ANOVA

(Analysis of Variance)
and
Experimentation

Anova
The Analysis of Variance technique is used when the independent variables are of
nominal scale (categorical) and the dependent variable is metric (continuous).

Designs
The design of the experiment is most critical in performing any experiment to be
analyzed through the technique of ANOVA.
There are four major types are
Completely Randomised Design in a One-Way ANOVA (Single Factor)
Randomised Block Design (Single Blocking Factor)
Latin Square Design (Two Blocking Factors)
Factorial Design (Two way Anova)

Completely Randomized Design

A oneindependent variable experiment is called one-way ANOVA. ANOVA
stands for Analysis of Variance, the generic name given to a set of techniques for
studying cause-and-effect of one or more factors on a single dependent
variable.

Randomized Block Design

If we hypothesize that there is also a Blocking Variable in addition to one
independent variable, we can use a.

One-Way ANOVA
Researchers are often interested in examining the differences in the
mean values of the dependent variable for several categories of a
single independent variable or factor.
One dependent (metric) variable.
There is only one categorical independent variable. Variable is called a
Factor. Each category of an independent variable is called a level.
The independent variable may be different levels of prices, or different pack sizes,
or different product colours, and the effect (dependent variable) could be sales,
preferences or attitudes towards the brand.

Some more examples:

Do the various segments differ in terms of their volume of
product consumption?
Do the brand evaluations of groups exposed to different
commercials vary?

Relationship with t-test

Analysis of variance (ANOVA) is used as a
test of means for two or more populations,
hence extension of t-test for difference of
means. The null hypothesis, typically, is
that all means are equal.

Conducting One-way Analysis of

Variance
Decompose the Total Variation
The total variation in Y, denoted by SSy, can be decomposed into
two components:
SSy = SSbetween + SSwithin
where the subscripts between and within refer to the categories of
X. SSbetween is the variation in Y related to the variation in the
means of the categories of X. For this reason, SSbetween is also
denoted as SSx. SSwithin is the variation in Y related to the variation
within each category of X. SSwithin is not accounted for by X.
Therefore it is referred to as SSerror.

The total variation in Y may be decomposed as:

SSy = SSx + SSerror
where
N

SS y = (Y i Y )

i =1

SS x = n (Y j Y )2
j =1

SS error=
j

(Y ij Y j )2

Yi = individual observation
= mean for category j
Yj
= mean over the whole sample, or grand mean
Y
Yij = i th observation in the j th category

Independent Variable

Within
Category
Variation
=SSwithin
Category
Mean

X
Total
Sample

X1

X2

Categories
X3

Xc

Y1

Y1

Y1

Y1

Y1

Y2
:
:
Yn

Y2

Y2

Y2

Yn

Yn

Yn

Y2
:
:
YN

Y1

Y2

Y3

Yc

Between Category Variation = SSbetween

Total
Variation
=SSy

Test Significance
In one-way analysis of variance, the
interest lies in testing the null hypothesis
that the category means are equal in the
population.
(i) H0: 1 = 2 = 3 = ........... = c
(ii) At least one of the

i is different from others.

(iii) Level of Significance: 0.05

(iv) Test-statistic:
The null hypothesis may be tested by the F statistic
based on the ratio between these two estimates:

SS x /(c1)
MS x
F=
=

SS error/(Nc) MS error
This statistic follows the F distribution, with (c - 1) and
(N - c) degrees of freedom (d.f.).

Sources of
Variation
Between the
groups

Within the
groups
Total

Sum of Squares

d.f

Mean Sum of Squares

SSx

c-1

MSx

SSerror
SSy

N-c
N-1

SSerror

Conducting One-way Analysis of

Variance
Interpret the Results
If the null hypothesis of equal category means is not
rejected, then the independent variable does not have a
significant effect on the dependent variable.
On the other hand, if the null hypothesis is rejected, then
the effect of the independent variable is significant.
Tukeys test can be used to see which pairs of groups are
significantly different or else.

Example :
Three different versions of advertising copy have been created by an advertising
agency for a campaign. Let us call these versions of copy ADCOPY 1, 2 and 3. Now,
the ad agency wants to test which of these three versions of the advertising copy is
preferred by its target population, before they launch the campaign.

A sample of 18 respondents is selected from the target population in the nearby areas of
the city. At random, these 18 respondents are assigned to the 3 versions of ad copy.
Each version of ad copy is thus shown to six of the respondents.
The respondents are asked to rate their liking for the ad copy shown to them on a scale
of 1 to 10. (1 = Not liked at all, 10 = Liked a lot, and other values in between these
two). The ratings given by the 18 respondents are tabulated.

Ratings
Respondents

Adcopy1

Adcopy2

Adcopy3

F2,15 = 7.70

The codes in the ad copy, column (1,2,3) indicate

the different versions of the ad. The last column,
rating, is the rating given by a respondent to the
adcopy seen by him/her. Thus, six respondents have
rated each ad. Please note, that these eighteen
respondents were randomly assigned to each of the
three ad versions. This random assignment is called a
completely randomised assignment or design.

