] 25.0 25.3 1.2

32 39 C&R Research Services Inc. Chicago [Link] 23.6 23.6 —

33 32 Informa Research Services Inc. Calabasas, Calif. [Link] 23.5 23.5 —

34 31 National Analysts Worldwide Philadelphia [Link] 23.3 23.3 —

35 44 Service Management Group Kansas City, Mo. [Link] 22.4 23.0 2.6

36 34 Market Probe Inc. Milwaukee [Link] 21.7 41.4 47.6

37 — Hitwise New York [Link] 21.6 49.9 56.7

38 42 Walker Information Indianapolis [Link] 21.2 25.5 16.9

39 43 KS&R Inc. Syracuse, N.Y. [Link] 17.1 21.0 18.6

40 47 Bellomy Research Inc. Winston-Salem, N.C. [Link] 16.7 16.7 —

41 46 MarketVision Research Inc. Cincinnati [Link] 16.4 16.4 —

42 28 Public Opinion Strategies Alexandra, Va. [Link] 15.5 15.5 —

Copyright © 2010 Pearson Education, Inc. 1-31

Table 1.2 Top 50 U.S. Marketing Research Firms (Cont…)
U.S. Rank Organization Headquarters Website U.S. Global Non-U.S.
2007 2006

43 — Compete Inc. Boston [Link] 14.9 14.9 —

44 45 Savitz Research Companies Dallas [Link] 14.8 14.8 —

Bloomfield Hills,
45 48 RDA Group Inc. Mich. [Link] 13.7 16.8 18.5
Auburn Hills,
46 — Gongos Research Inc. Mich. [Link] 13.3 13.3 —

47 — Q Research Solutions Inc. Old Bridge, N.J. [Link] 13.0 13.2 1.5

48 49 Marketing Analysts Inc. Charleston, S.C. [Link] 12.8 13.6 5.9

RTi Market Research & Brand
49 50 Strategy Stamford, Conn. [Link] 12.2 12.2 —

50 — The Link Group Atlanta [Link] 11.9 13.3 10.5

Total $7.828.7 $17,638.0 55.6%

All other (150 CASRO companies not

included in the Top 50) $774.3 $870.1 11.0%

Total (200 companies) $8,603.0 $18,508.1 53.5%

*Estimated by Top 50. U.S. and worldwide revenue may include nonresearch activities for some companies that are significantly higher. Rate of growth from
year to year has been adjusted so as not to include revenue gains or losses from acquisitions or divestitures. Total revenue of 150 survey research companies

that provide financial information on a confidential basis to CASRO.

Copyright © 2010 Pearson Education, Inc. 1-32

 Selected Marketing Research Career Descriptions

Fig. 1.5
Vice President of Marketing Research: The senior position in
marketing research. The vice president (VP) is responsible for the
entire marketing research operation of the company and serves on
the top management team. This person sets the objectives and
goals of the marketing research department.
Research Director: Also a senior position. The research director has
the general responsibility for the development and execution of all
the marketing research projects.
Assistant Director of Research: Serves as an administrative
assistant to the director and supervises some of the other
marketing research staff members.
(Senior) Project Manager: Has overall responsibility for design,
implementation, and management of research projects.
Statistician/Data Processing Specialist: Serves as an expert on
theory and application of statistical techniques. Responsibilities
include experimental design, data processing, and analysis.

Copyright © 2010 Pearson Education, Inc. 1-33

 Selected Marketing Research Career Descriptions
Fig. 1.5 cont.
Research Director
Vice President of Marketing
Research • Also part of senior
• Part of company’s top management management

team • Heads the development

and execution of all
• Directs company’s entire market research projects
research operation
• Sets the goals & objectives of the
Assistant Director of Research
marketing research department
• Administrative assistant to director
• Supervises research staff members

Senior Project Manager

• Responsible for design, implementation, & research
projects
Copyright © 2010 Pearson Education, Inc. 1-34
 Selected Marketing Research Career Descriptions

Fig. 1.5 cont.

Senior Analyst
• Participates in the development of projects
• Carries out execution of assigned projects
• Coordinates the efforts of analyst, junior analyst, & other personnel in the
development of research design and data collection
• Prepares final report

Analyst Statistician/Data Processing

• Handles details in execution of • Serves as expert on theory and
project application on statistical techniques
• Designs & pretests questionnaires • Oversees experimental design, data
• Conducts preliminary analysis of data processing, and analysis

Junior Analyst Fieldwork Director

• Secondary data analysis •Handles selection, training,
• Edits and codes questionnaires supervision, and evaluation of
• Conducts preliminary analysis of data interviewers and field workers
Copyright © 2010 Pearson Education, Inc. 1-35
 Marketing Research Suppliers & Services

• Internal suppliers – in house market research –

Unilever, P & G
• External suppliers
• Full-service suppliers
• Syndicated services
• Standardized services
• Customized services
• Internet services
• Limited-service suppliers
• Field services
• Focus groups and qualitative services
• Technical and analytical services
• Other services
Copyright © 2010 Pearson Education, Inc. 1-36
 Criteria for Selecting a Research Supplier

▪ What is the reputation of the supplier?

▪ Do they complete projects on schedule?
▪ Are they known for maintaining ethical standards?
▪ Are they flexible?
▪ Are their research projects of high quality?
▪ What kind and how much experience does the supplier
have? Has the firm had experience with projects similar
to this one?
▪ Do the supplier's personnel have both technical and
non-technical expertise?
▪ Can they communicate well with the client?

Competitive bids should be compared on the basis of

quality as well as price.

Copyright © 2010 Pearson Education, Inc. 1-37

 Careers in Marketing Research

• Career opportunities are available with marketing research

firms (e.g., AC Nielsen, Burke)
• Careers in business and non-business firms and agencies
with in-house marketing research departments (e.g., Procter
& Gamble, Coca-Cola, the Federal Trade Commission, United
States Census Bureau)
• Advertising agencies (e.g., BBDO International, Ogilvy &
Mather, J. Walter Thompson)
• Positions: VP of marketing research, research
director/assistant director, project manager, field work
director, statistician/data processing specialist, senior/junior
analyst, and supervisor

Copyright © 2010 Pearson Education, Inc. 1-38

 A Sample of Marketing Research Jobs

Copyright © 2010 Pearson Education, Inc. 1-39

 Preparation for a Career in Marketing Research

• Take all the marketing courses you can.

• Take courses in statistics and quantitative methods.

• Acquire Internet and computer skills. Knowledge of

programming languages is an added asset.

• Take courses in psychology and consumer behavior.

• Acquire effective written and verbal communication skills.

• Think creatively. Creativity and common sense command a

premium in marketing research.

Copyright © 2010 Pearson Education, Inc. 1-40

 Management Information Systems Vs. Decision
Support Systems

Fig. 1.6

MIS DSS

▪ Structured Problems
▪ Unstructured Problems
▪ Use of Reports
▪ Use of Models
▪ Rigid Structure
▪ User Friendly Interaction
▪ Information Displaying
▪ Adaptability
Restricted
▪ Can Improve Decision
▪ Can Improve Decision Making
Making by Using “What if”
by Clarifying Data
Analysis

Copyright © 2010 Pearson Education, Inc. 1-41

 The Department Store Project

The following information was solicited:

1. Familiarity with the four department stores
2. Frequency with which household members shopped at each
of the ten stores
3. Relative importance attached to each of the eight
factors of the choice criteria
4. Evaluation of the ten stores on each of the eight factors of
the choice criteria
5. Preference ratings for each store
6. Rankings of the four stores (from most preferred to least
preferred)
7. Degree of agreement with 21 lifestyle statements
8. Standard demographic characteristics (age, education, etc.)
9. Name, address, and telephone number

Copyright © 2010 Pearson Education, Inc. 1-42

 Marketing Research Associations Online
US BASED ASSOCIATIONS
AAPOR: American Association for Public Opinion Research
([Link])
AMA : American Marketing Association ([Link])
ARF : The Advertising Research Foundation
([Link]/arf)
CASRO: The Council of American Survey Research
Organizations ([Link])
MRA : Marketing Research Association ([Link])
QRCA : Qualitative Research Consultants Association
([Link])
RIC : Research Industry Coalition ([Link])
Copyright © 2010 Pearson Education, Inc. 1-43
 Marketing Research Associations Online

International
ESOMAR: European Society for Opinion and Marketing
Research ([Link])
MRS: The Market Research Society (UK)
([Link])
MRSA: The Market Research Society of
Australia ([Link])
PMRS: The Professional Marketing Research Society
(Canada) ([Link])

Copyright © 2010 Pearson Education, Inc. 1-44

 INDIAN RESEARCH ASSOCIATION

ESOMAR – European Society for Opinion and Marketing

Research

MRSI- Market Research Society of India

Copyright © 2010 Pearson Education, Inc. 1-45

Copyright © 2010 Pearson Education, Inc. 1-46
Copyright © 2010 Pearson Education, Inc. 1-47
Copyright © 2010 Pearson Education, Inc. 1-48
Copyright © 2010 Pearson Education, Inc. 1-49
 "Ethnography is the art and science of describing a group
or culture. The description may be of a small tribal group
in an exotic land or a classroom in middle-class suburbia."
--David M. Fetterman, 1998.

 Ethnography came from the Greek ethnos = folk/people

and graphein = writing. It identifies its roots in sociology
and anthropology.
 Ethnography is a social science research method. It relies
heavily on up-close, personal experience and possible
participation, not just observation, by researchers trained
in the art of ethnography. It involves a commitment to
get close to the subject being observed in its natural
setting, to be factual and descriptive in reporting what is
observed, and to find out the points of view of
participants in the domain observed.
 CHARACTERISTIC OF ETHNOGRAPHIC RESEARCH

 CONTEXTUAL
 The research is carried out in the context in which the subjects
normally live and work

 UNOBTRUSIVE
 The research avoids manipulating the phenomena under
investigation.

 LONGITUDINAL
 The research is relatively long.
 CHARACTERISTICS OF ETHNOGRAPHIC RESEARCH

 COLLABORATIVE
 The research involves the participation of stakeholders other
than the researcher.

 INTERPRETATIVE
 The researcher carries out interpretative analyses of the data.

 ORGANIC
 There is interaction between questions/ hypotheses and data
collection/ interpretation.
 (a) People's behavior is studied in everyday contexts, rather than
under experimental conditions created by the researcher.

 (b) Data are gathered from a range of sources, but observation and/
or relatively informal conversations are usually the main ones.

 (c) The approach to data collection is "unstructured in the sense that

it does not involve following through a detailed plan set up at the
beginning; nor are the categories used for interpreting what people
say and do pre-given or fixed. This does not mean that the research
is unsystematic; simply that initially the data are collected in as raw
a form, and on as wide a front, as feasible.
 (d) The focus is usually a single setting or group, of
relatively small scale. In life history research the focus
may even be a single individual.

 (e) The analysis of the data involves interpretation of the

meanings and functions of human actions and mainly
takes the form of verbal descriptions and explanations,
with quantification and statistical analysis playing a
subordinate role at most.
 NATURALISM
This is the view that the aim of social research is to
capture the character of naturally occurring human
behavior, and that this can only be achieved by first-hand
contact with it, not by inferences from what people do in
artificial settings like experiments or from what they say
in interviews about what they do elsewhere.
 UNDERSTANDING
From this point of view, if we are to be able to explain
human actions effectively we must gain an understanding
of the cultural perspectives on which they are based.
That this is necessary is obvious when we are studying a
society that is alien to us, since we shall find much of
what we see and hear puzzling.
 DISCOVERY
Another feature of ethnographic thinking is a conception
of the research process as inductive or discovery-based;
rather than as being limited to the testing of explicit
hypotheses.
 The design of an ethnographic research is deceptively
simple. It appears to require only one “act naturally.”
Then again, looking beyond, conducting an ethnographic
research is a process of discovery. It is something that
cannot be programmed. It is not a matter of following
methodological rules but a practical activity requiring the
exercise of one’s judgment.
 Typical ethnographic research employs three kinds of
data collection: interviews, observation, and documents.
This in turn produces three kinds of data: quotations,
descriptions, and excerpts of documents, resulting in one
product: narrative description.

 watching what happens

 listening to what is said
 asking questions through informal and formal interviews
 collecting documents and artifacts
 The data collected include, in addition to the rich
descriptive accounts, photographs, maps, figures, tables,
texts, audio and video records, and transcriptions. The
most common types of method used in data collection
are interviews [both formal and informal], documents
[also both formal and informal/ official], and through
observation.
 In conducting an ethnographic research, there are also
certain ethical concerns that are being raised every now
and then. Over-all, they can be summarized as:

 informed consent
 privacy
 harm
 exploitation
 Descriptive Research
Design: Survey and
Observation

Copyright © 2010 Pearson Education, Inc. 6-1

 Outline

1) Overview
2) Survey Methods
3) Survey Methods Classified by Mode of Administration
i. Telephone Methods
a. Traditional Telephone Interviews
b. Computer-Assisted Telephone Interviewing
(CATI)
ii. Personal Methods
a. Personal In-home Interviews
b. Mall-Intercept Personal Interviews
c. Computer-Assisted Personal Interviewing
(CAPI)
iii. Mail Methods
a. Mail Interviews b. Mail Panels
iv. Electronic Methods
a. E-mail Surveys b. Internet Surveys
Copyright © 2010 Pearson Education, Inc. 6-2
 Outline

