Chapter 1

Introduction

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Chapter 1 Introduction
LEARNING OBJECTIVES:
Upon completing this chapter, you should be able to do the
following:
1.
2.
3.
4.
5.

Explain what multivariate analysis is and when its application is

appropriate.
Define and discuss the specific techniques included in
multivariate analysis.
Determine which multivariate technique is appropriate for a
specific research problem.
Discuss the nature of measurement scales and their
relationship to multivariate techniques.
Describe the conceptual and statistical issues inherent in
multivariate analyses.
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What is Multivariate
Analysis?
What is it? Multivariate Data Analysis = all
statistical methods that simultaneously analyze
multiple measurements on each individual or
object under investigation.
Why use it?
Measurement
Explanation & Prediction
Hypothesis Testing
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Basic Concepts of Multivariate Analysis

The Variate
Measurement Scales
Nonmetric
Metric
Multivariate Measurement
Measurement Error
Types of Techniques

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The Variate

The variate is a linear combination of variables with

empirically determined weights.
Weights are determined to best achieve the objective of the
specific multivariate technique.
Variate equation: (Y) = W1 X1 + W2 X2 + . . . + Wn Xn
Each respondent has a variate value (Y).
The Y value is a linear combination of the entire set of
variables. It is the dependent variable.
Potential Independent Variables:
X1 = income
X2 = education
X3 = family size
X4 = ??
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Types of Data and Measurement Scales

Data

Nonmetric
or
Qualitative

Nomina
l
Scale

Ordina
l
Scale

Metric
or
Quantitativ
e

Interval
Scale

Ratio
Scale
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Measurement Scales
Nonmetric

Nominal size of number is not related to the amount of the

characteristic being measured
Ordinal larger numbers indicate more (or less) of the
characteristic measured, but not how much more (or less).

Metric

Interval contains ordinal properties, and in addition, there are

equal differences between scale points.
Ratio contains interval scale properties, and in addition, there is
a natural zero point.

NOTE: The level of measurement is critical in determining the

appropriate multivariate technique to use!
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Measurement Error

All variables have some error. What are the

sources of error?
Measurement error = distorts observed
relationships and makes multivariate
techniques less powerful.
Researchers use summated scales, for
which several variables are summed or
averaged together to form a composite
representation of a concept.

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Measurement Error
In addressing measurement error,
researchers evaluate two important
characteristics of measurement:
Validity = the degree to which a
measure accurately represents what it
is supposed to.
Reliability = the degree to which the
observed variable measures the true
value and is thus error free.
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Statistical Significance and Power

Type I error, or , is the probability of rejecting the null
hypothesis when it is true.
Type II error, or , is the probability of failing to reject the
null hypothesis when it is false.
Power, or 1-, is the probability of rejecting the null
hypothesis when it is false.

Fail to Reject H0
Reject H0

H0 true

H0 false

1-

Type II error

Type I error

1-
Power
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Power is Determined by Three Factors

Effect size: the actual magnitude of the effect of
interest (e.g., the difference between means or
the correlation between variables).
Alpha (): as is set at smaller levels, power
decreases. Typically, = .05.
Sample size: as sample size increases, power
increases. With very large sample sizes, even
very small effects can be statistically significant,
raising the issue of practical significance vs.
statistical significance.

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Impact of Sample Size on Power

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Rules of Thumb 11

Statistical Power Analysis

Researchers should always design the study to
achieve a power level of .80 at the desired
significance level.
More stringent significance levels (e.g., .01
instead of .05) require larger samples to achieve
the desired power level.
Conversely, power can be increased by choosing
a less stringent alpha level (e.g., .10 instead of .
05).
Smaller effect sizes always require larger sample
sizes to achieve the desired power.
Any increase in power is most likely achieved by
increased sample size.
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Types of Multivariate Techniques

Dependence techniques: a variable or set of
variables is identified as the dependent variable to
be predicted or explained by other variables
known as independent variables.
o Multiple Regression
o Multiple Discriminant Analysis
o Logit/Logistic Regression
o Multivariate Analysis of Variance (MANOVA)
and Covariance
o Conjoint Analysis
o Canonical Correlation
o Structural Equations Modeling (SEM)

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Types of Multivariate Techniques

Interdependence techniques: involve the
simultaneous analysis of all variables in the
set, without distinction between dependent
variables and independent variables.
o Principal Components and Common
Factor Analysis
o Cluster Analysis
o Multidimensional Scaling (perceptual
mapping)
o Correspondence Analysis
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Selecting a Multivariate Technique

1. What type of relationship is being examined
dependence or interdependence?
2. Dependence relationship: How many variables
are being predicted?
What is the measurement scale of the
dependent variable?
What is the measurement scale of the
predictor variable?
3. Interdependence relationship: Are you examining
relationships between variables, respondents, or
objects?
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Two Broad Types of Multivariate

Methods:
1. Dependence analyze dependent and
independent variables at the same time.

2. Interdependence analyze dependent

and independent variables separately.

