Chapter 1
Introduction and Data Collection
1.1
WHY LEARN STATISTICS?
GOOD TUNES
Good Tunes is a four-store home entertainment systems retailer. It wants to grow to eight stores
in next three years. It wants to prepare an electronic slide show to show to banks. It decides to do
a survey to show that their customers rate them as superior. We will follow this case throughout
this book. What will they have to do?
STATISTICS IS EVERYWHERE
WASHINGTON — U.S. employers appear to be laying off workers again as the
economic recovery weakens. The number of Americans applying for unemployment
benefits reached the half-million mark last week for the first time since November.
TALLAHASSEE, Fla. — A poll shows Florida Democratic gubernatorial hopeful Alex
Sink on par with or ahead of her prospective Republican opponents. A Qunnipiac
University poll released Thursday shows Sink with 31 percent to Bill McCollum's 29
percent in a hypothetical matchup. That's within the poll's margin of error of plus or
minus 3 percentage points.
WASHINGTON — The U.S. economy faces even more difficult times ahead with
chronic high unemployment rates and slow manufacturing growth hurting the recovery,
Congressional Budget Office Director Douglas Elmendorf said on Thursday. The U.S.
unemployment rate will not fall to around 5.0 percent until 2014, Elmendorf wrote in his
blog about CBO's new economic and budget outlook.
WASHINGTON — Obama said that 60 percent of job losses are coming from small
businesses, the sector that under a strong economy hires the most workers.
WASHINGTON — A Pew poll found that 21% of Americans believe that President
Obama is a Muslim.
HONOLULU – The marketing department at a major national bank discovered that 30%
of customers who purchased premium checking accounts would accept a proposal for
overdraft protection.
Page 1
1.1
WHY LEARN STATISTICS?
Statistics is a branch of mathematics that transforms numbers into useful information for
decision makers
Understanding the numbers by reducing them to meangingful patterns.
To reduce variance in decision making (but not to eliminate it).
Data (numbers) versus information (summarized data).
Purpose: To visualize patterns in the data
Alternative definition: Statistics is a pseudoscience akin to numerology and astrology but lacking
the precision of the former and the predictive power of the latter.
Page 2
1.2
STATISTICS IN THE BUSINESS WORLD
Applications

To summarize business data

To draw conclusions from that data

To make reliable forecasts of business activities

To improve business processes
Descriptive Statistics
Focuses on collecting, summarizing, presenting, and analyzing a set of data.
Inferential Statistics
Uses data that have been collected from a small group (sample) to draw conclusions
about a larger group.
1.3
BASIC VOCABULARY OF STATISTICS
A VARIABLE IS A CHARACTERISTIC OF AN ITEM OR INDIVIDUAL.
Something that varies—sales, expenses, headcount, advertising budget, etc.
Different values are the data associated with the variable, or just “the data”
Need operational definitions of variables. “Junior”
What is the operational definition of “Junior?”
POPULATIONS AND SAMPLES

A population consists of all the items or individuals about which you want to draw a
conclusion.

A sample is the portion of a population selected for analysis.
PARAMETERS AND STATISTICS

A parameter is a numerical measure that describes a characteristic of a population.

A statistic is a numerical measure that describes a characteristic of a sample.
WASHINGTON — A Pew poll found that 21% of Americans believe that President
Obama is a Muslim.
What is the parameter or statistic?
Is it a parameter or statistic?
Page 3
1.5
DATA COLLECTION
CIRCUMSTANCES THAT REQUIRE DATA COLLECTION
A marketing research analysts needs to assess the effectiveness of a new television
advertisement.
A pharmaceuticals manufacturer needs to determine whether a new drug is more effective than
those in current use.
An operations manager wants to improve a manufacturing or service process.
An auditor wants to review the financial transactions of a company in order to determine whether
the company is in compliance with generally acceptable accounting principles.
SOURCES OF DATA
DATA DISTRIBUTED BY AN ORGANIZATION OR INDIVIDUAL.
Marketing research firms, investment services, etc.
A DESIGNED EXPERIMENT.
Which of two packaging options do consumers prefer?
A SURVEY.
Who will you vote for?
What do you think about companies X, Y, and Z?
AN OBSERVATIONAL STUDY.
Notice what products shoppers in a store look at.
CORPORATE DATA. (NOT IN THE BOOK.)
Account, payroll, billing, human resources, shipping, etc.
Part of observational study?
SELECTING A SOURCE OF DATA
Each has strengths and weaknesses.
Must select the best type for an application.
Page 4
1.6
TYPES OF VARIABLES
Data Type
Subtype
Question Types
Categorical
Unordered
On what island do you live? Check boxes listing the Islands.
Numerical
Example
Check boxes with the choices
Excellent, Very Good, Average,
Poor, and Unsatisfactory.
Ordered
How do you rate the firm?
Discrete
How many phone numbers do you
have?
Number: ______
Continuous
How much did you spend on
breakfast?
Amount: _______
FIGURE 1.1: QUESTIONS ABOUT THE GOOD TUNES CUSTOMER EXPERIENCE
CLASSIFY THE TYPE OF DATA THAT EACH QUESTION WILL GENERATE.
CRITIQUE EACH QUESTION.
1.
How many days did it take from the time you ordered your merchandise to the time you
received it? _____
2.
Did you buy any merchandise that was featured in the Good Tunes Sunday newspaper
sales flyer for the week of your purchase? Yes _____ No _____
3.
Was this your first purchase at Good Tunes?
4.
Are you likely to buy additional merchandise from Good Tunes in the next 12 months?
Yes _____ No _____
5.
How much money (in U.S. dollars) do you expect to spend on stereo and consumer
electronics equipment in the next 12 months? __________
6.
How do you rate the overall service provided by Good Tunes with respect to other
retailers of home electronics?
□ Excellent □ Very Good □ Fair □ Poor
Page 5
Yes _____ No _____
7.
How do you rate the selection of products offered by Good Tunes with respect to other
retailers of home electronics?
□ Excellent □ Very Good □ Fair □ Poor
STAGES IN A DATA-CENTRIC PROJECT
1.
Define the problem.
2.
Define data requirements.
3.
Define the methodology for data collection and analysis.
4.
Collect the data.
5.
Analyze the results.
6.
Present the results.
Page 6