4) A Comparative Evaluation of Survey Methods

i. Task Factors
a. Diversity of Questions and Flexibility
b. Use of Physical Stimuli
c. Sample Control
d. Quantity of Data
e. Response Rate

ii. Situational Factors

a. Control of the Data Collection Environment
b. Control of Field Force
c. Potential for Interviewer Bias
d. Speed
e. Cost
Copyright © 2010 Pearson Education, Inc. 6-3
 Outline

iii. Respondent Factors

a. Perceived Anonymity
b. Social Desirability
c. Sensitive Information
d. Low Incidence Rate
e. Respondent Control

Copyright © 2010 Pearson Education, Inc. 6-4

 Outline

5) Selection of Survey Method(s)

6) Observation Methods
i. Structured Vs. Unstructured Observation
ii. Disguised Vs. Undisguised Observation
iii. Natural Vs. Contrived Observation
7) Observational Methods Classified by Mode of
Administration
i. Personal Observation
ii. Mechanical Observation
iii. Audit
iv. Content Analysis
v. Trace Analysis
Copyright © 2010 Pearson Education, Inc. 6-5
 Outline

8) A Comparative Evaluation of
Observational Methods
i. Degree of Structure
ii. Degree of Disguise
iii. Ability to Observe in Natural Setting
iv. Analysis Bias
v. General Remarks
9) A Comparison of Survey and
Observational Methods
i. Relative Advantages of Observation
ii. Relative Disadvantages of
Observation
Copyright © 2010 Pearson Education, Inc. 6-6
 A Classification of Survey Methods

Survey
Methods

Telephone Personal Mail Electronic

In-Home Mall Computer-Assisted

E-mail Internet
Intercept Personal
Interviewing

Traditional Computer-Assisted
Mail Mail
Telephone Telephone
Interview Panel
Interviewing

Copyright © 2010 Pearson Education, Inc. 6-7

Some Decisions Related to the Mail Interview
Package

Outgoing Envelope
Outgoing envelope Size, color, return address
Postage Method of addressing
Cover Letter
Sponsorship Type of appeal Postscript
Personalization Signature
Questionnaire
Length Size Layout Format
Content Reproduction Color Respondent anonymity
Return Envelope
Type of envelope Postage
Incentives
Monetary versus non-monetary Prepaid versus promised amount

Copyright © 2010 Pearson Education, Inc. 6-8

 Sample Mailing Lists

List Title Number on List Price

Advertising agencies 3892 $45/M

Banks, branches 11089 $85/M
Boat owners 4289601 $50/M
Chambers of Commerce 6559 $45/M
Personal computer owners 2218672 Inquire
Families 76000000 Inquire
Hardware wholesalers 7378 $45/M
Magazines, consumers 4119 $45/M
Photographic, portrait 33742 $45/M
Sales executives 190002 $55/M
Wives of professional men 1663614 $60/M
YMCA’s 1036 $85

* Price shown is per 1000 names (/M), except where noted.

Copyright © 2010 Pearson Education, Inc. 6-9
 Criteria for Evaluating Survey Methods

TASK FACTORS
Diversity of Questions and Flexibility of Data Collection
• The flexibility of data collection is determined primarily by
the extent to which the respondent can interact with
the interviewer and the survey questionnaire.
• The diversity of questions that can be asked in a survey
depends upon the degree of interaction the
respondent has with the interviewer and the
questionnaire, as well as the ability to actually see the
questions.

Use of Physical Stimuli

• The ability to use physical stimuli such as the product, a
product prototype, commercials, or promotional displays
during the interview.
Copyright © 2010 Pearson Education, Inc. 6-10
 Criteria for Evaluating Survey Methods

Sample Control
• Sample control is the ability of the survey mode to reach the
units specified in the sample effectively and efficiently.

Quantity of Data
• The ability to collect large amounts of data.

Response Rate
• Survey response rate is broadly defined as the percentage of
the total attempted interviews that are completed.

Copyright © 2010 Pearson Education, Inc. 6-11

 Random Digit Directory Designs

Adding a Constant to the Last Digit

An integer between 1 and 9 is added to the telephone number
selected from the directory. In plus-one sampling, the number
added to the last digit is 1.
Number selected from directory: 404-953-3004 (exchange-
block). Add one to the last digit to form 404-953-3005. This is
the number to be included in the sample.

Randomizing the r Last Digits

Replace the r (r = 2, 3, or 4) last digits with an equal number of
randomly selected digits.
Number selected from directory: 404-881-1124. Replace the last
four digits of the block with randomly selected numbers 5, 2, 8,
and 6 to form 404-881-5286.
Copyright © 2010 Pearson Education, Inc. 6-12
 Random Digit Directory Designs

Two-Stage Procedure
The first stage consists of selecting an exchange and telephone
number from the directory. In the second stage, the last three
digits of the selected number are replaced with a three-digit
random number between 000 and 999.

Cluster 1
Selected exchange: 636
Selected number: 404-636-3230
Replace the last three digits (230) with randomly selected 389 to
form 404-636-3389.
Repeat this process until the desired number of telephone numbers
from this cluster is obtained.
Copyright © 2010 Pearson Education, Inc. 6-13
 Criteria for Evaluating Survey Methods

SITUATIONAL FACTORS
Control of the Data Collection Environment
• The degree of control a researcher has over
the environment in which the respondent
answers the questionnaire.
Control of Field Force
• The ability to control the interviewers and
supervisors involved in data collection.

Copyright © 2010 Pearson Education, Inc. 6-14

 Criteria for Evaluating Survey Methods

Potential for Interviewer Bias

• The extent of the interviewer's role
determines the potential for bias.

Speed
• The total time taken for administering
the survey to the entire sample.

Cost
• The total cost of administering the
survey and collecting the data.

Copyright © 2010 Pearson Education, Inc. 6-15

 Criteria for Evaluating Survey Methods

RESPONDENT FACTORS
Perceived Anonymity
• Perceived anonymity refers to the respondents'
perceptions that their identities will not be
discerned by the interviewer or the researcher.

Social Desirability/Sensitive Information

• Social desirability is the tendency of the
respondents to give answers that are socially
acceptable, whether or not they are true. With
some exceptions, obtaining sensitive information is
inversely related to social desirability.
Copyright © 2010 Pearson Education, Inc. 6-16
 Criteria for Evaluating Survey Methods

Low Incidence Rate

• Incidence rate refers to rate of occurrence of
persons eligible to participate in the study.

Respondent Control
• Methods that allow respondents control over
the interviewing process will solicit greater
cooperation and are therefore desirable.

Copyright © 2010 Pearson Education, Inc. 6-17

 A Comparative Evaluation of Survey Methods

Mall Mail
Criteria Telephone/ In-Home Intercept CAPI Surveys Mail Panels E-Mail Internet

CATI Interviews Interviews

TASK FACTORS

Diversity of questions and

flexibility Low High High Moderate Moderate Moderate Moderate Moderate
to
moderate to high to high

Use of physical stimuli Low Moderate High High Moderate Moderate Low Moderate

to high

Sample Moderate Moderate

Control to Potentially Moderate Moderate Low to Low Low to

high high high moderate

Quantity of data Low High Moderate Moderate Moderate High Moderate Moderate

Response
rate Moderate High High High Low High Low Very low

Copyright © 2010 Pearson Education, Inc. 6-18

 A Comparative Evaluation of Survey Methods

Mall- Mail Mail

Criteria Telephone In-Home Intercept CAPI Surveys Panels E-Mail Internet
CATI Interviews Interviews

SITUATIONAL FACTORS
Control of data collection
environment Moderate Moderate High High Low Low Low Low

to high
Moderat
Control of field force Moderate Low Moderate e High High High High

Potential for interviewer bias Moderate High High Low None None None None

Moderat
Speed High Moderate Moderate e Low Low High Very

to
to high to high moderate high

Moderat
Cost Moderate High Moderate e Low Low Low Low

to
to high to high moderate
Copyright © 2010 Pearson Education, Inc. 6-19
 A Comparative Evaluation of Survey Methods

Mall- Mail Mail

Criteria Telephone / In-Home Intercept CAPI Surveys Panels E-Mail Internet
CATI Interviews Interviews
RESPONDENT FACTORS

Perceived anonymity of the

respondent Moderate Low Low Low High High Moderate High

Moderat
Social desirability Moderate High High e Low Low Moderate Low

to High

Obtaining sensitive information High Low Low Low High Moderate Moderate High

to
moderate to high

Moderat
Low incidence rate High Low Low Low e Moderate Moderate High

Respondent control Low Low Low Low High High High Moderate
to
moderate to high
Copyright © 2010 Pearson Education, Inc. 6-20
 Observation Methods Structured Versus Unstructured
Observation

• For structured observation, the

researcher specifies in detail what is to be
observed and how the measurements are to
be recorded, e.g., an auditor performing
inventory analysis in a store.

• In unstructured observation, the

observer monitors all aspects of the
phenomenon that seem relevant to the
problem at hand, e.g., observing children
playing with new toys.

Copyright © 2010 Pearson Education, Inc. 6-21

 Observation Methods Disguised Versus Undisguised
Observation

• In disguised observation, the respondents

are unaware that they are being observed.
Disguise may be accomplished by
• using one-way mirrors,
• hidden cameras, or inconspicuous
mechanical devices.
• Observers may be disguised as shoppers or
sales clerks.

• In undisguised observation, the

respondents are aware that they are under
observation.
Copyright © 2010 Pearson Education, Inc. 6-22
 Observation Methods
Natural Versus Contrived Observation

• Natural observation involves observing

behavior as it takes places in the
environment. For example, one could
observe the behavior of respondents eating
fast food at Burger King.

• In contrived observation, respondents'

behavior is observed in an artificial
environment, such as a test kitchen.

Copyright © 2010 Pearson Education, Inc. 6-23

 A Classification of Observation Methods

Classifying
Observation
Methods

Observation Methods

Personal Mechanical Audit Content Trace

Observation Observation Analysis Analysis

Copyright © 2010 Pearson Education, Inc. 6-24

 Observation Methods: Personal Observation

• A researcher observes actual behavior as it

occurs.

• The observer does not attempt to

manipulate the phenomenon being observed
but merely records what takes place.

• For example, a researcher might record

traffic counts and observe traffic flows
– number of people in and out of a
department store.

Copyright © 2010 Pearson Education, Inc. 6-25

 Observation Methods: Mechanical Observation

Do not require respondents' direct

participation.
• The AC Nielsen audimeter
• Turnstiles that record the number of people
entering or leaving a building.
• On-site cameras (still, motion picture, or
video- in ATMS, STORES)
• Optical scanners in supermarkets

Do require respondent involvement.

• Eye-tracking monitors
• Pupilometers
• Psychogalvanometers- lie detector
• Voice pitch analyzers
• Devices measuring response latency
Copyright © 2010 Pearson Education, Inc. 6-26
 Observation Methods: Audit

• The researcher collects data by examining

physical records or performing inventory
analysis. (ORG RETAIL AUDIT, GFK Audit)
• Data are collected personally by the
researcher.
• The data are based upon counts, usually of
physical objects. (prices paid got from bill
book)
• Retail and wholesale audits conducted by
marketing research suppliers were discussed
in the context of syndicated data in earlier ppt.
Copyright © 2010 Pearson Education, Inc. 6-27
 Observation Methods: Content Analysis

• The objective, systematic, and quantitative

description of the manifest content of a
communication.
• The unit of analysis may be words,
characters (individuals or objects), themes
(propositions), space and time measures
(length or duration of the message), or
topics (subject of the message).
• Analytical categories for classifying the units
are developed and the communication is
broken down according to prescribed rules.

Copyright © 2010 Pearson Education, Inc. 6-28

 Observation Methods: Trace Analysis

Data collection is based on physical traces, or

evidence, of past behavior.

◼ The selective erosion of tiles in a museum indexed by the replacement

rate was used to determine the relative popularity of exhibits.
◼ The number of different fingerprints on a page was used to gauge
the readership of various advertisements in a magazine.
◼ The position of the radio dials in cars brought in for service was
used to estimate share of listening audience of various radio stations.
◼ The age and condition of cars in a parking lot were used to assess
the affluence of customers.
◼ The magazines people donated to charity were used to determine
people's favorite magazines.
◼ Internet visitors leave traces which can be analyzed to examine
browsing and usage behavior by using cookies.

Copyright © 2010 Pearson Education, Inc. 6-29

 A Comparative Evaluation of Observation Methods
Table 6.3

Criteria Personal Mechanical Audit Content Trace

Observation Observation Analysis Analysis Analysis

Degree of structure Low Low to high High High Medium

Degree of disguise Medium Low to high Low High High
Ability to observe High Low to high High Medium Low
in natural setting
Observation bias High Low Low Medium Medium
Analysis bias High Low to Low Low Medium
Medium
General remarks Most Can be Expensive Limited to Method of
flexible intrusive commu- last resort
nications

Copyright © 2010 Pearson Education, Inc. 6-30

 Relative Advantages of Observation

• They permit measurement of actual behavior

rather than reports of intended or preferred
behavior.

• There is no reporting bias, and potential bias

caused by the interviewer and the interviewing
process is eliminated or reduced.

• Certain types of data can be collected only by

observation.

