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Basic Quantitative Technique Concepts used in BRM:

An Overview

Prof(Dr.) Harsh Vardhan


06, 13/11/2022
If you plan for a year , plant a seed. If for ten years ,plant a tree. If for a
hundred years, teach the people. When you sow once, you will reap a single
harvest. When you teach the people , you will reap a hundred harvests.
K’uan –Tzu (551-479 BC)

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Session Objective
 Basic Quantitative Techniques
 Descriptive & Inferential Statistics
 Data-Primary & Secondary
 Basic Descriptive Statistics
 Random Variable-Discrete & Continuous
 Types of Variables
 Normal Distribution, Central Limit Theorem
 Inferential Statistics, Testing of Hypothesis ,p-value
 Different Types of Scales - Nominal, Ordinal, Interval , Ratio & their
characteristics
 Management Decision Problem Vs.
Marketing Research Problem
 SPSS - An Introduction
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Statistical Methods

•Descriptive Statistics
Collecting and Describing Data.

•Inferential Statistics
Making Decisions based on Sample Data.

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Descriptive Statistics

 Collect Data e.g. Survey

 Present Data e.g. Tables and Graphs

 Characterize Data e.g. Mean


 xi
n
A Characteristic of a:
Population is a Parameter
Sample is a Statistic.
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Inferential Statistics

 Estimation
 Hypothesis Testing

Making decisions concerning a population based on


Sample results.
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Descriptive versus Inferential Statistics
 Descriptive Statistics can be defined as those methods and
characterization of a set of Data in order to describe the various
features of that set of data properly.

 Inferential Statistics can be defined as those methods that make


possible the estimation of a characteristics of a Population or
making of a decision concerning a population based only on
Sample results.

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Some Definitions
 A Population (or universe) is the totality of items or things under
consideration.
 A Sample is the portion of the population that is computed to describe a
characteristic of the entire population.
 A Parameter is a summary measure that is computed to describe a
characteristic of an entire population.
 A Statistic is summary measure that is computed to describe a characteristic
from only a sample population.

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Reasons for obtaining Data
 Data are needed to provide the necessary input to a survey.
 Data are needed to measure performance of an ongoing service or
production process.
 Data are needed to evaluate conformance to standards.
 Data are needed to assist in formulating alternative course of
action in a decision making process.
 Data are needed to satisfy our curiosity.

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Primary and Secondary Data

 Primary Data are originated by the researcher for specific purpose of


addressing the research problem.

 Secondary Data is collected for some purpose other than the


problem in hand.

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Basic Descriptive Statistics

 Central Tendency
 Dispersion
 Skewness
 Kurtosis

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Summary Measures
Summary Measures

Central Tendency Quartile Variation


Mean Mode
Median
Range Coefficient of
Variation
Variance

Standard Deviation
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Central Tendency & Dispersion

 Central Tendency is midpoint of a distribution. Measures of Central Tendency


is also known as Measure of Location.
 Dispersion is the spread of the data in a distribution i.e. the extent to which
the observation is spread.
 Curves representing the data points in the data set may be either
Symmetrical or Skewed..
 Symmetrical A characteristic of a distribution in which each half is the mirror
image of the other half.
 Skewness The extent to which a distribution of data points is concentrated at
one end or other or it is lack of Symmetry.

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Contd.

 Positively Skewed is skewed towards right as it tails off toward


the high end of the scale.
 Negatively Skewed is skewed towards the left because it tails off
the low end of the scale.
 Kurtosis is the degree of peakedness of distribution points.
Curves have same central of location, dispersion and are
symmetrical but may have different degree of Kurtosis.

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The Shape of a Frequency The Shape of a Frequency
Curve Curve
Skewness Kurtosis

Skewness BRM/IIFT/Harsh/2 Kurtosis


15
Random Variables
 A Random Variable is a variable that takes on different values as a
result of the outcome of an experiment.
 A random variable can be classified as being either Discrete or
Continuous depending on the numerical values it assumes.
 A Discrete Random Variable may assume to take on only a limited
or countable number of values that can be listed.
 Number of new subscribers to a magazine
 Number of students attending session today on overview of different concepts.
 Number of students had dinner in a restaurant.
.

