RESEARCH METHODOLOGY

(Business Research Methods)

Measurement and Scaling (1)

In business research, measurement of variables is a indispensable requirement Problem Defining what is to be measured, and how it is to be accurately and reliably measured Some things (or concepts) which are inherently abstract in their nature (e.g. job satisfaction, employee morale, brand loyalty of consumers) are more difficult to measure than concepts which can be assigned numerical values (e.g. sales volume for employees X, Y and Z)

Measurement and Scaling (2)

In order for a concept to have the quality of being measurable, it must first be made operational An operation definition may be defined as a definition that gives meaning to concept by specifying the activities or operations which are necessary in order to measure it Example A satisfied consumer will make at least five purchases of Product A from Shop T over a three-month period of time Note that sometimes depending on the context of the research study - it may be difficult to make operational definitions

Measurement and Scaling (3)

A scale is basically a continuous spectrum or series of categories and has been defined as any series of items that are arranged progressively according to value or magnitude, into which an item can be placed according to its quantification Four popular scales in business research are:
Nominal scales Ordinal scales Interval scales Ratio scales

Measurement and Scaling (4)

A nominal scale is the simplest of the four scale types and in which the numbers or letters assigned to objects serve as labels for identification or classification Example:
Males = 1, Females = 2 Sales Zone A = Islamabad, Sales Zone B = Rawalpindi Drink A = Pepsi Cola, Drink B = 7-Up, Drink C = Miranda

Measurement and Scaling (5)

An ordinal scale is one that arranges objects or alternatives according to their magnitude Examples:
Career Opportunities = Moderate, Good, Excellent Investment Climate = Bad, inadequate, fair, good, very good Merit = A grade, B grade, C grade, D grade A problem with ordinal scales is that the difference between categories on the scale is hard to quantify, I,e., excellent is better than good but how much is excellent better?

Measurement and Scaling (6)

An interval scale is a scale that not only arranges objects or alternatives according to their respective magnitudes, but also distinguishes this ordered arrangement in units of equal intervals (i.e. interval scales indicate order (as in ordinal scales) and also the distance in the order) Examples:
Consumer Price Index Temperature Scale in Fahrenheit Interval scales allow comparisons of the differences of magnitude (e.g. of attitudes) but do not allow determinations of the actual strength of the magnitude

Measurement and Scaling (7)

A ratio scale is a scale that possesses absolute rather than relative qualities and has an absolute zero. Examples:
Money Weight Distance Temperature on the Kelvin Scale

Interval scales allow comparisons of the differences of magnitude (e.g. of attitudes) as well as determinations of the actual strength of the magnitude

Measurement and Scaling (8)

Type of Scale Numerical Operation Descriptive Statistics

Nominal

Counting

Frequency in each category, percentage in each category, mode Median, range, percentile ranking Mean, standard deviation, variance Geometric mean, coefficient of variation

Ordinal

Rank Ordering

Interval

Arithmetic Operations on Intervals between numbers Arithmetic Operations on actual quantities

Ratio

The Levels of Measurement

Nominal Ordinal Interval Ratio

Nominal Measurement
The values name the attribute uniquely (classification). The value does not imply any ordering of the cases, for example, jersey numbers in football and dates in a calendar.

Nominal continued
Nominal: These variables consist of categories that are non-ordered. For example, race or ethnicity is one variable used to classify people.
A simple categorical variable is binary or dichotomous (1/0 or yes/no). For example, did a councilwomen vote for the ordinance change or not? When used as an independent variable, it is often referred to as a dummy variable. When used as a dependent variable, the outcome of some phenomenon is either present or not.

Ordinal
Ordinal: These variables are also categorical, but we can say that some categories are higher than others. For example, income tax brackets, social class, levels of education etc.
However, we cannot measure the distance between categories, only which is higher or lower. Hence, we cannot say that someone is twice as educated as someone else. Can also be used as a dependent variable.

Ordinal Measurement
When attributes can be rank-ordered Distances between attributes do not have any meaning, for example, code Educational Attainment as
0=less than H.S. 1=some H.S. 2=H.S. degree 3=some college 4=college degree 5=post college

Is the distance from 0 to 1 the same as 3 to 4?