• If the observed phenomenon occurs frequently or

is of short duration, observational methods
may be cheaper and faster than survey
methods.
Copyright © 2010 Pearson Education, Inc. 6-31
 Relative Disadvantages of Observation

• The reasons for the observed behavior may not be determined

since little is known about the underlying motives, beliefs,
attitudes, and preferences.
• Selective perception (bias in the researcher's perception) can
bias the data.
• Observational data are often time-consuming and
expensive, and it is difficult to observe certain forms of
behavior.
• In some cases, the use of observational methods may be
unethical, as in observing people without their knowledge or
consent.
It is best to view observation as a complement to survey
methods, rather than as being in competition with them.

Copyright © 2010 Pearson Education, Inc. 6-32

 A Comparative Evaluation of Survey Methods
for International Marketing Research

Criteria Telephone Personal Mail Electronic

High sample control + + - -
Difficulty in locating + - + +
respondents at home
Inaccessibility of homes + - + +
Unavailability of a large + - + +
pool of trained interviewers
Large population in rural areas - + - -
Unavailability of maps + - + +
Unavailability of current - + - +
telephone directory
Unavailability of mailing lists + + - +
Low penetration of telephones - + + -
Lack of an efficient postal system + + - +
Low level of literacy - + - -
Face-to-face communication culture - + - -
Poor access to computers & Internet ? + ? -
Note: A (+) denotes an advantage, and a (–) denotes a disadvantage.

Copyright © 2010 Pearson Education, Inc. 6-33

Copyright © 2010 Pearson Education, Inc. 6-34
INFORMATION AND MARKET RESEARCH
SYSTEMS

By
[Link]
AUG 2013
 INTRODUCTION

➢ Success depends on making correct and timely decisions

➢ Need reliable and correct information system –

▪ External factors and internal factors

➢ Success depends on depth, quality and timeliness of

information

➢ Benefits of a superior and timely information system

➢ Errors in decision making due to lack of correct information

 INFORMATION AND MIS PLANNING

Internal Type of Gathering Analyzing

information information information information

Regular schedule Tabulations

Environment Existing Reports
Upon request Markets Standardized Statistics
Industry Specific research models
Competition studies
Distribution
company
 NEED FOR GOOD INFORMATION AND
MIS PLANNING

➢ Rapidly changing marketing environment

➢ Globalization and expanding business boundaries

➢ Shift in consumer incomes and changing demographics

➢ Changing life styles and changing preferences of customers

 MARKETING INFORMATION
SYSTEM
➢ Managing and organizing external and internal information
sources of a organization

➢ Assess information needs and provide required information

▪ Competitors, prices, adv expenditures, sales, distribution

➢ MIS includes-
▪ Internal records, agency information
▪ Marketing data bases,
▪ Marketing intelligence reports and data
▪ Market research and data supplied by external vendors
 ELEMENTS OF MIS

Internal sources

Information for
Marketing Data retrieval
Marketing
data base system
decisions

External sources
 DATABASES

➢ Collection of information about customers and prospects

▪ Demographic, psychographics, attitudes, perceptions
▪ Products, services they buy, total sales
▪ Purchase volumes and prices
➢ Data for easy access and retrieval mechanism

➢ Data and information computerized

➢ Reports such as:

▪ Sales reports
▪ News articles, company press releases
▪ Economic reports
 INTERNAL RECORDS

➢ Information for marketing decisions accessible

➢ Analyze and track customer behavior

➢ Understand customer needs and motivations

➢ Integration of data sources for valuable information

➢ Modern technologies –
▪ Email, voice mail, SMS, teleconferencing, video
conferencing, faxes, digital maps, mobile phone
 INTERNAL RECORDS

➢ Internal records track-

▪ What is selling?
▪ How fast and in which locations it is selling?
▪ To which consumers products are sold?
▪ Data on customer queries, past purchasing histories
▪ Identify profitable customer segments
➢ Order system information for sales people, resellers,
customers, prices, costs, inventories, receivables, credit
notes and payables.
➢ Right data at right time to right people in decision making
➢ RFM technology
➢ Reliance Fresh loyalty cards
 EXTERNAL SOURCES

➢ Census reports on demographics, NP, magazines articles,

trade publications, technical journals, directories, balance
sheet of companies, syndicated reports, publication research
reports, data purchased at a price

➢ Reader’s Digest data, Behavior scan, Thomas Register,

Source Directories, India [Link], Yellow pages, internet,
Ac Nielsen retail audit reports, Francis Kanoi Reports
 COMPUTER NETWORKS AND
INTERNET
➢ Computer networks, access to data sources, customer
information about products and preferences

➢ Exchange emails with employees, customers and suppliers

➢ Internet across global exchange of emails, discussions

➢ Compu Serv, American Online, gives subscriber access to

emails, discussions groups, chat rooms, data bases, related
research materials

➢ Information helps to find right products for right target

segments
 DATAMINING AND DATAWAREHOUSE

➢ Automated analyzes of large amounts of stored data with the

help of computer power – faster data collection and analysis

➢ Unearth meaningful patterns in data thru visualization,

estimation, classification and prediction

➢ DW creates customer data bases and answers queries

➢ Data base has data on resellers, distribution channels,
competitors and customers
➢ Central collection of clean, consistent, summarized
information for transactional process systems
 MARKETING INTELLIGENCE SYSTEM

➢ MIS refers to systematic and ethical approach, procedures

and sources that managers use to gather and analyze every
day information about various developments with regard to
customers, competitors and other business trends in
economy

➢ Competitive intelligence-
▪ tracking research, annual financial reports, trade fairs
▪ Speeches by company personnel, government documents
filed like TRAI, AAI reports, trade organization reports,
online data bases, popular business articles, sales
personnel collection of market data, buy competitor’s
products and learn from them
 QUESTIONS FOR COMPETITIVE
INTELLIGENCE

➢ How fast does competitive climate change in our industry?

➢ How important is it to keep our knowledge about these

changes ?

➢ What are the objectives of our company about competitors

intelligence?

➢ What are the important clients for competitor intelligence?

➢ To whom should the effort be reported?
 MARKET RESEARCH PROCESS

➢ Concerned with generating outside information for DM

➢ When there are no answers from internal data we go for MR:
▪ To define marketing problem
▪ Or identify opportunities
➢ What does MR do?
▪ Understand customer needs and segments
▪ Information for developing new products
▪ Formulating marketing strategies
▪ Measure effectiveness of marketing programs
▪ Forecast demand and economic factors
▪ Helps financial planning and quality control
 MR PROCESS

➢ Systematic procedures for collecting, recording and analyzing

data from secondary and primary sources

➢ 3R model of data collecting

▪ Recruiting new consumers
▪ Retaining current consumers
▪ Regaining lost consumers
➢ MR is the function which links the consumer, customer and
competitor and public to marketer through information used
to identify and define marketing opportunities and problems,
generate, refine and evaluate marketing actions, monitor
marketing performance, improve market understanding
 SIX STEPS IN MR

Define problem
and set Design research Data collection
objectives project approach

Present the Analyze the

Sampling plan
findings information
 MR PROCESS

➢ Research should be unbiased and accurate – errors in

research should be handled in MR decision making

➢ Different between good research and bad research is quality

of inputs and objectives and methods of the research

➢ Are the research objectives right?

➢ Will the data collected be sufficient to fulfill the objectives?
➢ Is the choice of data sources appropriate?
➢ Is qualitative and quantitative research properly aligned?
➢ Is research design appropriate to address research goals?
➢ Are questionnaire scales and measurements correct?
 MR PROCESS- PROBLEM DEFINITION

➢ MR manager must analyze the situation and carefully define

the problem to be addressed

➢ A problem well defined is half solved

➢ Defining the problem is not very easy, state the precise

research problem

➢ Companies have large consumer insight teams

➢ Sales or market shares are declining, how to position?
➢ Be Clear about the problem and objectives of the reseaerch
 RESEARCH OBJECTIVES QUESTIONS

➢ Who are our customers?

➢ Who are the customers of the competitors?
➢ What do customers like and dislike, us versus competitors?
➢ How are we perceived by our customers?
➢ What must we do to clarify and improve the consumer’s
existing perceptions?
 DESIGN RESEARCH PROJECT

➢ Specify methods for gathering and analyzing data to a

problem or opportunity

➢ Use strict standards to collect and tabulate data

➢ Collect reliable and valid data

➢ Use adequate sample sizes for various problems

➢ Validity depends on a good survey questionnaire and

analysis
 THREE CATEGORIES OF RESEARCH

➢ Exploratory research

➢ Descriptive research

➢ Causal Research
 DATA COLLECTION PROCESS

➢ Secondary data

➢ Observational data

➢ Survey data

➢ Experimental data
 PRIMAY DATA COLLECTION

➢ Qualitative research

➢ Depth interviews

➢ Focus group discussions

➢ Projective techniques

➢ Laddering
 PROJECTIVE TECHNIQUES

➢ TAT

➢ Sentence completion

➢ Word association test

➢ Ink blot tests

➢ Third person technique

➢ laddering
 QUANTITATIVE RESEARCH

➢ Observation

➢ Experimentation

➢ Survey research
 SURVEY RESEARCH

➢ Personal interview

➢ Mail survey

➢ Telephone survey

➢ E mail surveys
 COMPARISON OF DATA COLLECTION
PROCESS

Attribute Personal survey Telephone survey Mail survey

Cost of data high medium low
collection
Time required medium low high
Sample size given small medium large
budget
Data quantity per high medium low
contact
Reach of the Not wide May be yes
sample
Reach special yes May be no
locations
Level of interaction high medium none
 COMPARISON OF DATA COLLECTION
PROCESS

Attribute Personal survey Telephone survey Mail survey

Degree of interview high medium none
bias
Presentation of visual yes no May be
stimuli
Response rate high medium low
desirability high high low
 DATA COLLECTION INSTRUMENT

➢ Primary method of data collection – questionnaire

➢ Set of questions given to a respondent

➢ Problems- ask many questions, lengthy qnr, wrong wordings,

improper sequencing of questions

➢ Effective surveys – focus, brevity and clarity

➢ Questions – interesting, objective, unambiguous, easy to

answer, truthful and complete, proper sequence
 DATA COLLECTION INSTRUMENT

➢ Questions on relevant consumer information and precise

order of topics

➢ Pilot testing of questionnaire before starting the research

➢ Open ended and closed ended questions

➢ Dichotomous, multiple choice, semantic differential questions

 EFFECTIVE QUESTIONNAIRE

➢ Questions based on objectives of the research

➢ Do not collect irrelevant data
➢ Short qnr, long qnr gives fatigue
➢ Questions must be simple and clean to answer, easy to read
➢ Give introduction, company names, interviewers names
➢ Put respondent at ease while answering
➢ Ask inoffensive questions
➢ Logically arrange question sequences
➢ Don’t use suggestive and biased questions
➢ Cross check respondent answers with other questions
➢ Collect demographic details at the end of the questionnaire
 DATA COLLECTION INSTRUMENT

➢ Types of attitude scales used

▪ Likert scales – agree versus disagree scale

▪ Semantic differential scales

▪ Rank ordered scales

 SAMPLING PLAN

➢ Probability sample
▪ Random sampling
▪ Stratified random sampling
▪ Cluster sampling
➢ Non probability sampling
▪ Convenience sample
▪ Judgmental sampling
▪ Quota sampling
 SAMPLING

Probability sample description

Simple random sampling Every member of the population has an equal chance
of being selected
Stratified sample Population is divided into mutually exclusive groups
such as gender, age group and random sample are
drawn from each group
Cluster sampling The population is divided into mutually exclusive
groups such as cities or pop strata and the researcher
draws a sample to be interviewed
NON PROBABILITY SAMPLE
Convenience sample Interviewer selects the most accessible population
members to interview and obtain information – mall
intercept
Judgmental sample Uses researcher’s judgment to choose population
members who are good prospects – expert interviews
Quota sample Researcher finds and interviews a predetermined
number of respondents in each category such as 50
males and 50 females
 DIFFERENCES BETWEEN QUALITATIVE AND
QUANTITATIVE RESEARCH

Qualitative research Quantitative research

➢ Main techniques – focus groups and ➢ Surveys and scientific sampling
depth interviews
➢ Kinds of questions asked- why? ➢ How much? How many?
Through what thought process? In
what way? What other behavior or
thoughts?
➢ Interviewer’s role: Interviewer must ➢ Critical role of investigator
think carefully and quickly frame ➢ Interviewer need be able to read
questions and probes in response to scripts. They should not improvise or
what ever respondent says. Highly deviate.
trained professionals needed ➢ Little training needed
➢ Responsible persons needed
➢ Questions asked: position of questions ➢ Fixed set of questions
may vary in sequence and phrasing ➢ Must be the same question s and
from group to group – new questions phrasing of questions carefully
included and old ones discarded controlled
 DIFFERENCES BETWEEN QUALITATIVE AND
QUANTITATIVE RESEARCH

Qualitative research Quantitative research

➢ Number of interviews: fewer interviews ➢ Many interviews to ascertain scientific
but the duration of each interview is sample that is worth projecting
long

➢ Nature of findings: develop a ➢ Test hypotheses, arrange factors

hypotheses, gain insight, explore according to priority, furnish data for
language options, refine concepts, add statistical modeling, and projections
numerical data, provide diagnostics
like copy testing
Thank you
 Chapter

Research Design

Copyright © 2010 Pearson Education, Inc. 3-1

 Chapter Outline

1) Overview
2) Research Design: Definition
3) Research Design: Classification
4) Exploratory Research
5) Descriptive Research
i. Cross-Sectional Design
ii. Longitudinal Design
iii. Advantages and Disadvantages of
Longitudinal and Cross-Sectional Designs
6) Causal Research
7) Relationships Among Exploratory, Descriptive
and Causal Research
Copyright © 2010 Pearson Education, Inc. 3-2
 Chapter Outline

8) Potential Sources of Error

i. Random Sampling Error
ii. Non-sampling Error
a. Non-response Error
b. Response Error
9) Budgeting and Scheduling
10) Marketing Research Proposal
11) Summary

Copyright © 2010 Pearson Education, Inc. 3-3

 Research Design: Definition

• A research design is a framework or

blueprint for conducting the marketing
research project.