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Selecting the Correct Multivariate Method

Multivariate
Methods

Interdependence
Methods

Dependence
Methods

One
Dependent
Variable

Metric

Nonmetric

Several
Dependent
Variables

Metric

Multiple
Relationships Structural
Equations
SEM

Nonmetric

Canonical
Correlation
,
Dummy
Copyright 2010 Pearson Education, Inc., publishing as Prentice-Hall.
Variables
Multiple
Regression
and Conjoint

Discriminant
Analysis
and Logit

MANOVA
and
Canonical

Nonmetric

Metric

CFA

Factor
Analysis

Cluster
Analysis

Metric
MDS

Nonmetric
MDS and
Correspondence
Analysis
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Multiple Regression
. . . a single metric dependent
variable is predicted by several
metric independent variables.

X1
Y
X2
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Discriminant Analysis

What is it?
. . . single, non-metric (categorical)
dependent variable is predicted by
several metric independent variables.

Why use it?

Examples of D
ependent
Variables:

Gender Male vs. Female

Culture USA vs. Outside
U SA
Purchasers vs. Non-purch
asers
Member vs. Non-Member
Good, Average and Poor C

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Credit Risk

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Logistic Regression
A single nonmetric dependent variable is
predicted by several metric independent
variables. This technique is similar to
discriminant analysis, but relies on
calculations more like regression.

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MANOVA

Several metric dependent variables

are predicted by a set of nonmetric
(categorical) independent variables.

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CANONICAL ANALYSIS
Several metric dependent variables
are predicted by several metric
independent variables.

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CONJOINT ANALYSIS
. . . is used to understand respondents
preferences for products and services.
In doing this, it determines the
importance of both:
attributes and
levels of attributes
. . . based on a smaller
subset of combinations of
attributes and levels.
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CONJOINT ANALYSIS
Typical Applications:

Soft Drinks
Candy Bars
Cereals
Beer
Apartment Buildings; Condos
Solvents; Cleaning Fluids

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Structural Equations Modeling

(SEM)
Estimates multiple, interrelated dependence
relationships based on two components:
1. Measurement Model
2. Structural Model

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Exploratory Factor Analysis

. . . analyzes the structure of the
interrelationships among a large
number of variables to determine a
set of common underlying
dimensions (factors).

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Cluster Analysis

. . . groups objects (respondents, products,

firms, variables, etc.) so that each object is
similar to the other objects in the cluster and
different from objects in all the other clusters.

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Cluster Analysis of Eating Out

Questions
1. I eat at fast food restaurants at least once a week.
2. I prefer restaurants with the highest quality food.
3. I prefer restaurants that have quick service.
4. I prefer to eat at restaurants that have a nice atmosphere.

Objective: Identify groups that maximize

ratio of

between groups variance

within groups variance

large
small

7-point Agree/Disagree Scale

1

7
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Example: Cluster Analysis . . .

Constructs . . .

Trust
Commitment
Cooperation
Locus of Control
Job Satisfaction
Turnover

Polar Extremes
= remove middle group(s)

Organizational
Commitment

High

Medium

Low

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Multidimensional Scaling
. . . identifies unrecognized dimensions
that affect purchase behavior based on
customer judgments of:

similarities or
preferences
and transforms these into distances
represented as perceptual maps.

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Correspondence Analysis
. . . uses non-metric data and evaluates
either linear or non-linear relationships in
an effort to develop a perceptual map
representing the association between
objects (firms, products, etc.) and a set of
descriptive characteristics of the objects.

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Guidelines for Multivariate Analysis

o Establish Practical Significance as well as
Statistical Significance.
o Sample Size Affects All Results.
o Know Your Data.
o Strive for Model Parsimony.
o Look at Your Errors.
o Validate Your Results.

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A Structured Approach to
Multivariate Model Building:
Stage 1: Define the Research Problem, Objectives, and
Multivariate Technique(s) to be Used
Stage 2: Develop the Analysis Plan
Stage 3: Evaluate the Assumptions Underlying the
Multivariate Technique(s)
Stage 4: Estimate the Multivariate Model and Assess
Overall Model Fit
Stage 5: Interpret the Variate(s)
Stage 6: Validate the Multivariate Model
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Description of HBAT Primary Database Variables

Variable Description
Data Warehouse Classification Variables
X1
X2
X3
X4
X5

Customer Type
Industry Type
Firm Size
Region
Distribution System

Variable Type
nonmetric
nonmetric
nonmetric
nonmetric
nonmetric

Performance Perceptions Variables

X6
X7
X8
X9
X10
X11
X12
X13
X14
X15
X16
X17
X18

Product Quality
E-Commerce Activities/Website
Technical Support
Complaint Resolution
Advertising
Product Line
Salesforce Image
Competitive Pricing
Warranty & Claims
New Products
Ordering & Billing
Price Flexibility
Delivery Speed

metric
metric
metric
metric
metric
metric
metric
metric
metric
metric
metric
metric
metric

Outcome/Relationship Measures
X19
X20
X21
X22
X23

Satisfaction
Likelihood of Recommendation
Likelihood of Future Purchase
Current Purchase/Usage Level
Consider Strategic Alliance/Partnership in Future

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metric
metric
metric
metric
nonmetric

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Multivariate Analysis
Learning Checkpoint
1.
2.
3.

What is multivariate analysis?

Why use multivariate analysis?
Why is knowledge of measurement scales
important in using multivariate analysis?
4. What basic issues need to be examined
when using multivariate analysis?
5. Describe the process for applying
multivariate analysis.

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