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Continuous Random Variable

Continuous Random Variable - Takes on values at every point over a


given interval.
Daily temperature.
Elapsed time between arrivals of bank customers
Percentage of the unemployed labor force.

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Types of Variables
 A variable is a characteristics of an individual or object that can be
measured.
 There are two types of variables-Qualitative & Quantitative.
 Qualitative Variables are those variables which differ in kind rather than
degree. These could be measured on nominal or ordinal scale.
 The Nominal scale indicates categorizing into groups or classes.
 Example - gender, religion, race, color & occupation
 The Ordinal scale indicates ordering of items.
 Example agreement disagreement scales(Likert Scale)
 Qualitative data could be dichotomous in which there are two categories (gender)
or multinomial in there are more than two variables (geographic region).

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 Quantitative Variables are those variables which differ in degree rather than
kind. These can be measured on interval or ratio scales
 Interval scales indicates rank and distance from a arbitrary zero.
 Example- temperature, examination scores.
 Ratio scale indicates rank & distance from a natural zero
 Example- height, monthly consumption, annual budget.
 SPSS does not differentiate between interval & ratio scale and lists them under label
Scale.

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Characteristics of Normal Distribution

 Center of distribution is .
 Spread is determined by .
 Most values fall around the mean, but some values are smaller and
some are larger.
 The points where there is a change in curvature is one Standard
Deviation on either side of the mean.

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The Normal Distribution

 The mean and standard deviation affect the flatness and center of the
curve, but not the basic shape

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Excel for Data Analysis
 How to add Analysis Tool pack for data analysis:
 Excel -File –Option-Add in-Excel Add-ins-Go-Analysis Tool pack-OK
 How to obtain Descriptive Statistics of data:
 Data-data analysis – Descriptive Statistics-Ok-Input Range-Summary
Statistics-Out put Range-OK

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Inferential Statistics
Some Important Terms
 Hypothesis An assumption or speculation we make about the Population
Parameter.
 Null Hypothesis It is hypothesis or assumption about the Population Parameter
we wish to test, usually an assumption of status quo.
 Alternative Hypothesis The conclusion we accept when the data fails to support
the Null hypothesis.
 Critical Value The value of standard statistic ( Z or t) beyond which we reject the
Null hypothesis, the boundary between the acceptance and rejection region.
 Significance Level A value indicating the percentage of sample values that is
outside certain limits, assuming the null hypothesis is correct ,that is the
probability of rejecting the null hypothesis when it is true.

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Some Important Terms-contd.
 Type I Error: Rejecting Null hypothesis when it is true
 Type II Error: Accepting Null hypothesis when it is false
 Alpha α The Probability of Type I Error
 Beta β The Probability of type II Error.
 Power of Hypothesis Test 1- β
 The probability of rejecting Null hypothesis when it is false ,that is ,a measure
of how well the hypothesis test is working.
 One tailed test A hypothesis test when there is only one rejection region.
 Two tailed test A test involving two rejection regions.
 What is Central Limit Theorem??
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Errors in Making Decisions
 Type I Error
 Rejects a true Null Hypothesis
 Probability of Type I Error is called level of significance α.
 It is set by the researcher
 Has serious consequences
 Type II Error
 Fails to reject a false Null Hypothesis
 Probability of Type II Error is β
 Power of the test is (1-β)

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Errors in Making Decisions

 Probability of not making Type I Error is (1-α) and is called the


Confidence Coefficient
 The Power of statistical hypothesis (1- β) measures test’s ability to
reject null hypothesis when it is actually false i.e. it gives ability to
make correct decision.

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Result Probabilities
H0: Innocent

Jury Trial Hypothesis Test

The Truth The Truth

Verdict Innocent Guilty Decision H 0 True H 0 False

Do Not
Type II
Innocent Correct Error Reject 1-α
Error ( b )
H 0
Type I
Reject Power
Guilty Error Correct Error
H 0 (1 - b )
(a )

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Testing of Hypothesis

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Examples of Testing of Hypothesis

 Hypothesis Testing helps in Decision making for Business ,Economics and


Research related problems.
 Examples:
 Marketing: The Marketing department wishes to know if a particular
marketing campaign held had any impact in increasing product awareness.
 Production: The Production department wants to know if the average out put
of two manufacturing units are same.
 Finance: The Finance department wishes to compare its average stock price
with competitor.