• It details the procedures necessary for

obtaining the information needed to
structure or solve marketing research
problems. – Economy housing-
profiling sample and main interview
Copyright © 2010 Pearson Education, Inc. 3-4
 Components of a Research Design

• Define the information needed

• Design the exploratory, descriptive, and/or causal
phases of the research
• Specify the measurement and scaling procedures
• Construct and pretest a questionnaire
(interviewing form) or an appropriate form for
data collection
• Specify the sampling process and sample size
• Develop a plan of data analysis

Copyright © 2010 Pearson Education, Inc. 3-5

 A Classification of Marketing Research
Designs

Research Design

Exploratory Conclusive
Research Design Research Design

Descriptive Causal
Research Research

Cross-Sectional Longitudinal
Design Design

Single Cross- Multiple Cross-

Sectional Design Sectional Design
Copyright © 2010 Pearson Education, Inc. 3-6
 Exploratory & Conclusive Research
Differences
Exploratory Conclusive
Objective: To provide insights and To test specific hypotheses and
understanding examine relationships

Character- ▪ Information needed is defined Information needed is clearly

istics: only loosely. defined. Research process is formal
▪ Research process is flexible and structured. Sample is large and
and unstructured. representative. Data analysis is
▪ Sample is small and non- quantitative
representative. Analysis of
primary data is qualitative

Findings/ Conclusive
Results: Tentative

Outcome: Findings used as input into decision

Generally followed by further making
exploratory or conclusive
Copyright © 2010 Pearsonresearch
Education, Inc. 3-7
 A Comparison of Basic Research Designs

Exploratory Descriptive Causal

Objective: Discovery of ideas Describe market Determine cause
and insights characteristics or and effect
functions relationships

Characteristics: Flexible, versatile Marked by the prior Manipulation of

formulation of specific independent
hypotheses variables, effect
on dependent
Often the front end Preplanned and variables
of total research structured design
design Control mediating
variables
Expert surveys Secondary data:
Methods: Pilot surveys quantitative analysis Experiments
Case studies Surveys
Secondary data: Panels
qualitative analysis Observation and other
qualitative research data
Copyright © 2010 Pearson Education, Inc. 3-8
 Uses of Exploratory Research

• Formulate a problem or define a problem

more precisely ( color preferences and
shape of water heaters at home)

• Identify alternative courses of action

(should I give white, red and blue
colors)

• Develop hypotheses (people prefer red

color) (people don’t buy white color
because it is easily soiled)

Copyright © 2010 Pearson Education, Inc. 3-9

 Uses of Exploratory Research

• Isolate key variables and relationships for

further examination (color and
preference for water heaters)

• Gain insights for developing an approach

to the problem

• Establish priorities for further research

Copyright © 2010 Pearson Education, Inc. 3-10

 Methods of Exploratory Research

• Survey of experts (demand for Economy

housing – Consultants - Jones La Salles
Jones, Frank Knight, Jerry Rao-VBHC)
• Pilot surveys
• Secondary data analyzed in a qualitative way
(newspaper information on demand for
water heaters in India)
• Qualitative research

Copyright © 2010 Pearson Education, Inc. 3-11

 Use of Descriptive Research

• To describe the characteristics of relevant

groups, such as consumers, salespeople,
organizations, or market areas (number of
people buying high value durables in a
year in metro markets)

• To estimate the percentage of units in a

specified population exhibiting a certain
behavior (53 % of people liking the
economy housing concept)

Copyright © 2010 Pearson Education, Inc. 3-12

 Use of Descriptive Research

• To determine the perceptions of product

characteristics (white color gets dirty
faster)
• To determine the degree to which marketing
variables are associated (advertising helps
sell economy houses to lower middle
income groups)
• To make specific predictions (20000 people
will buy economy house in 2017)

Copyright © 2010 Pearson Education, Inc. 3-13

 Methods of Descriptive Research

• Secondary data analyzed in a quantitative, as

opposed to a qualitative, manner (population
statistics of Bangalore and its wards)

• Surveys – (profiling and main questionnaires)

• Panels – (expert panels- Delphi research)

• Observational and other data – (observing
consumer choice process in a departmental
store)

Copyright © 2010 Pearson Education, Inc. 3-14

 Cross-Sectional Designs

• Involve the collection of information from any given sample of

population elements only once

• In single cross-sectional designs, there is only one sample

of respondents and information is obtained from this sample
only once.(economy house buyers in the income range <
Rs. 50000)

• In multiple cross-sectional designs, there are two or more

samples of respondents, and information from each sample is
obtained only once. Often, information from different
samples is obtained at different times. (economy house
buyers in lower middle income (Rs. < 20000) and
middle income consumers- (Rs. 20000 to 50000)

Copyright © 2010 Pearson Education, Inc. 3-15

 Cross-Sectional Designs

• Cohort analysis consists of a series of surveys conducted at

appropriate time intervals, where the cohort serves as the
basic unit of analysis.

• A cohort is a group of respondents who experience the same

event within the same time interval.

Copyright © 2010 Pearson Education, Inc. 3-16

 Consumption of Various Soft Drinks by
Various Age Cohorts

Percentage consuming on a typical day

Age 1950 1960 1969 1979
8-19 52.9 62.6 73.2 81.0
20-29 45.2 60.7 76.0 75.8 C8
30-39 33.9 46.6 67.7 71.4 C7
40-49 23.2 40.8 58.6 67.8 C6
50+ 18.1 28.8 50.0 51.9 C5
C1 C2 C3 C4
C1: cohort born prior to 1900 C5: cohort born 1931-40
C2: cohort born 1901-10 C6: cohort born 1940-49
C3: cohort born 1911-20 C7: cohort born 1950-59
C4: cohort born 1921-30 C8: cohort born 1960-69
Copyright © 2010 Pearson Education, Inc. 3-17
 Longitudinal Designs

• A fixed sample (or samples) of population

elements is measured repeatedly on the
same variables – (same consumers in the
age group 30 to 50 monitored every
month on expenditures in seeing
movies)

• A longitudinal design differs from a cross-

sectional design in that the sample or
samples remain the same over time
• Measured again and again over time on the
same samples

Copyright © 2010 Pearson Education, Inc. 3-18

 Cross-Sectional vs. Longitudinal

Cross- Sample Preference of people in the

Sectional Surveyed income group 50000
rupees MHI for economy
Design at T1
house worth Rs.16 lakhs

Same
Sample Sample also
Longitudinal
Surveyed at Surveyed at
Design
T1 T2

Time T1 T2
Copyright © 2010 Pearson Education, Inc. 3-19
 Relative Advantages and Disadvantages of
Longitudinal and Cross-Sectional Designs

Evaluation Cross-Sectional Longitudinal

Criteria Design Design

Detecting Change - +
Large amount of data collection - +
Accuracy - +
Representative Sampling + -
Response bias + -

Note: A “+” indicates a relative advantage over the other

design, whereas a “-” indicates a relative disadvantage.

Copyright © 2010 Pearson Education, Inc. 3-20

 Cross-Sectional Data May Not Show Change

Brand Purchased Time Period

Period 1 Period 2
Survey Survey

Brand A 200 200

Brand B 300 300
Brand C 500 500
Total 1000 1000

Copyright © 2010 Pearson Education, Inc. 3-21

 Longitudinal Data May Show Substantial Change

Brand Brand Purchased in Period 2

Purchased
in Period 1 Brand A Brand B Brand C Total

Brand A 100 50 50 200

Brand B 25 100 175 300
Brand C 75 150 275 500
Total 200 300 500 1000

Copyright © 2010 Pearson Education, Inc. 3-22

 Uses of Causal Research

• To understand which variables are the cause

(independent variables) and which
variables are the effect (dependent
variables) of a phenomenon

• To determine the nature of the relationship

between the causal variables and the effect
to be predicted

• METHOD: Experiments

Copyright © 2010 Pearson Education, Inc. 3-23

 CAUSAL RESEARCH

➢ One group of students shown gaming as a way of improving

student engagement and motivation to learn

➢ Other group is not used the gaming and responses got on the
same dimensions of engagement and motivation

➢ Difference between group 1 and group 2 is the effect of the

gaming phenomena

➢ Control variable – Section A and section B without other

environmental changes like students with lap tops and not
owning laptops- laptops same variables controlled in
the design

Copyright © 2010 Pearson Education, Inc. 3-24

 Alternative Research Designs

Exploratory Research
(a) •Secondary Data Conclusive Research
Analysis •Descriptive/Causal
•Focus Groups

(b) Conclusive Research

•Descriptive/Causal

Exploratory
Conclusive Research Research
(c)
•Descriptive/Causal •Secondary Data
Analysis
•Focus Groups
Copyright © 2010 Pearson Education, Inc. 3-25
 Potential Sources of Error in Research Designs

Total Error

Random Non-sampling
Sampling Error Error

Response Non-response
Error Error

Researcher Interviewer Respondent

Error Error Error
Surrogate Information Error Respondent Selection Error Inability Error
Measurement Error Questioning Error Unwillingness Error
Population Definition Error Recording Error
Sampling Frame Error Cheating Error
Data Analysis Error
Copyright © 2010 Pearson Education, Inc. 3-26
 Errors in Marketing Research

• The total error is the variation between the true

mean value in the population of the variable of
interest and the observed mean value obtained in
the marketing research project.

• Random sampling error is the variation between

the true mean value for the population and the true
mean value for the original sample.

Copyright © 2010 Pearson Education, Inc. 3-27

 Errors in Marketing Research

▪ Non-sampling errors can be attributed to sources

other than sampling, and they may be random or
nonrandom:
• including errors in problem definition,
• approach, scales, (ranking scale vs rating scale)
• questionnaire design, (skip pattern for married,
what about bachelors)
• interviewing methods, (mall intercept, home
interview) and
• data preparation and analysis.
• Non-sampling errors consist of non-response errors
and response errors.
Copyright © 2010 Pearson Education, Inc. 3-28
 Errors in Marketing Research

• Non-response error arises when some

of the respondents included in the
sample do not respond.
• Indian men and women don’t answer
questions on sex
• Response error arises when
respondents give inaccurate answers or
their answers are misrecorded or mis-
analyzed.
• Income is overstated in survey
research
Copyright © 2010 Pearson Education, Inc. 3-29
 Citicorp Banks on Exploratory,
Descriptive, and Causal Research
▪ Marketing Research at Citicorp is typical in that it is used
to measure consumer awareness of products,
▪ monitor their satisfaction and
▪ attitudes associated with the product,
▪ track product usage and
▪ diagnose problems as they occur.

➢ To accomplish these tasks Citicorp makes extensive use

of exploratory, descriptive, and causal research.
➢ Often it is advantageous to offer special financial
packages to specific groups of customers.
➢ In this case, a financial package is being designed for
senior citizens.
Copyright © 2010 Pearson Education, Inc. 3-30
 Citicorp Banks on Exploratory,
Descriptive, and Causal Research

The following seven-step process was taken by marketing

research to help in the design.

Copyright © 2010 Pearson Education, Inc. 3-31

 Citicorp Banks on Exploratory,
Descriptive, and Causal Research

1) A taskforce was created to better define the market

parameters to include all the needs of the many Citicorp
branches. A final decision was made to include Americans
55 years of age or older, retired, and in the upper half of
the financial strata of that market.
Copyright © 2010 Pearson Education, Inc. 3-32
 Citicorp Banks on Exploratory,
Descriptive, and Causal Research

2) Exploratory research in the form of secondary data analysis of the

mature or older market was then performed and a study of
competitive financial products was conducted. Exploratory
qualitative research involving focus groups was also carried out in
order to determine the needs and desires of the market and
the level of satisfaction with the current products.

In the case of senior citizens, a

great deal of diversity was
found in the market. This was
determined to be due to such
factors as affluence,
relative age, and the
absence or presence of a
spouse.
Copyright © 2010 Pearson Education, Inc. 3-33
 Citicorp Banks on Exploratory,
Descriptive, and Causal Research

3) The next stage of research was brainstorming. This

involved the formation of many different financial
packages aimed at the target market. In this case, a total
of 10 ideas were generated.
Copyright © 2010 Pearson Education, Inc. 3-34
 Citicorp Banks on Exploratory,
Descriptive, and Causal Research
4) The feasibility of the 10 ideas generated in step 3 was then
tested. The ideas were tested on the basis of whether they
were possible in relation to the business. The following list of
questions was used as a series of hurdles that the ideas had to
pass to continue on to the next step.

• Can the idea be explained in a manner that the target

market will easily understand?
• Does the idea fit into the overall strategy of Citicorp?

