Data Methodology, Analysis and Managerial Implication for Dell Direct

Logistic Regression (Case 1.1; page 772-776 of MR course Book)

Managerial Problem- To determine whether differences in the perception about Dell PC

exist between the recent purchasers of Dell PC who are very satisfied versus those who are dissatisfied

Objective of the Study

1) Identifying the important variables that impact group membership (very satisfied vs dissatisfied) of the recent purchasers of Dell PC. 2) Establishing a classification system for determining group membership.

Data and Methodology

A survey method was used by Burke, an independent marketing research firm to collect the data required for the study. 372 recent purchasers of Dell PCs and notebooks participated in the study. Apart from demographic and other basic information, the questionnaire consisted of 13 items measuring the customers perception of performance of Dell computers on various aspects like make ordering, quality of peripherals, ease of assembling the computer, speed, quick delivery etc. The 13 items were rated by the customers on a 9 point likert scale ranging from dont agree at all (1) to agree completely (9). Respondents were also asked a question on over all satisfaction with dell computer system on a four point scale- very satisfied (1) to very dissatisfied (4). Burke then recoded the overall satisfaction item into two categories very satisfied (coded as 1) and dissatisfied (coded as 0). Since the objective of the study is identify the important variables that help to discriminate between two groups very satisfied and dissatisfied, either a discriminant or a logistic regression analysis could be used. Both the approaches deal with categorical dependent variables. The advantage of logistic regression over discriminant analysis is that it could be used when none of the assumptions of regression are met. In this manner logistic is a more robust technique than discriminant analysis. Thus Burke decided to use logistic regression over the data collected. In the given study SPSS Ver 17.0 was used and the output obtained is given below-

Prepared by Saurabh Bhattacharya@ IBS, Hyderabad for MR Sec (E) ON 05.09.2012

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Analysis
The total number of respondents is 372 and there are no missing cases. The dependent variable overall satisfaction is a categorical variable with dissatisfied being coded as 0 and very satisfied being coded as 1. Thus a positive (negative) coefficient for an independent variable indicates that increasing (decreasing) values of that independent variable indicates an increasing (decreasing) likelihood of very satisfied classification. Logistic regression in SPSS is conducted using two steps. In step 0 only the constant term is present while in step 1 all the significant independent variables are considered along with the constant term. The step 0 classification table indicates that when no independent variable is considered then at least 55.9% of the respondents (belonging to the satisfied group) will be correctly classified. This indicates that if no logistic regression is applied, by chance a correct classification of 55.9% will be achieved. Thus classification due to logistic regression should be atleast as good as 55.9%. In the next step i.e., step 1 all the significant independent variables are considered. As regards to the predictive accuracy of the model (step 1), the Nagelkerkes R square points out to the fact that the model with independent variables accounts for 34.2 % of the variance of how respondents were categorized as very satisfied or dissatisfied. The goodness of fit of the logistic model is further reflected by the Hosmer and Lemeshow test. Since the chi square value of 7.112 with eight degrees of freedom is more than .05, the test is insignificant indicating that the model has a good fit. In step 1 all the independent variables which are significant at .05 level are considered. In the present study quick delivery, competitive price, speed and high quality peripherals all have
Prepared by Saurabh Bhattacharya@ IBS, Hyderabad for MR Sec (E) ON 05.09.2012 Page 2

Walds statistics which are significant at .05 level. Further the direction of the relationship of quick delivery, competitive price, speed and high quality peripherals with overall satisfaction is positive as indicated by the positive beta values (B) of .216, .491, .158, .380 respectively and Exp (B) of all the variables being greater than 1. The magnitude of the relationship is as followsQuick Delivery --------------(1.241-1)*100% = 24.1% Competitive Price-----------(1.634-1)*100% =63.4% Speed -------------------------(1.171-1)*100 = 17.1% High Quality Peripherals ---(1.463-1)*100% =46.3% Thus a one unit change in quick delivery, competitive price, speed and high quality peripherals implies the likelihood that a person will be categorized as very satisfied increases by 24.1%, 63.4%, 17.1% and 46.3% respectively. Thus the most important variable for classification is competitive price, followed by high quality peripherals, quick delivery and speed. The logistic regression has also led to an increase in the number of appropriately classified as compared to the step 0 classification from 55.9 % to 71.8%. The hit ratio of 71.8% using logistic regression is further better than the proportional chance criterion Cpro (Cpro = p^2 +(1-p)^2) = (55.9)^2 +(44.1)^2) = 51%, where p is the proportion of people in the sample who are satisfied) and thereby indicating that the model is externally valid and generalizable.

Managerial Implications
The study conducted by Burke (a marketing research consultancy) on the behalf of Dell points out to the fact that four variables namely- quick delivery, competitive price, speed and high quality peripherals are the most important factors for Dell. The classification of the consumers as very satisfied increases as these factors increase. Also among the four variables competitive price is the most important variable and thus Dell if it needs to thrive in the PC and notebook market should remain price competitive. It can also be argued that these four variables are the ones which are creating the difference between a satisfied and dissatisfied purchaser. Any future marketing communication of Dell should highlight on these four aspects of Dell computers.

Prepared by Saurabh Bhattacharya@ IBS, Hyderabad for MR Sec (E) ON 05.09.2012

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