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 Human Resource : The HR department wants to evaluate impact of 360
degree feedback system on employees’ performance.
 Quality Control : The Quality Control department wants to check
whether average number of defects are within the prescribed limits.
 Economics: Policy makers wishes to know performance of “Start Ups”
under Make in India program.
 Research: A scientist want to compare productivity of cotton grown by
genetically modified seed & normal variety of seeds.

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Steps for Hypothesis Testing
Step 1: State null and alternate hypotheses

Step 2: Select a level of significance

Step 3: Identify the test statistic

Step 4: Formulate a decision rule

Step 5: Take a sample, arrive at a decision

Do not reject null Reject null and accept alternate


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p-value approach for Testing Hypothesis

 p- value is probability of wrongly rejecting Ho if in fact it is true


 Smallest value of α for which H0 can be rejected
 Compare the p-value with α
 If p-value > α , Do not reject H0
 If p-value< α , Reject H0
 Thus small p value[prob. value] means more convincingly H0 can be rejected.

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One-tail Z Test for Mean
(σ Known)
 Assumptions
 Population is Normally distributed
 If not normal, requires large samples
 Null hypothesis has < or > sign only
 Z - test statistic

X  X X 
Z  
X / n

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t Test: σ Unknown
 Assumption
 Population is Normally distributed
 t - test statistic with n-1 degrees of freedom
 n <30

X 
t
S/ n

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Management Decision Problem & Research Problem

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State the Research Problem for the following Management
Decision Problem- Exercise
1. Should new product be introduced?
2. Should an advertising campaign that has run for three years be changed?
3. Should the price of the brand be increased?
4. Should the price be cut in response to a price-cut by a competitor?
5. Should the product ‘X’ be introduced in the market?
6. What should be done to increase the relative market share of product ‘Y’?
7. Should the in-store promotion for an existing product line be increased?
8. What pricing strategy should be adopted for a new product?
9. Should the compensation package be changed to motivate the sales force
better?
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Management Decision Problem Vs.
Marketing Research Problem E 6/11/22
Management Decision Problem Marketing Research Problem
Should a new product be To determine consumer preferences and purchase
introduced? intentions for the proposed new product.

Should the advertising To determine the effectiveness of the current advertising


campaign be changed? campaign.
Should the price of the To determine the price elasticity of demand
brand be increased? (dq/q/dp/p)and the impact on sales and profits of various
levels of price changes.

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Management Decision Problem Marketing Research Problem
Should the price be cut in response to a Determine the buyer- behavior at various
price-cut by a competitor? price levels

Should the product ‘X’ be Assess the probable market size and share
introduced in the market? for product ‘X’.

What should be done to increase the Determine the strengths and weaknesses
relative market share of product ‘Y’? of ‘Y’ vis-à-vis those of the competitors

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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.

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Department Store Project

 RQ: Do the customers of Reliance Fresh exhibit store loyalty?


 H1: Customers who are store loyal are less knowledgeable about the
shopping environment.
 H2: Store-loyal customers are more risk-averse (reluctant to take risk)
than are non-loyal customers.

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Research Question and Hypothesis- Exercise

RESEARCH QUESTION HYPOTHESIS


What is the mean income of The lower income people consume more beer.
heavy-drinkers of beer?
What age group of purchasers The age group 35–44 is the heaviest user.
of product ‘X’ buys ‘X’ the most?
What will be the result on sales of a 20 percent A 20 percent increase in price will not lead to a
increase in price? decrease in Rupee sales.

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At United, Food is Uniting the Airline with Travelers

United Airlines, 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.

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At United, 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.

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At United, 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, United
Airlines had to find a way to differentiate itself. Food
turned out to be the solution.

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At United, Food is Uniting the Airline with Travelers

Secondary data, like the J. D Power & Associates' survey on "current and
future trends in airline food industry," indicated that "food service is a major
contributor to customers’ loyalty." This survey also emphasized the
importance of food brands.

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At United, Food is Uniting the Airline with Travelers

The airline's Marketrak survey informed United Airlines 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.
H3: Travelers prefer larger food portions, but with consistent quality.
H4: Travelers prefer exotic food.