Copyright © 2010 Pearson Education, Inc. 3-35

 Citicorp Banks on Exploratory,
Descriptive, and Causal Research

▪ Is there an available description of a specific target market for

the proposed product?
▪ Does the research conducted so far indicate a potential match for
target market needs, and is the idea perceived to have
appeal to this market?
▪ Is there a feasible outline of the tactics and strategies for
implementing the program?
▪ Have the financial impact and cost of the program been thoroughly
evaluated and determined to be in line with company practices?
In this study, only one idea generated from the brainstorming
session made it past all the listed hurdles and on to step 5.

Copyright © 2010 Pearson Education, Inc. 3-36

 Citicorp Banks on Exploratory,
Descriptive, and Causal Research

5) A creative work-plan was then generated. This plan was to emphasize

the competitive advantage of the proposed product as well as better
delineate the specific features of the product.

6) The previous exploratory research was now followed up with

descriptive research in the form of mall intercept surveys of people in
the target market range. The survey showed that the list of special
features was too long and it was decided to drop the features more
commonly offered by competitors.

Copyright © 2010 Pearson Education, Inc. 3-37

 Citicorp Banks on Exploratory,
Descriptive, and Causal Research

7) Finally, the product was test marketed in six

of the Citicorp branches within the target
market. Test marketing is a form of causal
research. Given successful test marketing results,
the product is introduced nationally.

Copyright © 2010 Pearson Education, Inc. 3-38

 Marketing Research Proposal

• Executive Summary
• Background
• Problem Definition/Objectives of the
Research
• Approach to the Problem
• Research Design
• Fieldwork/Data Collection
• Data Analysis
• Reporting
• Cost and Time
• Appendices
Copyright © 2010 Pearson Education, Inc. 3-39
 The Greenfield of Online Research
Greenfield Online Research Center, Inc.
([Link] based in Westport,
Connecticut, is a subsidiary of the Greenfield Consulting
Group.
➢ The Online Research Center conducts focus
groups, surveys, and polls over the Internet.
The company has built up a “panel” of several
thousand Internet users, from which it draws
survey samples. The samples may be used for
descriptive research designs like single or
multiple cross-sectional designs, as well as
longitudinal designs.
➢ Causal designs can also be implemented.
Respondents may also be chosen from the registered
Internet users.
Copyright © 2010 Pearson Education, Inc. 3-40
 The Greenfield of Online Research
▪ Internet users wishing to take part in surveys and
other projects begin by registering online at the
company’s Web site.

▪ The registration consists of a “sign-up survey”

▪ that asks for e-mail address,
▪ type of computer used,
▪ personal interests and
▪ information about the respondent’s household.

▪ Once an Internet user is registered, Greenfield

Online matches the user with research studies that
are well-suited to his or her interests.

Copyright © 2010 Pearson Education, Inc. 3-41

 The Greenfield of Online Research
▪ Incentives to take part in focus groups or special
surveys are offered by the companies whose
products or services are being researched.

▪ This incentive is cash or valuable prizes.

▪ Incentives are also offered to Internet users to

encourage them to register with Greenfield’s
Internet panel.

▪ New registrants automatically qualify for prizes

that are awarded in monthly drawings.

Copyright © 2010 Pearson Education, Inc. 3-42

Copyright © 2010 Pearson Education, Inc. 3-43
Exploratory Research Design:
Qualitative Research

Copyright © 2010 Pearson Education, Inc. 5-1

Outline

1) Overview
2) Primary Data: Qualitative Versus Quantitative
Research
3) Rationale for Using Qualitative Research
Procedures
4) A Classification of Qualitative Research
Procedures

Copyright © 2010 Pearson Education, Inc. 5-2

 Outline

5) Focus Group (FG) Interviews

i. Characteristics
ii. Planning and Conducting Focus Groups
iii. Telesessions and Other Variations
iv. Advantages and Disadvantages of Focus Groups
v. Applications of Focus Groups
vi. Online Focus Group Interviews
vii. Advantages and Disadvantages of Online FGs
6) Depth Interviews
i. Characteristics
ii. Techniques
iii. Advantages and Disadvantages of Depth Interviews
iv. Applications of Depth Interviews
Copyright © 2010 Pearson Education, Inc. 5-3
Outline

7) Projective Techniques
i. Association Techniques
ii. Completion Techniques
a. Sentence Completion
b. Story Completion
iii. Construction Techniques
a. Picture Response
b. Cartoon Tests
iv. Expressive Techniques
a. Role Playing
b. Third-Person Technique
v. Advantages and Disadvantages
of Projective Techniques
vi. Applications of Projective
Techniques

Copyright © 2010 Pearson Education, Inc. 5-4

 Outline

8) Analysis of Qualitative Data

9) International Marketing
Research
10) Ethics in Marketing Research
11) Summary

Copyright © 2010 Pearson Education, Inc. 5-5

A Classification of Marketing Research Data

Marketing Research Data

Secondary Data Primary Data

Qualitative Data Quantitative Data

Descriptive Causal

Survey Observational Experimental

Data and Other Data Data
Copyright © 2010 Pearson Education, Inc. 5-6
Qualitative Vs. Quantitative Research

Qualitative Research Quantitative Research

Objective To gain a insight and To quantify the data and

understanding of the generalize the results from
underlying reasons and the sample to the population
motivations of interest

Sample Small number of non- Large number of

representative cases representative cases

Data Collection Unstructured Structured

Data Analysis Non-statistical Statistical

Outcome Develop an initial Recommend a final course of

understanding action
Copyright © 2010 Pearson Education, Inc. 5-7
A Classification of Qualitative Research
Procedures

Qualitative Research
Procedures

Direct (Non- Indirect

disguised) (Disguised)

Projective
Depth Interviews Techniques
Focus Groups

Association Completion Construction Expressive

Techniques Techniques Techniques Techniques

Copyright © 2010 Pearson Education, Inc. 5-8

 Characteristics of Focus Groups

Group Size 8-12

Group Composition Homogeneous, respondents,

prescreened

Physical Setting Relaxed, informal atmosphere

Time Duration 1-3 hours

Recording Use of audiocassettes and

videotapes, voice recorders

Moderator Observational, interpersonal, and

communication skills of the
moderator
Copyright © 2010 Pearson Education, Inc. 5-9
Baltimore Research: Facility Overview.
Source [Link]

Copyright © 2010 Pearson Education, Inc. 5-10

 One-way mirror

Layout of focus group room and

viewing room
Copyright © 2010 Pearson Education, Inc. 5-11
Viewing room looking into the focus group room
through one-way mirror

Source: [Link]/[Link]
Copyright © 2010 Pearson Education, Inc. 5-12
Key Qualifications of Focus Group Moderators

1. Kindness with firmness: The moderator must combine a

disciplined detachment with understanding empathy so as
to generate the necessary interaction.
2. Permissiveness: The moderator must be permissive yet
alert to signs that the group’s cordiality or purpose is
disintegrating.
3. Involvement: The moderator must encourage and
stimulate intense personal involvement.
4. Incomplete understanding: The moderator must
encourage respondents to be more specific about
generalized comments by exhibiting incomplete
understanding.
Copyright © 2010 Pearson Education, Inc. 5-13
Key Qualifications of Focus Group Moderators

5. Encouragement: The moderator must encourage

unresponsive members to participate.

6. Flexibility: The moderator must be able to improvise

and alter the planned outline amid the distractions of
the group process.

7. Sensitivity: The moderator must be sensitive enough

to guide the group discussion at an intellectual as well
as emotional level.

Copyright © 2010 Pearson Education, Inc. 5-14

Procedure for Planning and Conducting
Focus Groups

Determine the Objectives and Define the Problem

Specify the Objectives of Qualitative Research

State the Objectives/Questions to be Answered by Focus Groups

Write a Screening Questionnaire

Develop a Moderator’s Outline

Conduct the Focus Group Interviews

Review Tapes and Analyze the Data

Summarize the Findings and Plan Follow-Up Research or Action

Copyright © 2010 Pearson Education, Inc. 5-15

Variations in Focus Groups

• Two-way focus group. This allows one target

group to listen to and learn from a related group.
For example, a focus group of physicians viewed
a focus group of arthritis patients discussing the
treatment they desired.

• Dual-moderator group. A focus group

conducted by two moderators: One moderator is
responsible for the smooth flow of the session,
and the other ensures that specific issues are
discussed.

• Dueling-moderator group. There are two

moderators, but they deliberately take opposite
positions on the issues to be discussed.
Copyright © 2010 Pearson Education, Inc. 5-16
 Variations in Focus Groups

• Respondent-moderator group. The

moderator asks selected participants to play the
role of moderator temporarily to improve group
dynamics.
• Client-participant groups. Client personnel
are identified and made part of the discussion
group.
• Mini groups. These groups consist of a
moderator and only 4 or 5 respondents.
• Telesession groups. Focus group sessions by
phone using the conference call technique.
• Online focus groups. Focus groups conducted
online over the Internet.
Copyright © 2010 Pearson Education, Inc. 5-17
Advantages of Focus Groups

1. Synergism
2. Snowballing
3. Stimulation
4. Security
5. Spontaneity
6. Serendipity
7. Specialization
8. Scientific scrutiny
9. Structure
10. Speed

Copyright © 2010 Pearson Education, Inc. 5-18

Disadvantages of Focus Groups

1. Misuse
2. Misjudge
3. Moderation
4. Messy
5. Misrepresentation

Copyright © 2010 Pearson Education, Inc. 5-19

Online Versus Traditional Focus Groups

Characteristic Online Focus Groups Traditional Focus Groups

Group size 4-6 8-12

Group composition Anywhere in the world Drawn from the local area

Time duration 1-1.5 hours 1-3 hours

Physical setting Researcher has little control Under the control of the researcher

Respondent identity Difficult to verify Can be easily verified

Respondent attentiveness Respondents can engage in other tasks Attentiveness can be monitored

Copyright © 2010 Pearson Education, Inc. 5-20

Online Versus Traditional Focus Groups

Respondent recruiting Easier. Can be recruited online, e-mail, Recruited by traditional means
panel, or by traditional means (telephone, mail, mail panel)

Group dynamics Limited Synergistic, snowballing

(bandwagon) effect

Openness of respondents Respondents are more candid Respondents are candid, except for
due to lack of face-to-face contact sensitive topics

Nonverbal communication Body language cannot be observed. Body language and emotions
Emotions expressed by using symbols observed

Use of physical stimuli Limited to those that can be displayed A variety of stimuli (products,
on the Internet advertising demonstrations, etc.)
can be used

Copyright © 2010 Pearson Education, Inc. 5-21

 Online Versus Traditional Focus Groups

Transcripts Available immediately Time consuming and expensive to

obtain

Observers’ communication Observers can communicate with the Observers can manually send notes
with moderator the moderator on a split-screen to the focus group room

Unique moderator skills Typing, computer usage, familiarity Observational

with chat room slang

Turnaround time Can be set up and completed Takes many days for setup and
in a few days completion

Client travel costs None Can be expensive

Client Involvement Limited High

Basic focus group costs Much less expensive More expensive: facility rental,
food, taping, transcript preparation
Copyright © 2010 Pearson Education, Inc. 5-22
 Advantages of Online Focus Groups

• Geographical constraints are removed and time

constraints are lessened.
• Unique opportunity to re-contact group
participants at a later date.
• Can recruit people not interested in traditional
focus groups: doctors, lawyers, etc.
• Moderators can carry on side conversations with
individual respondents.
• There is no travel, videotaping, or facilities to
arrange so the cost is much lower.

Copyright © 2010 Pearson Education, Inc. 5-23

Disadvantages of Online Focus Groups

• Only people that have access to the Internet can

participate.
• Verifying that a respondent is a member of a
target group is difficult.
• There is lack of general control over the
respondent's environment.
• Only audio and visual stimuli can be tested.
Products can not be touched (e.g., clothing) or
smelled (e.g., perfumes).

Copyright © 2010 Pearson Education, Inc. 5-24

Depth Interview Techniques: Laddering

In laddering, the line of questioning proceeds from product

characteristics to user characteristics. This technique allows
the researcher to tap into the consumer's network of
meanings.

Wide body aircrafts (product characteristic)

I can get more work done

I accomplish more

I feel good about myself (user characteristic)

Advertising theme: You will feel good about yourself when

flying our airline. “You're The Boss.”
Copyright © 2010 Pearson Education, Inc. 5-25
Depth Interview : Hidden Issue Questioning

In hidden issue questioning, the focus is not on

socially shared values but rather on personal “sore
spots;” not on general lifestyles but on deeply felt
personal concerns.

fantasies, work lives, and social lives

historic, elite, “masculine-camaraderie,”

competitive activities

Advertising theme: communicate aggressiveness,

high status, and competitive heritage of the airline.
Copyright © 2010 Pearson Education, Inc. 5-26
Depth Interview Techniques: Symbolic Analysis

Symbolic analysis attempts to analyze the symbolic

meaning of objects by comparing them with their
opposites. The logical opposites of a product that are
investigated are: non-usage of the product, attributes of
an imaginary “non-product,” and opposite types of
products.

“What would it be like if you could no longer use

airplanes?”

“Without planes, I would have to rely on e-mails, letters

and long-distance calls.”

Airlines sell to the managers face-to-face communication.