Interval
Interval: Variables of this type are called scalar or index variables in the sense they provide a scale or index that allows us to measure between levels. We can not only measure which is higher or lower, but how much so.
Distance is measured between points on a scale with even units. Good example is temperature based on Fahrenheit or Celsius.

Interval Measurement
When distance between attributes has meaning, for example, temperature (in Fahrenheit) -- distance from 30-40 is same as distance from 70-80 Note that ratios dont make any sense -80 degrees is not twice as hot as 40 degrees (although the attribute values are).

Ratio
Ratio: Similar to interval level variables in that it can measure the distance between two points, but can do so in absolute terms.
Ratio measures have a true zero, unlike interval measures. For example, one can say that someone is twice as rich as someone else based on the value of their assets since to have no money is based on a starting point of zero.

Ratio
Has an absolute zero that is meaningful Can construct a meaningful ratio (fraction), for example, number of clients in past six months It is meaningful to say that ...we had twice as many clients in this period as we did in the previous six months.

Measurement Hierarchy
RATIO
STRONGEST

INTERVAL
ORDINAL

NOMINAL
WEAKEST

Primary Scales of Measurement

Primary Scales

Nominal Scale

Ratio Scale Ordinal Scale

Interval Scale

Primary Scales of Measurement Nominal Scale

The numbers serve only as labels or tags for identifying and classifying objects.

When used for identification, there is a strict one-toone correspondence between the numbers and the objects. The numbers do not reflect the amount of the characteristic possessed by the objects. The only permissible operation on the numbers in a nominal scale is counting. Only a limited number of statistics, all of which are based on frequency counts, are permissible, e.g., percentages, and mode.

Nominal Scales
Nominal scales focus on only requiring a respondent to provide some type of descriptor as the raw response
Example.
Please indicate your current martial status. __Married __ Single __ Single, never married __ Widowed

Primary Scales of Measurement Ordinal Scale

A ranking scale in which numbers are assigned to objects to indicate the relative extent to which the objects possess some characteristic. Can determine whether an object has more or less of a characteristic than some other object, but not how much more or less. Any series of numbers can be assigned that preserves the ordered relationships between the objects. In addition to the counting operation allowable for nominal scale data, ordinal scales permit the use of statistics based on centiles, e.g., percentile, quartile, median.

Ordinal Scales
Ordinal scales allow the respondent to express relative magnitude between the raw responses to a question
Example. Which one statement best describes your opinion of an Intel PC processor? __ Higher than AMDs PC processor __ About the same as AMDs PC processor __ Lower than AMDs PC processor

Primary Scales of Measurement Interval Scale

Numerically equal distances on the scale represent equal values in the characteristic being measured. It permits comparison of the differences between objects. The location of the zero point is not fixed. Both the zero point and the units of measurement are arbitrary. Any positive linear transformation of the form y = a + bx will preserve the properties of the scale. It is not meaningful to take ratios of scale values. Statistical techniques that may be used include all of those that can be applied to nominal and ordinal data in addition the arithmetic mean, standard deviation, and other statistics commonly used in marketing research.

Interval Scales
Interval scales demonstrate the absolute differences between each scale point
Example. How likely are you to recommend the Santa Fe Grill to a friend?

Definitely will not

1 2 3 4 5

Definitely will
6 7

Primary Scales of Measurement Ratio Scale

Possesses all the properties of the nominal, ordinal, and interval scales. It has an absolute zero point. It is meaningful to compute ratios of scale values.

Only proportionate transformations of the form y = bx, where b is a positive constant, are allowed.
All statistical techniques can be applied to ratio data.

Ratio Scales
Ratio scales allow for the identification of absolute differences between each scale point, and absolute comparisons between raw responses
Example 1. Please circle the number of children under 17 years of age currently living in your household.

0 1 2 3 4 5 6

7 (if more than 7, please specify ___.)

Primary Scales Measurement

Scale Nominal Numbers Assigned to Runners

17

21

13

Finish

Ordinal

Rank Order of Winners

Third Place

Second Place

First Place

Finish

Interval

Performance Rating on a 0 to 100 scale

74

90

97

Ratio

Time to Finish, in Seconds

16.1

14.0

13.2