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At United, Food is Uniting the Airline with Travelers

Characteristics which influence the research design included the identification of


competing airlines (Delta, American, etc.), factors of the choice criteria (already
identified), measurement of airline travel, and loyalty.

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

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Example: United Airlines
Components
1 2 3 4 5
Large Size Portions .859 .1 56 8.363E-02 .1 24 .262
Quality of Food .729 .274 .350 .1 52 7.71 6E-02
Speed of Service .204 .862 7.256E-04 .284 .1 47
. Friendly Employees-Staff .220 .75 0 .41 9 -.1 22 .1 75
Reasonable Prices .246 .1 65 .853 .242 .1 99
Conveniently Located .1 70 .11 6 .1 85 .928 .11 8
Menu Variety .255 .21 5 .1 96 .1 34 .9 04

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SPSS
Statistical Package for the Social Sciences

SPSS 22.0 For Windows

22.0
SPSS - An Introduction

 SPSS was developed in 1965 at Stanford University , California.


 It is a widely used Statistical Data Analysis package in the area of social
sciences.
 Initially SPSS was DOS based; now it is WINDOWS based; a number of
versions are released and one of its version is IBM-SPSS 22.0
 It is used by market researchers, health researchers, survey companies,
government, education researchers, and students .

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SPSS-what does it do?

 A software system for data management and analysis.


 SPSS is a software package used for conducting statistical analysis,
manipulating data, and generating tables and graphs that summarizes data.

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Features

 SPSS can take data from almost any type of file and use them to generate
tabulated reports, charts, and plots of distributions and trends,
Descriptive Statistics, and conduct complex statistical analyses.
 SPSS for Windows can read data files from a variety of file formats
including Excel and SAS ( Business Analytics soft ware).

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The User Interface to SPSS/Windows

The user interface to SPSS/Windows is built around three primary and


distinct windows:
 The Data Editor window
 The Syntax Editor window
 The Viewer window

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This provides view about
the data.
This view provides a platform to
define variables and their
characteristics.

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The Variable View …
This view is used to define a variable.
1. Its name.
2. Type
3. Width
4. Decimals
5. Labels
6. Values
7. Missing
8. Columns
9. Align
10. Measure

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This view is used to enter
and edit data.

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Menus

Data
Transform
Analyze
Graphs
Utilities

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SPSS Features - What it could do.
SPSS in brief will help us to:
 Manage data
 Transform data
 Analyze data
 Present data (graphs and tables)
Measurement and Scaling
Measurement and Scaling
 Measurement is the assignment of numbers or other symbols to measure
characteristics of objects according to set rules.
 Assignment of number permits Statistical Analysis
 Numbers helps to understand measurement rules and results.
 The process of assigning numbers is one to one (isomorphic) . There is one to one
correspondence between number and characteristics to be measured.
 Scaling involves the generation of a continuum upon which measured objects are
located.
 Scaling is extension of measurement.

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EXAMPLE
 Consider a scale from 1 to 10 for locating consumers according to the
characteristics ‘attitude towards department stores’. Each respondent is
assigned a number from 1 to 10 indicating the degree of (un) favorableness,
with 1=extremely unfavorable and 10=extremely favorable.
 Measurement is actual assignment of numbers from 1 to 10 to each
respondent.
 Scaling is the process of placing the respondents on a continuum with respect
to their attitude towards department stores.

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Scale
 A scale is any series of items that are progressively arranged
according to value or magnitude into which an item can be placed
according to its quantification.
 A scale is a continuous spectrum or series of categories.
 The purpose of scaling is to represent quantitatively, an item’s, a
person’s, or an event’s place in the spectrum.