Advertising theme: The airline will do the same thing for
a manager as Federal Express does for a package.
Copyright © 2010 Pearson Education, Inc. 5-27
Focus Groups Versus Depth Interviews

Characteristic Focus Depth

Groups Interviews
Group synergy and dynamics + -
Peer pressure/group influence - +
Client involvement + -
Generation of innovative ideas + -
In-depth probing of individuals - +
Uncovering hidden motives - +
Discussion of sensitive topics - +
Copyright © 2010 Pearson Education, Inc. 5-28
Focus Groups Versus Depth Interviews

Characteristic Focus Depth

Groups Interviews
Interviewing competitors - +
Interviewing professional respondents - +
Scheduling of respondents - +
Amount of information + -
Bias in moderation and interpretation + -
Cost per respondent + -
Time (interviewing & analysis) + -
Note: A + indicates a relative advantage over the
other procedure, a - indicates a relative disadvantage.
Copyright © 2010 Pearson Education, Inc. 5-29
Definition of Projective Techniques

• An unstructured, indirect form of questioning

that encourages respondents to project their
underlying motivations, beliefs, attitudes or
feelings regarding the issues of concern.
• In projective techniques, respondents are
asked to interpret the behavior of others.
• In interpreting the behavior of others,
respondents indirectly project their own
motivations, beliefs, attitudes, or feelings
into the situation.

Copyright © 2010 Pearson Education, Inc. 5-30

 Word Association

In word association, respondents are presented with a list of

words, one at a time, and asked to respond to each with the
first word that comes to mind. The words of interest, called
test words, are interspersed throughout the list which also
contains some neutral, or filler words to disguise the purpose
of the study. Responses are analyzed by calculating:

(1) the frequency with which any word is given as a response;

(2) the amount of time that elapses before a response is

given; and

(3) the number of respondents who do not respond at all to a

test word within a reasonable period of time.
Copyright © 2010 Pearson Education, Inc. 5-31
Word Association

EXAMPLE
STIMULUS MRS. M MRS. C
washday everyday ironing
fresh and sweet clean
pure air soiled
scrub don't; husband does clean
filth this neighborhood dirt
bubbles bath soap and
water
family squabbles children
towels dirty wash
Copyright © 2010 Pearson Education, Inc. 5-32
Completion Techniques

In sentence completion, respondents are given incomplete

sentences and asked to complete them. Generally, they are
asked to use the first word or phrase that comes to mind.

A person who shops at Sears is ______________________

A person who receives a gift certificate good for Sak's Fifth

Avenue would be __________________________________

J. C. Penney is most liked by _________________________

When I think of shopping in a department store, I ________

A variation of sentence completion is paragraph completion, in

which the respondent completes a paragraph beginning with
the stimulus phrase.

Copyright © 2010 Pearson Education, Inc. 5-33

Completion Techniques

In story completion, respondents are

given part of a story – enough to direct
attention to a particular topic but not to hint
at the ending. They are required to give
the conclusion in their own words.

Copyright © 2010 Pearson Education, Inc. 5-34

 Construction Techniques

With a picture response, the respondents are

asked to describe a series of pictures of
ordinary as well as unusual events. The
respondent's interpretation of the pictures
gives indications of that individual's
personality.

In cartoon tests, cartoon characters are

shown in a specific situation related to the
problem. The respondents are asked to
indicate what one cartoon character might say
in response to the comments of another
character. Cartoon tests are simpler to
administer and analyze than picture response
techniques.
Copyright © 2010 Pearson Education, Inc. 5-35
 A Cartoon Test

Sears

Let’s see if we
can pick up some
house wares at
Sears.

Copyright © 2010 Pearson Education, Inc. 5-36

 Expressive Techniques

In expressive techniques, respondents are presented with

a verbal or visual situation and asked to relate the feelings
and attitudes of other people to the situation.

Role playing. Respondents are asked to play the role or

assume the behavior of someone else.

Third-person technique. The respondent is presented with

a verbal or visual situation and the respondent is asked to
relate the beliefs and attitudes of a third person rather than
directly expressing personal beliefs and attitudes. This third
person may be a friend, neighbor, colleague, or a “typical”
person.

Copyright © 2010 Pearson Education, Inc. 5-37

 Advantages of Projective Techniques

• They may elicit responses that subjects would

be unwilling or unable to give if they knew the
purpose of the study.

• Helpful when the issues to be addressed are

personal, sensitive, or subject to strong social
norms.

• Helpful when underlying motivations, beliefs,

and attitudes are operating at a subconscious
level.

Copyright © 2010 Pearson Education, Inc. 5-38

Disadvantages of Projective Techniques

• Suffer from many of the disadvantages of

unstructured direct techniques, but to a greater
extent.
• Require highly-trained interviewers.
• Skilled interpreters are also required to analyze
the responses.
• There is a serious risk of interpretation bias.
• They tend to be expensive.
• May require respondents to engage in unusual
behavior.

Copyright © 2010 Pearson Education, Inc. 5-39

Guidelines for Using Projective Techniques

• Projective techniques should be used

because the required information cannot be
accurately obtained by direct methods.
• Projective techniques should be used for
exploratory research to gain initial insights
and understanding.
• Given their complexity, projective techniques
should not be used naively.

Copyright © 2010 Pearson Education, Inc. 5-40

Comparison of Focus Groups, Depth
Interviews, and Projective Techniques

Criteria Focus Depth Projective

Groups Interviews Techniques
1. Degree of Structure Relatively high Relatively medium Relatively low
2. Probing of individual Low High Medium
respondents
3. Moderator bias Relatively medium Relatively high Low to high
4. Interpretation bias Relatively low Relatively medium Relatively high
5. Uncovering Low Medium to high High
subconscious
information
6. Discovering innovative
information High Medium Low
7. Obtaining sensitive
Low Medium High
information
8. Involve unusual behavior
No To a limited Yes
or questioning
extent
9. Overall usefulness Highly useful Useful Somewhat
useful
Copyright © 2010 Pearson Education, Inc. 5-41
 Analysis of Qualitative Data

1)Data reduction – Select which aspects of the

data are to be emphasized, minimized, or set
aside for the project at hand.
2)Data display – Develop a visual interpretation
of the data with the use of such tools as a
diagram, chart, or matrix. The display helps to
illuminate patterns and interrelationships in the
data.
3)Conclusion drawing and verification –
Consider the meaning of analyzed data and
assess its implications for the research question
at hand.
Copyright © 2010 Pearson Education, Inc. 5-42
Respondent: (a) Past Communications (b) Most (c) Why

Effective

A • E-mail • E-mail • News is

• Informal communicated in

interchanges almost “real

• Telephone time”

B • E-mail • E-mail • Easy to keep a

• Student newspaper • Campus record of the

• Campus web page web page news for future

reference

C • Informal • Campus • Work on campus

interchanges mail • Do not have

• Telephone Internet access at

• Campus mail home

Copyright © 2010 Pearson Education, Inc. 5-43

International Marketing Research

• Qualitative research is crucial

• The moderator should be familiar with the

language, culture, and patterns of social
interaction

• Nonverbal cues (voice intonations, inflections,

gestures) are important

• The size of the focus group could vary across

cultures

• Focus groups may not be appropriate in some

cultures
Copyright © 2010 Pearson Education, Inc. 5-44
 International Marketing Research

• Equivalence of meaning of stimuli across

cultures should be established.
• Line drawings subject to fewer problems
of interpretation than photographs.

Copyright © 2010 Pearson Education, Inc. 5-45

 Ethical Issues

• Ethical issues related to the respondents and

the general public are of primary concern.
• Disguise can violate the respondents' right to
know and result in psychological harm.
• In debriefing sessions, respondents should be
informed about the true purpose and given
opportunities to ask questions.
• The use of qualitative research results for
questionable purposes raises ethical concerns

Copyright © 2010 Pearson Education, Inc. 5-46

 Ethical Issues

• Deceptive procedures that violate

respondents’ right to privacy and
informed consent should be avoided.
• Video- or audio-taping the respondents
without their prior knowledge or consent
raises ethical concerns.
• The comfort level of the respondents
should be addressed.

Copyright © 2010 Pearson Education, Inc. 5-47

Copyright © 2010 Pearson Education, Inc. 5-48
Correlation and Regression – Section 2

Copyright © 2010 Pearson Education, Inc. 17-1

 TEACHING OBJECTIVES

1) Overview

2) Conducting Bivariate Regression Analysis

i. Scatter Diagram
ii. Bivariate Regression Model
iii. Estimation of Parameters
iv. Standardized Regression Coefficient
v. Significance Testing
vi. Strength and Significance of Association
vii. Prediction Accuracy
viii. Assumptions of the regression model

Copyright © 2010 Pearson Education, Inc. 17-2

Explaining Attitude Toward the City of
Residence- Problem
Y X
Respondent No Attitude Toward Duration of Importance
the City Residence Attached to
Weather
1 6 10 3

2 9 12 11

3 8 12 4

4 3 4 1

5 10 12 11

6 4 6 1

7 5 8 7

8 2 2 4

9 11 18 8

10 9 9 10

11 10 17 8

12 2 2 5

Copyright © 2010 Pearson Education, Inc. 17-3

Conducting Bivariate Regression Analysis

Plot the Scatter Diagram

Formulate the General Model

Estimate the Parameters

Estimate Standardized Regression Coefficients

Test for Significance

Determine the Strength and Significance of Association

Check Prediction Accuracy

Examine the Residuals

Cross-Validate the Model

Copyright © 2010 Pearson Education, Inc. 17-4
Conducting Bivariate Regression Analysis
Formulate the Bivariate Regression Model

In the bivariate regression model, the general form of a

straight line is: Y = b 0 + b 1X

where
Y = dependent or criterion variable
X = independent or predictor variable
b 0= intercept of the line
b 1= slope of the line

The regression procedure adds an error term to account for the

probabilistic or stochastic nature of the relationship:

Yi = b 0 + b 1 Xi + ei

where ei is the error term associated with the i th observation.

Copyright © 2010 Pearson Education, Inc. 17-5
 Plot of Attitude with Duration

9
Attitude

2.25 4.5 6.75 9 11.25 13.5 15.75 18

Duration of Residence
Copyright © 2010 Pearson Education, Inc. 17-6
 Which Straight Line Is Best?

Line 1
Fig. 17.4
Line 2

9 Line 3

Line 4
6

2.25 4.5 6.75 9 11.25 13.5 15.75 18

Copyright © 2010 Pearson Education, Inc. 17-7

 Bivariate Regression

Y β0 + β1X
YJ
eJ

eJ

YJ

X
X1 X2 X3 X4 X5
Assumptions
▪ Line passes through X bar and Y bar
▪ Yis are distributed normally around the reg line
▪ Sum of errors = zero, variance of each observation of
Yi is a constant
Copyright © 2010 Pearson Education, Inc. 17-8
Conducting Bivariate Regression Analysis
Estimate the Parameters
In most cases,b 0 and b 1 are unknown and are estimated
from the sample observations using the equation

Y i = a + b xi
where Y i is the estimated or predicted value of Yi, and
a and b are estimators of0b 0andb 1 , respectively.
COVxy
b=
S x2

n
S (X i - X )(Y i - Y )
= i=1
n 2
S (X i - X )
i=1

n
S X iY i - nXY
= i=1
n
S X i2 - nX 2
i=1
Copyright © 2010 Pearson Education, Inc. 17-9
Conducting Bivariate Regression Analysis
Estimate the Parameters

The intercept, a, may then be calculated using:

a =Y - b X
For the data in Table, the estimation of parameters may
be illustrated as follows:
12
S XiYi
i =1
= (10) (6) + (12) (9) + (12) (8) + (4) (3) + (12) (10) +
(6) (4)
+ (8) (5) + (2) (2) + (18) (11) + (9) (9) + (17) (10) +
(2) (2)
= 917
12
SXi2 = 102 + 122 + 122 + 42 + 122 + 62
i =1
+ 82 + 22 + 182 + 92 + 172 + 22
= 1350
Copyright © 2010 Pearson Education, Inc. 17-10
Conducting Bivariate Regression Analysis
Estimate the Parameters

It may be recalled from earlier calculations of the simple

correlation that:
X =9.33
Y = 6.583

Given n = 12, b can be calculated as:

917 - (12) (9.333) ( 6.583)
b=
1350 - (12) (9.333)2
= 0.5897

a=Y-b X
= 6.583 - (0.5897) (9.333)
= 1.0793

Copyright © 2010 Pearson Education, Inc. 17-11

Conducting Bivariate Regression Analysis
Estimate the Standardized Regression Coefficient

• Standardization is the process by which the raw data

are transformed into new variables that have a mean
of 0 and a variance of 1.
• When the data are standardized, the intercept
assumes a value of 0.
• The term beta coefficient or beta weight is used to
denote the standardized regression coefficient.

Byx = Bxy = rxy

• There is a simple relationship between the

standardized and non-standardized regression
coefficients:

Byx = byx (Sx /Sy)

Copyright © 2010 Pearson Education, Inc. 17-12

Conducting Bivariate Regression Analysis
Test for Significance

The statistical significance of the linear

relationship
between X and Y may be tested by examining the
H0 : b 1 = 0
hypotheses:
H1 : b 1  0
A t statistic with n - 2 degrees of freedom can be
used, where t = b
SEb
SEb denotes the standard deviation of b and is
called
the standard error.

