Applications of statistics in Marketing, Finance,

and HR Management
Submitted To: Prof. Salah Uddin
Submitted By: ALEEM AHMAD
AWAIS TAJ
KAMRAN SINDHU

DEPARTMENT OF MANAGEMENT SCIENCES (DOMS)

UNIVERSITY OF OKARA
 Applications of Statistics in Marketing, Finance and HR

Applications of Statistics in Marketing:

Statistics are applied in marketing to identify market trends, and to measure and evaluate the
potential and success of marketing programs. The secret to successful marketing is to identify the
target market accurately and to use effective marketing communications channels and tactics to
reach it. Statistics can help the marketer achieve both of those goals as well as evaluate the
success of the marketing effort and provide data on which to base changes to the marketing
program.

Objective:
 Basis more decision and data analysis.
 Acquiring more customers.
 Segmentation target markets.
 Enhance data quality and sales.

 To determine the role of various statistical tools in the area of marketing research.
 To determine the function of various statistical tools which are helpful for marketing
managers for making various policies.
 To find out applications of statistical tools in the area of marketing.

Statistics Tools:
Measure of Central Tendency:
A measure of central tendency is a summary statistic that represents the center point or typical
value of a dataset. These measures indicate where most values in a distribution fall and are also
referred to as the central location of a distribution. You can think of it as the tendency of data to
cluster around a middle value. In statistics, the three most common measures of central tendency
are the mean, median, and mode. Each of these measures calculates the location of the central
point using a different method.

Choosing the best measure of central tendency depends on the type of data you have. In this post,
I explore these measures of central tendency, show you how to calculate them, and how to
determine which one is best for your data.
Mean

The mean is the arithmetic average, and it is probably the measure of central tendency that you
are most familiar. Calculating the mean is very simple. You just add up all of the values and
divide by the number of observations in your dataset.

The calculation of the mean incorporates all values in the data. If you change any value, the
mean changes. However, the mean doesn’t always locate the center of the data accurately.

Median

The median is the middle value. It is the value that splits the dataset in half. To find the median,
order your data from smallest to largest, and then find the data point that has an equal amount of
values above it and below it. The method for locating the median varies slightly depending on
whether your dataset has an even or odd number of values. I’ll show you how to find the median
for both cases. In the examples below, I use whole numbers for simplicity, but you can have
decimal places.

In the dataset with the odd number of observations, notice how the number 12 has six values
above it and six below it. Therefore, 12 is the median of this dataset.

E.g.: 10, 11,12,13,14

Mode

The mode is the value that occurs the most frequently in your data set. On a bar chart, the mode
is the highest bar. If the data have multiple values that are tied for occurring the most frequently,
you have a multimodal distribution. If no value repeats, the data do not have a mode.

In the dataset below, the value 5 occurs most frequently, which makes it the mode. These data
might represent a 5-point Likert scale.

E.g. 5, 2, 4,6,5,5,8,9,5
Correlation Analysis:
Correlation is a statistical technique that can show whether and how strongly pairs of variables
are related. For example, height and weight are related; taller people tend to be heavier than
shorter people. The relationship isn't perfect. People of the same height vary in weight, and you
can easily think of two people you know where the shorter one is heavier than the taller one.
Nonetheless, the average weight of people 5'5'' is less than the average weight of people 5'6'', and
their average weight is less than that of people 5'7'', etc. Correlation can tell you just how much
of the variation in peoples' weights is related to their heights.

Although this correlation is fairly obvious your data may contain unsuspected correlations. You
may also suspect there are correlations, but don't know which are the strongest. An intelligent
correlation analysis can lead to a greater understanding of your data.

Techniques in determining correlation

There are several different correlation techniques. The Survey System's optional Statistics
Module includes the most common type, called the Pearson or product-moment correlation. The
module also includes a variation on this type called partial correlation. The latter is useful when
you want to look at the relationship between two variables while removing the effect of one or
two other variables.

Like all statistical techniques, correlation is only appropriate for certain kinds of
data. Correlation works for quantifiable data in which numbers are meaningful, usually
quantities of some sort. It cannot be used for purely categorical data, such as gender, brands
purchased, or favorite color.

Statistical Tests:
There are few statistical tests like run test and t-test which are helpful to marketing managers for
making policies.

Regression Analysis

This is a statistical technique used for working out the relationship between two (or more)
variables.

A change in a dependent variable depends on, and is associated with, a change in one (or more)
independent variables.
Linear regression uses a single independent variable to predict an outcome of the dependent
variable. Multiple regressions use at least two independent variables.

Analysis of Variance (ANOVA) Test

This is used with a regression study to find out what effect independent variables have on the
dependent variable. It can compare multiple groups simultaneously to see if there is a
relationship between them, e.g. studying whether different types of advertisements get different
consumer responses.