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Scale

 Thus Scale is series of items


 Arranged according to value
 Purpose is quantification
 A continuous spectrum or series of categories
 Numbers are assigned

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Scale Properties
 There are four primary scales of measurements in increasing order of
their properties:
 Nominal: Uniquely Classifies
 Ordinal: Preserves Order
 Interval: Equal Intervals
 Ratio: Natural Zero

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Example Primary Scales of Measurements

Scale

Nominal Numbers assigned to Finish

Runners 7 11 3
Ordinal Rank Order of Winner Finish

Third place Second place First place

Interval Performance Rating 8.2 9.1 9.6


on 0-10 Scale

Ratio Time to Finish, in 15.2 14.1 13.4


seconds

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Nominal Scale
 Nominal Scale
 A scale whose numbers serves only as labels or tags for identifying and classifying objects
with a strict one to one correspondence between the numbers and objects.
Example- Numbers assigned to football players.
 Nominal Scales are used for identifying respondents, brands, attributes and stores etc.
 The numbers in a nominal scale don't reflect the amount of the characteristic possessed
by the objects.
IT UNIQUELY CLASSIFIES
Numbers & letters are assigned to objects
Roll numbers:
Pooja # MBA012
Navdeep # MBAA02

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Ordinal Scale

 Ordinal Scale is a ranking scale in which numbers are assigned to objects to


indicate the relative extent to which some characteristics is possessed.
 It is possible to determine whether an object has more or less of
characteristics than other object.
 Ordinal scale indicates relative position not the magnitude of difference
between the object (how close is the 2nd to the one ranked 1st )
 Used in relative attitudes, opinions, perceptions and preferences.

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Ordinal Scale Properties
 Uniquely classifies
 Preserves order
 Arrangement of objects is according to their magnitude.
 Example
 Excellent , Good, Fair (importance of object)
 Excellent is better than Good but we do not know by how much.

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Interval Scale
 A scale in which the numbers are used to rate objects such that numerically
equal distances on the scale represent equal distance in the characteristic
being measured.
 An interval scale contains all information of an ordinal scale ,but it also allows
to compare the differences between objects.
 There is a constant or equal interval between scale values.
 The difference 1 between 2 is the same as the difference between 2 and 3, which is same as
difference between 5 and 6.
 Example - temperature scale, attitudinal data, most admired company.
 Interval and Nominal Scale is used for Qualitative data.

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Interval Scale Properties
 Uniquely classifies
 Preserves order
 Equal intervals
 Consumer Price Index (base 100)
 Fahrenheit temperature
 F=(9/5)*C+32
 Location of zero point is not fixed .Both zero point and unit of measurement are
arbitrary.
 Any linear transformation y=a+bx will preserve properties of scale, x is original
scale value ,y is transformed scale value.
 Two interval scales that rate objects A,B,C,D as 1,2,3,4 or 22,24,26 and 28 are equivalent.
(use a=20,b=2).Zero has no value. Ratio between D to B values changes from 2:1 to
become 7:6
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Ratio Scale
 It is highest scale as it possesses properties of the Nominal, Ordinal and
Interval scale in addition it has an absolute zero point.
 It allows researcher to identify or classify objects, rank order the objects and
compare intervals or difference.
 It is also meaningful to compute ratios of scale values.
 The difference between 2 and 5 is the same as the difference between 14 and
17 but also 14 is 7 times large as 2 in the absolute terms
 Example of ratio scale: height, weight, age and money
 In marketing sales, costs, market share, and number of customers are variables
on a ratio scale.
 It allows transformation of y=bx, b>0

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Ratio Scale Properties

 Uniquely Classifies
 Preserves Order
 Equal Intervals
 Natural Zero
 Weight and Distance
 Temperature (Kelvin scale)
 Used for Quantitative data

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Scaling Techniques

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TYPES OF SCALES

Comparative Rating Scales Noncpmparative Rating Scales

Paired Rank Constant Q-Sort Graphic Itemized


Comparision Order Sum Rating Rating

Likert Semantic Stapel


Differential
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Scale Basic Characteristics Example Advantages Disadvantages

Continuous Place a mark on a continuous Reaction to TV Easy to construct Scoring can be


line commercial cumbersome unless
Rating computerized
Scale

Itemized Rating Scale


Likert Scale Degree of agreement on a strongly Measurement of Easy to construct More time consuming
disagree) to 5 (strongly agree )scale Attitude ,administer and
understand

Semantic Seven-point scale with bipolar labels Brand, product Versatile Controversy as to
and company image whether the dates are
Differential interval

Stapel Scale Unipolar ten point scale,-5 to +5 Measurement of Easy to construct; Confusing and difficult
without a neutral point (zero) attitudes and images administered over to apply.
telephone

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Thanks

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