Copyright © 2010 Pearson Education, Inc. 17-13

Conducting Bivariate Regression Analysis
Test for Significance

Using a computer program, the regression of attitude on

duration of residence, using the data shown in Table, yielded
the results shown in Table The intercept, a, equals 1.0793,
and the slope, b, equals 0.5897. Therefore, the estimated
equation is:

Attitude (Y hat ) = 1.0793 + 0.5897 (Duration of residence)

The standard error, or standard deviation of b is estimated as

0.07008, and the value of the t statistic as t = 0.5897/0.0700 =
8.414, with n - 2 = 10 degrees of freedom.
From Table 4 in the Statistical Appendix, we see that the critical
value of t with 10 degrees of freedom and = 0.05 is 2.228 for
a
a two-tailed test. Since the calculated value of t (8.414 >
2.228) is larger than
the critical value, the null hypothesis is rejected.

Copyright © 2010 Pearson Education, Inc. 17-14

Decomposition of the Total
Variation in Bivariate Regression

Fig. 17.6

Y
Residual Variation
SSres
Explained Variation
SSreg
Y

X
X1 X2 X3 X4 X5

Copyright © 2010 Pearson Education, Inc. 17-15

Conducting Bivariate Regression Analysis
Determine the Strength and Significance of Association

The total variation, SSy, may be decomposed into the variation

accounted for by the regression line, SSreg, and the error or residual
variation, SSerror or SSres, as follows:

SSy = SSreg + SSres

where n
SSy = iS=1 (Yi - Y)2

n
SSreg = iS (Yi - Y)2
=1

n
SSres = iS= (Yi - Yi)2
1
Copyright © 2010 Pearson Education, Inc. 17-16
 Conducting Bivariate Regression Analysis
Determine the Strength and Significance of Association

The strength of association may then be calculated as

follows:
SSreg
r2 =
SSy

SSy - SSres
=
SSy

To illustrate the calculations of r2, let us consider again the effect of attitude
toward the city on the duration of residence. It may be recalled from earlier
calculations of the simple correlation coefficient that:
n
SS y = S (Y i - Y )2
i =1
= 120.9168
Copyright © 2010 Pearson Education, Inc. 17-17
Conducting Bivariate Regression Analysis
Determine the Strength and Significance of Association

The predicted values (Y ) can be calculated using the

regression
equation:

Attitude ( Y ) = 1.0793 + 0.5897 (Duration of residence)

For the first observation in Table 17.1, this value is:

Y
( ) = 1.0793 + 0.5897 x 10 = 6.9763. For each value of X
calculate Y est – predicted values on the regression
line.

For each successive observation, the predicted values are,

in order,
8.1557, 8.1557, 3.4381, 8.1557, 4.6175, 5.7969, 2.2587,
11.6939, 6.3866, 11.1042, and 2.2587.
Copyright © 2010 Pearson Education, Inc. 17-18
Conducting Bivariate Regression Analysis
Determine the Strength and Significance of Association

Therefore, n
S S reg = S (Y i - Y )
2

i =1
= (6.9763-6.5833)2 + (8.1557-6.5833)2
+ (8.1557-6.5833)2 + (3.4381-6.5833)2
+ (8.1557-6.5833)2 + (4.6175-6.5833)2
+ (5.7969-6.5833)2 + (2.2587-6.5833)2
+ (11.6939 -6.5833)2 + (6.3866-6.5833)2
+ (11.1042 -6.5833)2 + (2.2587-6.5833)2
=0.1544 + 2.4724 + 2.4724 + 9.8922 + 2.4724
+ 3.8643 + 0.6184 + 18.7021 + 26.1182
+ 0.0387 + 20.4385 + 18.7021

= 105.9524

Copyright © 2010 Pearson Education, Inc. 17-19

Conducting Bivariate Regression Analysis
Determine the Strength and Significance of Association

Another, equivalent test for examining the

significance of the linear relationship between X and
Y (significance of b) is the test for the significance of
the coefficient of determination. The hypotheses in
this case are:

H0: R2pop = 0

H1: R2pop > 0

Copyright © 2010 Pearson Education, Inc. 17-20

Conducting Bivariate Regression Analysis
Determine the Strength and Significance of Association

The appropriate test statistic is the F statistic:

SS reg
F=
SS res /(n-2)

which has an F distribution with 1 and n - 2 degrees of

freedom. The F test is a generalized form of the t test.
If a random variable is t distributed with n degrees of
freedom, then t2 is F distributed with 1 and n degrees of
freedom. Hence, the F test for testing the significance
of the coefficient of determination is equivalent to
testing the following hypotheses:
H0: b 1 = 0
H1 : b 1  0

H0: r = 0
or: r  0
H1
Copyright © 2010 Pearson Education, Inc. 17-21
 Bivariate Regression

Multiple R 0.93608
R2 0.87624
Adjusted R2 0.86387
Standard Error 1.22329

ANALYSIS OF VARIANCE
df Sum of Squares Mean Square

Regression 1 105.95222 105.95222

Residual 10 14.96444 1.49644
F = 70.80266 Significance of F = 0.0000

VARIABLES IN THE EQUATION

Variable b SEb Beta (ß) T Significance
of T
Duration 0.58972 0.07008 0.93608 8.414 0.0000
(Constant) 1.07932 0.74335 1.452 0.1772

Copyright © 2010 Pearson Education, Inc. 17-22

Conducting Bivariate Regression Analysis
Determine the Strength and Significance of Association
From Table , it can be seen that:

r2 = 105.9522/(105.9522 + 14.9644)

= 0.8762
Which is the same as the value calculated earlier. The
value of the F statistic is:

F = 105.9522/(14.9644/10)=
F= regression sums of sq /residual sums of squares/ df
= 70.8027

with 1 and 10 degrees of freedom. The calculated F

statistic
exceeds the critical value of 4.96 determined from Table 5
in the
Statistical Appendix. Therefore, the relationship is
a significant at
= 0.05, corroborating the results of the t test.
Copyright © 2010 Pearson Education, Inc. 17-23
Conducting Bivariate Regression Analysis
Check Prediction Accuracy
To estimate the accuracy of predicted values, Y , it is useful to
calculate the standard error of estimate, SEE.
n

 (Y i - Yˆ i )
2

SEE = i =1

n-2

or
SEE = SS res

n-2

or more generally, if there are k independent variables,

SEE = SS res

n - k -1

For the data given in Table, the SEE is estimated as follows:

SEE = 14.9644/(12-2)
= 1.22329
Copyright © 2010 Pearson Education, Inc. 17-24
Assumptions of Regression analysis

• The error term is normally distributed. For each

fixed value of X, the distribution of Y is normal.

• The means of all these normal distributions of Y,

given X, lie on a straight line with slope b.

• The mean (sum) of the error term is 0.

• The variance of the error term is constant. This

variance does not depend on the values assumed
by X. (Homoscedasticity)

• The error terms are uncorrelated. In other words,

the observations have been drawn independently.

Copyright © 2010 Pearson Education, Inc. 17-25

Conducting Multiple Regression Analysis
Strength of Association

SSy = SSreg + SSres

where
n
SS y = S (Y i - Y )2 Total sums of squared

i=1
n
2
SS re g = S (Y i - Y ) Regression sums of squared

i=1
n
2
SS re s = S (Y i - Y i) Error sums of squared
i=1

Copyright © 2010 Pearson Education, Inc. 17-26

Conducting Multiple Regression Analysis
Strength of Association

The strength of association is measured by the square of the multiple

correlation coefficient, R2, which is also called the coefficient of
multiple determination.

SS reg
R2 = =regression sums of sq/ total sums of
SS y squares

R2 is adjusted for the number of independent variables and the sample

size by using the following formula:
2
k(1 - R2 )
Adjusted R2 =R -
n-k-1

Copyright © 2010 Pearson Education, Inc. 17-27

 Regression Homework

➢ Call 10 friends of yours and ask there height in

centimeters and weight in kilograms. For this data
of 10 persons, compute ANOVA TABLE, F TEST,
regression Parameters and standard errors and r
squared.

Copyright © 2010 Pearson Education, Inc. 17-28

 RECAP

➢ How to fit regression line?

➢ Least squares method of fitting regression line

➢ Calculating regression parameters

➢ Decomposing variation in Bivariate model

➢ Calculate R squared, standard error, ANOVA

Table, F test

Copyright © 2010 Pearson Education, Inc. 17-29

 THANKS – STOP HERE

Copyright © 2010 Pearson Education, Inc. 17-30

 Correlation and Regression – SECTION 3

Copyright © 2010 Pearson Education, Inc. 17-1

 TEACHING OBJECTIVES

1) Overview
2) Multiple Regression

3) Statistics Associated with Multiple

Regression

4) Conducting Multiple Regression

i. Partial Regression Coefficients
ii. Strength of Association
iii. Significance Testing
iv. Examination of Residuals
v. Collinearity
vi. ANOVA TABLE computation

Copyright © 2010 Pearson Education, Inc. 17-2

Explaining Attitude Toward the City of
Residence - EXAMPLE
Y X
Respondent No Attitude Toward Duration of Importance
the City Residence Attached to
Weather
1 6 10 3

2 9 12 11

3 8 12 4

4 3 4 1

5 10 12 11

6 4 6 1

7 5 8 7

8 2 2 4

9 11 18 8

10 9 9 10

11 10 17 8

12 2 2 5

Copyright © 2010 Pearson Education, Inc. 17-3

 Multiple Regression

The general form of the multiple regression model

is as follows:

Y = b 0 + b 1 X1 + b 2 X2 + b 3 X3+ . . . + b k X k + e
which is estimated by the following equation:

Y= a + b1X1 + b2X2 + b3X3+ . . . + bkXk

As before, the coefficient a represents the intercept,
but the b's are now the partial regression coefficients.

Copyright © 2010 Pearson Education, Inc. 17-4

 Statistics Associated with Multiple Regression

• Adjusted R2. R2, coefficient of multiple determination, is

adjusted for the number of independent variables and the
sample size to account for the diminishing returns. After the
first few variables, the additional independent variables do not
make much contribution.

• Coefficient of multiple determination. The strength of

association in multiple regression is measured by the square of
the multiple correlation coefficient, R2, which is also called the
coefficient of multiple determination.

• F test. The F test is used to test the null hypothesis that the
coefficient of multiple determination in the population, R2pop, is
zero. This is equivalent to testing the null hypothesis. The test
statistic has an F distribution with k and (n - k - 1) degrees of
freedom.

Copyright © 2010 Pearson Education, Inc. 17-5

 Multiple Regression – ANOVA Table

Multiple R 0.97210
R2 0.94498
Adjusted R2 0.93276
Standard Error 0.85974

ANALYSIS OF VARIANCE
df Sum of Squares Mean Square

Regression 2 114.26425 57.13213

Residual 9 6.65241 0.73916
F = 77.29364 Significance of F = 0.0000

VARIABLES IN THE EQUATION

Variable b SEb Beta (ß) T Significance
of T
IMPORTANCE 0.28865 0.08608 0.31382 3.353 0.0085
DURATION 0.48108 0.05895 0.76363 8.160 0.0000
(Constant) 0.33732 0.56736 0.595 0.5668
Copyright © 2010 Pearson Education, Inc. 17-6
Conducting Multiple Regression Analysis
Strength of Association

SSy = SSreg + SSres

where
n
SS y = S (Y i - Y )2 Total sums of squared

i=1
n
2
SS re g = S (Y i - Y ) Regression sums of squared

i=1
n
2
SS re s = S (Y i - Y i) Error sums of squared
i=1

Copyright © 2010 Pearson Education, Inc. 17-7

Conducting Multiple Regression Analysis
Strength of Association

The strength of association is measured by the square of the multiple

correlation coefficient, R2, which is also called the coefficient of
multiple determination.

SS reg
R2 = =regression sums of sq/ total sums of
SS y squares

R2 is adjusted for the number of independent variables and the sample

size by using the following formula:
2
k(1 - R2 )
Adjusted R2 =R -
n-k-1

Copyright © 2010 Pearson Education, Inc. 17-8

Conducting Multiple Regression Analysis
Significance Testing

H0 : R2pop = 0

This is equivalent to the following null hypothesis:

H0: b 1 = b2 = b 3 = . . . = b k = 0

The overall test can be conducted by using an F statistic:

SS reg /k
F=
SS res /(n - k - 1)

2
= R /k
(1 - R 2 )/(n- k - 1)

which has an F distribution with k and (n - k -1) degrees of freedom.

Copyright © 2010 Pearson Education, Inc. 17-9

Conducting Multiple Regression Analysis
Significance Testing

Testing for the significance of the b i's can be done in a manner

similar to that in the bivariate case by using t tests. The
significance of the partial coefficient for importance
attached to weather may be tested by the following equation:

t= b
SE
b

which has a t distribution with n - k -1 degrees of freedom.

Copyright © 2010 Pearson Education, Inc. 17-10

Conducting Multiple Regression Analysis
Examination of Residuals

• A residual is the difference between the observed value of

Yi and the value predicted by the regression equation Yi.

• Scatter-grams of the residuals, in which the residuals are

plotted against the predicted values, Y i, time, or predictor
variables, provide useful insights in examining the
appropriateness of the underlying assumptions and
regression model fit.

• The assumption of a normally distributed error term can be

examined by constructing a histogram of the residuals.

• The assumption of constant variance of the error term can

be examined by plotting the residuals against the predicted
values of the dependent variable, Y i.