This input data is input into a statistical

package for performing a One-Way ANOVA,
because we have only 1 categorical factor (Ad
copy) at 3 levels 1, 2, 3 and 1 dependent
variable Rating.
Output

Source of
Variation
Between
Groups
Within
Groups
Total

Sum of
Squares

DF

Mean
Square

7.000

3.500

29.500

15

1.967

36.500

17

2.147

F
1.780

Sig.
of F
.203

The null hypothesis for this F-test is that there is no significant difference
in the mean ratings for the three ad copy versions.
H0: M1 = M2 = M3 where M1, M2 and M3 are the mean ratings for the
three versions of ad copy.
Thus, in this case, we have accepted the null hypothesis (or failed to
reject the null hypothesis), at the 95 percent confidence level.

In other words, the Ratings given to the three ad

copy versions are not significantly different from
each other.

The ANOVA has thus told us what we may not have been able to gauge if we
had simply looked at the mean ratings for each ad copy by computing these.
For example, the ratings for the ad copy version 1 are 6,7,5,8,8,8 and the
mean rating is (6+7+5+8+8+8) / 6, or 42/6 = 7. Similarly, the mean rating of
ad copy version 2 is (4+4+5+7+7+6) / 6, or 33/6 = 5.5. The mean rating for ad
copy version 3 is (5+5+4+7+8+7) / 6, or 36/6 = 6.
At a glance, the three mean ratings appear to be different 7, 5.5 and 6. But
the ANOVA tells us that this difference is not statistically significant at the 95
percent confidence level.
It does this by performing an F-test.

1.

Randomised Block Design

Independent factor (Fixed)

Dependent Variable

Blocking factor (Random)

Hypothesis
1. The assignment of our sample of 18 in the above manner assumes that
the magazine in which the version of adcopy appears may have an
impact on the ratings. We can test this hypothesis - in fact, two
hypotheses - by doing an ANOVA with a randomized block design.
2. For this purpose, we use the variable Rating as the dependent
variable, and Adcopy as the factor, and Magazine as the block.

3. A block is defined as some variable which could affect the relationship

between the independent factor and the dependent variable under study in an
ANOVA. In our example, the magazine in which the advertisement appears
could influence the Rating given to Adcopy by the respondents. We are trying
to remove the effect of the magazine used, by "blocking" its effect, or treating
the block separately.
4. If we do not block on a variable, its effect gets included with the error
(residual) term. This may lead to wrong conclusions about the relationship
between the independent and dependent variables. In that sense, a randomised
block design is more "powerful" than a simple one-way ANOVA, if the block
effect is significantly influencing the relationship.

First null hypothesis

Mean rating of the ADCOPY is the same for all 3 versions.

Second null hypothesis

Block used (Magazine in this case) has no effect on mean ratings
given to ADCOPY versions by respondents.

Blocking Factor being considered separately has now

led us to a different conclusion from that in a
completely randomized test of the same basic data.
This makes the randomized block test a better test
when we suspect that a blocking factor affects the
relationship between the independent variable and
the dependent variable.

Latin Square Design

The Latin Square Design is an extension of the Randomised Block
Design. It consists of one independent variable (FACTOR) and two
Blocks, instead of one which we saw in the Randomised Block Design.

Factorial Design/Two way Anova: Example

In this example, we assume that we are testing for a soap brand, the effect of two
Factors (independent variables) Pack Design and Price - on Sales (dependent
variable). We would like to know (1) if each of the Factors independently affects
Sales (called the Main Effects), and (2) if there is a combined effect of Pack
Design and Price (called the 2 way Interaction Effect) on Sales.
If there are 3 factors in a study, then we could test for all 2-way interaction effects
and the 3-way interaction effect, in addition to the Main Effects of the individual
factors.
The experiment is conducted in a simulated environment on 18 randomly selected
respondents. There are 3 levels of price Rs. 8, Rs. 11 and Rs. 14, and 3 levels
of Pack Design designated by the main colours used Blue, Red and
Green.
The coding of these variables is 1, 2, 3 respectively for Rs. 8, 11 and 14 and 1, 2,
3 for Blue, Red and Green in the case of Pack Design.

Input Data

Column 1 is Sales, column 2 is Pack Design and Column 3 is Price. Please note that
even though Price is a continuous metric variable, for the purpose of ANOVA, being
an independent variable, it has to be treated as a categorical variable. Hence the
coding (1, 2, 3) for Price.

We find that the significance of F values are

Pack Design - .248 (Main Effect 1)
Price - .000 (Main Effect 2)
Pack Design by Price - .646 (Interaction Effect)
Hypothesis 1 cannot be rejected, as the significance of F values is greater
than 0.05 i.e. 0.248.
The Price effect, one of the two main effects, is significant statistically, at
95 percent confidence level. This means that hypothesis no. 2 is rejected.
Hypothesis 3 cannot be rejected, as the significance of F values is greater
than 0.05 as 0.646.
Thus, we conclude that Price alone has an impact on Sales. Neither Pack
Design alone nor the combination of Pack Design with Price have any
significant impact on Sales of the toilet soap.