Copyright © 2010 Pearson Education, Inc. 17-11

 Residual Plot Indicating that
Variance Is Not Constant

Fig. 17.7

Residuals

Predicted Y Values

Heteroscedasticity
Copyright © 2010 Pearson Education, Inc. 17-12
Residual Plot Indicating a Linear Relationship
Between Residuals and Time

Fig. 17.8

Residuals

Time

Autocorrelation
Copyright © 2010 Pearson Education, Inc. 17-13
 Plot of Residuals Indicating that
a Fitted Model Is Appropriate

Fig. 17.9

Residuals

Predicted Y Values

Copyright © 2010 Pearson Education, Inc. 17-14

 Stepwise Regression

The purpose of stepwise regression is to select, from a large

number of predictor variables, a small subset of variables that
account for most of the variation in the dependent or criterion
variable. In this procedure, the predictor variables enter or are
removed from the regression equation one at a time. There are
several approaches to stepwise regression.
• Forward inclusion. Initially, there are no predictor variables
in the regression equation. Predictor variables are entered one
at a time, only if they meet certain criteria specified in terms of
F ratio. The order in which the variables are included is based
on the contribution to the explained variance.
• Backward elimination. Initially, all the predictor variables
are included in the regression equation. Predictors are then
removed one at a time based on the F ratio for removal.
• Stepwise solution. Forward inclusion is combined with the
removal of predictors that no longer meet the specified criterion
at each step.

Copyright © 2010 Pearson Education, Inc. 17-15

 Multicollinearity

• Multicollinearity arises when intercorrelations

among the predictors are very high.

• Multicollinearity can result in several problems,

including:
• The partial regression coefficients may not be
estimated precisely.
• The standard errors are likely to be high.
• The magnitudes, as well as the signs of the
partial regression coefficients, may change from
sample to sample.
• It becomes difficult to assess the relative
importance of the independent variables in
explaining the variation in the dependent
variable.
• Predictor variables may be incorrectly included or
removed in stepwise regression.

Copyright © 2010 Pearson Education, Inc. 17-16

 Multicollinearity- How to overcome
multi-collinearity?

• A simple procedure for adjusting for multicollinearity

consists of using only one of the variables in a highly
correlated set of variables.

• Alternatively, the set of independent variables can be

transformed into a new set of predictors that are
mutually independent by using techniques such as
principal components analysis or Factor analysis

• More specialized techniques, such as ridge regression

and latent root regression, can also be used.

Copyright © 2010 Pearson Education, Inc. 17-17

Relative Importance of Predictors

Unfortunately, because the predictors are correlated,

there is no unambiguous measure of relative
importance of the predictors in regression analysis.
However, several approaches are commonly used to
assess the relative importance of predictor variables.

• Statistical significance. If the partial regression

coefficient of a variable is not significant, as
determined by an incremental F test, that variable is
judged to be unimportant. An exception to this rule is
made if there are strong theoretical reasons for
believing that the variable is important.
• Square of the simple correlation coefficient. This
measure, r 2, represents the proportion of the
variation in the dependent variable explained by the
independent variable in a bivariate relationship.

Copyright © 2010 Pearson Education, Inc. 17-18

Relative Importance of Predictors

• Measures based on standardized coefficients or beta

weights. The most commonly used measures are the
absolute values of the beta weights, |Bi| , or the
squared values, Bi 2.
• If height is measured in feet and weight is measures
in pounds, then comparison of the relative
importance of the 2 variables can be done based on
beta coefficient)
• Stepwise regression. The order in which the
predictors enter or are removed from the regression
equation is used to infer their relative importance.

Copyright © 2010 Pearson Education, Inc. 17-19

 Cross-Validation

• The regression model is estimated using the entire data set.

• The available data are split into two parts, the estimation sample
and the validation sample. The estimation sample generally
contains 50-90% of the total sample.
• The regression model is estimated using the data from the
estimation sample only. This model is compared to the model
estimated on the entire sample to determine the agreement in
terms of the signs and magnitudes of the partial regression
coefficients.
• The estimated model is applied to the data in the validation
sample to predict the values of the dependent variable,Y i, for the
observations in the validation sample.
• The observed values Yi, and the predicted values, Y i, in the
validation sample are correlated to determine the simple r 2. This
measure, r 2, is compared to R 2 for the total sample and to R 2
for the estimation sample to assess the degree of shrinkage.

Copyright © 2010 Pearson Education, Inc. 17-20

 Regression with Dummy Variables

Product Usage Original Dummy Variable Code

Category Variable
Code D1 D2 D3
Nonusers.............. 1 1 0 0
Light Users.......... 2 0 1 0
Medium Users...... 3 0 0 1
Heavy Users......... 4 0 0 0

Yi = a + b1D1 + b2D2 + b3D3

• In this case, "heavy users" has been selected as a reference

category and has not been directly included in the regression
equation.
• The coefficient b1 is the difference in predicted Y i for nonusers, as
compared to heavy users.

Copyright © 2010 Pearson Education, Inc. 17-21

 Problem to solve

▪ Call 10 friends of yours- Ask them their age,

height in CMS and weight in KGS, do a multiple
regression and calculate regression equation, all
statistics to be computed, ANOVA Table, R
squared, Residual analysis

Copyright © 2010 Pearson Education, Inc. 17-22

 RECAP

➢ How to conduct multiple regression?

➢ ANOVA table and Regression coefficients

estimation

➢ Decomposing variations in an ANOVA table

➢ Calculating R squared and adjusted R squared

➢ Residual analysis, standard error estimate

➢ Stepwise regression and dummy variables in

regression
Copyright © 2010 Pearson Education, Inc. 17-23
 THANKS – STOP HERE

Copyright © 2010 Pearson Education, Inc. 17-24

FACTOR ANALYSIS
 FACTOR ANALYSIS USED FOR
1 • DATA REDUCTION

INTER_RELATED VARIABLES
2 JOINED TOGETHER
• DATA SUMMARIZATION

Input to Regression
3 • Latent Variable formation
 FACTOR ANALYSIS

• Is a procedure used for data reduction and data

summarization.
• In MR project, large number of variables are inter
correlated and which may be reduced to a
manageable level
• In this process, latent variables are found that are
uncorrelated
• Relationships amongst sets of many interrelated
variables are examined and represented in terms
of a few underlying factors
• e.g. a person’s IQ :
 FACTOR ANALYSIS
• Quantitative analytical ability
• Qualitative ability
Mathematical ability

Analytical

Logical ability

Language

Singing
Qualitative

Art and dramatics

 FACTOR ANALYSIS
• Factor analysis is an inter dependence technique and not a
dependent-independent variable technique.

• Factor analysis is used in the following circumstances

➢ To identify the underlying dimensions or factors that

explain the correlation among a set of variables
e.g. Dalit study – Attitude and perceptions battery of
statements

➢ To identify a new, smaller set of uncorrelated variables

to replace the original set of correlated variables in a
regression framework.-
➢ e.g. Brand Equity factors explaining bond /
commitment to a brand
 FACTOR ANALYSIS

• Factor analysis is an inter dependence technique and not a

dependent-independent variable technique.

• Factor analysis is used in the following circumstances

➢ To identify a smaller set of salient variables from a

large set of variables to use in subsequent multivariate
analysis.

ECONOMY HOUSING: psychographic statements

factor analysis- Input factors into cluster analysis
 FACTOR MODEL
• Variables standardized - mean 0, variance 1
Xi= Ai1F1+ Ai2F2 + Ai3F3 + … + Aim Fm+ ViUi
Xi – ith standardized variable

Aij – Standardized multiple regression

coefficient of variable i on common factor j – Factor
loadings

Fi – common factor – latent variable

Vi – standardized regression coefficient of
variable i on unique factor j
Ui – unique factor / error for variable i
m – number of common factors / latent variables
 FACTOR MODEL

• Each variable (Xi) is expressed as a linear

combination of underlying factors (latent
variables)
• The amount of variance a variable shares with all
other variables included (latent variables) in the
analysis is referred to as communality
• The co-variation among the variables is described
in terms of a smaller number of common factors +
a unique (error) factor for each variable
• Factors are not overtly observed- Latent Variables
 FACTOR MODEL
• Unique factors (errors) are uncorrelated with each other
and with the common factors- latent variables

• Common factors are expressed as a linear combination of

the observed variables

Fi = wi1x1 + wi2x2 + wi3x3 +…+wikxk

Fi = estimate of the ith factor

wi = weight or factor score coefficient

 FACTOR MODEL
• Select factor score coefficients such that the first factor
explains the largest portion of the total variance. Second
set of factor score weights can be selected such that second
factor accounts for most of the residual variance subject to
being uncorrelated with the first factor and so on

• 1st factor accounts for the highest variance in the data and
the second factor the second highest variance explained
and so on

• Each of the latent variables are orthogonal to each other

 CONDUCTING FACTOR ANALYSIS
Formulate the problem

Construct correlation matrix

Determine the method of FA

Determine the number of factors

Rotate the factors

Interpret the factors

Calculate factor score Select surrogate variables

Determine model fit

 PROBLEM- BENEFIT SEGMENTATION

• Suppose a researcher wants to determine the underlying

benefits consumers seek from the purchase of a toothpaste
• A sample of 30 respondents are interviewed
• Respondents asked to indicate their degree of agreement
with a 7 point likert scale- AGREE AND DISAGREE
VARIABLES

• Variables
V1 – toothpaste that prevents cavities
V2 – toothpaste that gives shining teeth
V3 – toothpaste that strengthens gums
V4 – prefer toothpaste that freshens the breath
v5 – tooth decay protection not important
V6 – toothpaste makes attractive teeth
 DATA FILE
• [Link]. V1 V2 V3 V4 V5 V6
1 7.00 3.00 6.00 4.00 2.00 4.00
2 1.00 3.00 2.00 4.00 5.00 4.00
3 6.00 2.00 7.00 4.00 1.00 3.00
. . . . . . .
. . . . . . .
. . . . . . .
28 3.00 7.00 2.00 6.00 4.00 3.00
29 4.00 6.00 3.00 7.00 2.00 7.00
30 2.00 7.00 2.00 4.00 7.00 2.00
 CONSTRUCT THE CORRELATION
MATRIX
• Analysis is based on correlations between the variables –
correlation matrix

• For factor analysis, variables must be correlated

• In FA, one would expect those variables that are highly

correlated with each other would also be highly correlated
with the same factor- latent variable
• .
 CONSTRUCT THE CORRELATION
MATRIX

• Bartlett test tests the null hypothesis that the variables are
uncorrelated in the population

• Kaiser – Mayor Oklin (KMO) measures sampling

adequacy. KMO should be high values > 0.6

• This index compares the magnitude of the observed

correlation to the magnitude of the partial correlation
coefficients

• Small values of KMO indicates that FA may be

inappropriate for the data set.
 CORRELATION MATRIX

• Variables V1 V2 V3 V4 V5 V6
V1 1.00

V2 -.053 1.00

V3 0.873 -.155 1.00

V4 -.026 .532 -.248 1.00

V5 -.858 .020 -.728 -.007 1.00

V6 0.004 .640 -.018 .640 -.126 1.0

 CORRELATION DATA

• High correlation amongst V1 V3 V5

• These variables have same set of factors

• Bartlett test of sphericity Chi squared x2 =

111.3, df = 15, p = .0000

• KMO = 0.660, a large number and so FA

appropriate
 COMMUNALITIES
• Variable Initial Extraction
V1 1.0 0.926
V2 1.0 0.723
V3 1.0 0.894
V4 1.0 0.739
V5 1.0 0.878
V6 1.0 0.790
• Communality is the amount of variance a variable shares
with all the other common factor- latent variables being
considered

• Communality is the proportion of variance explained by

the common factors – latent factors.
 INITIAL EIGEN VALUES
• Factor Eigenvalue %variance cumulative%
variance
1 2.731 45.520 45.520
2 2.218 36.969 82.488
3 0.442 7.360 89.788
4 0.341 5.688 95.536
5 0.183 3.044 98.580
6 0.085 1.420 100.00

Extracted sum of squared loadings

Factor Eigenvalue %variance cumulative%
1 2.731 45.520 45.520
2 2.218 36.969 82.488
 INITIAL EIGEN VALUES- PRINCIPAL
COMPONENT ANALYSIS
Factor Loadings
• Factor matrix F1 F2
V1 .929 .253
V2 -.301 .295
V3 .936 .131
V4 -.342 .789
V5 -.869 -.351
V6 -.177 .871

Varimax rotated sum of squares

Factor Eigenvalue %variance cumulative%
1 2.688 44.802 44.802
2 2.261 37.687 82.488
ROTATED FACTOR MATRIX
FACTOR LOADINGS
F1 F2
V1 .962 -.027
V2 -.057 .848
V3 .934 -.646
V4 -.098 .854
V5 -.933 -.084
V6 .083 .885
• Number of Factors:
Thumb rule – Eigen value > 1 factors are selected
 SCREE PLOT
• A graphical display of eigen values against the number of factors in
order of extraction
• Shape of the plot used to determine the number of factors
3.0
2.5
Eigen 2.0
value 1.5
1.0
.5

1 2 3 4 5 6
• Choose number of factors after sharp decrease Number of Factor
 ROTATION OF FACTORS
X2
Varimax Rotation

X1

Rotation of factors is to aid interpretation keeping

the variance constant among factors
 INTERPRETATION OF FACTORS

• Identify variables that have large loadings on the

same factor
• Variable loading > 0.5 or < -0.5 are circled
• We find V1, V3 are positively correlated to F1
while V5 is negatively correlated to F1
• Factor 2 is related with variable
V2 -strong teeth
• V4 - freshens breath and V6 - attractive teeth
• F2 – social benefit factor
• F1 – health related benefit factor
Thank You