Conjoint Analysis

Market researchers love to understand and predict why people make the complex choices they
do. Conjoint analysis comes closest to doing this: it asks people to make trade-offs when making
decisions, just as they do in the real world, then analyses the results to give the most popular
outcome.

For example, an investor wants to open a new restaurant in a town. They think one of the
following options might be the most profitable:

Type of Restaurant Gourmet Burger Spanish Tapas Thai

Average price per

$20 $40 $60
head

Distance from town

5 miles 2 miles 10 miles
center

What does customer’s

-It’s OK It’s OK Loves it!
partner feel?

It’s a bit more

It’s cheap, fairly near It’s expensive, quite far
expensive but very near
Trade-offs home, partner is just from home but partner
home, partner is just
OK with it loves it
OK with it

The T-Test

This helps you compare whether two data groups have different mean values, e.g. do women and
men have different mean heights? The t-test allows the user to interpret whether differences are
meaningful or merely coincidental.
Crosstab Analysis

This is used in quantitative market research to analyze categorical data – that is, variables that
are different and mutually exclusive, such as: ‘men’ and ‘women’, or ‘under 30’ and ‘over 30’. It
allows you to compare the relationship between two variables in contingency tables.

Applications of Statistics in Finance:

Statistics plays a leading role in finance. Probability and statistics play a vital role in every field
of human activity. In particular, they are quantitative tools widely used in the areas of economics
and finance. Knowledge of modern probability and statistics is essential to develop economic
and finance theories and test their validity through the analysis of empirical real-world data. For
example, probability and statistics could help to form effective monetary and fiscal policies and
to develop pricing models for financial assets such as equities, bonds, currencies, and derivative
securities.

Skewness and Kurtosis:

In basic statistics and probability theory, Skewness is a measure of symmetry, or more precisely,
the lack of symmetry. A distribution, or data set, is symmetric if it looks the same to the left and
right of the center point. Kurtosis is a measure of whether the data are heavy-tailed or light-
tailed relative to a normal distribution.

Skewness:
Skewness refers to distortion or asymmetry in a symmetrical bell curve, or normal distribution,
in a set of data. ... Negatively-skewed distributions are also known as left-skewed
distributions. Skewness is used along with kurtosis to better judge the likelihood of events
falling in the tails of a probability distribution.

Any random variable with a symmetric distribution will have Skew  0. Values greater than zero
indicate positive skewness, i.e. distributions that have a heavy tail on the right hand side.
Conversely, Skew  0 indicates a left-skewed distribution.

Kurtosis:
Kurtosis is a statistical measure that defines how heavily the tails of a distribution differ from
the tails of a normal distribution. In other words, kurtosis identifies whether the tails of a given
distribution contain extreme values. In finance, kurtosis is used as a measure of financial risk
Financial Risk Modeling.

It is important to note that the kurtosis is not very meaningful for skewed distributions, because it
will measure both asymmetry and tail weight. Hence, it is an indicator that is aimed at symmetric
distributions. Its minimal value is 1, and is achieved for any random variable that only takes two
distinct values with probability 1/2.

Histogram:
A histogram exposure is related to a data set usually in finance. The data set is usually the entire
existence of the market and where prices are set. For example, the histogram might use a data set
from the S&P 500 on expected returns. Thus for each frequency that the market hit that return it
will show up as part of a bar graph. The higher the bar graph the more frequent the market hits
that particular return.
The histogram can also show the density amount or find data that provides somewhat of a
percentage range of where the stock or market index is likely to hit. Returns are not the only use
for the histogram within the market. In fact, you can use histogram graphs for just about any
aspect of a stock, bond, or market index. Some of these factors may include the standard
deviation or covariance in measuring risk, or returns in different stocks or markets.

 How does current performance of the company, represented by financial ratios, compares
to the past?
 How does the performance of the company, represented by financial ratios, compares to
its peers?

 What was the historic behavior of macro-economic indicators, stock returns and
commodity prices?

Bar Chart:
One of the basic tools of technical analysis is the bar chart, A bar chart shows the open, high,
low, and close prices for a specified period of time. The vertical line on a price bar represents
the high and low prices for the period. The left and right horizontal lines on each
price bar represent the open and close prices. Bar charts can be colored coded.

Applications of Statistics in HR/Management:

To use of statistical tools, methodologies, and models in human resource management (HRM)
has increased because of human resources (HR) analytics and predictive HR decision making. To
utilize these technological tools, HR managers and students must increase their knowledge of the
resources’ optimum application.
Statistical Tools and Analysis in Human Resources Management is a critical scholarly
resource that presents in-depth details on the application of statistics in every sphere of HR
functions for optimal decision-making and analytical solutions. Featuring coverage on a broad
range of topics such as leadership, industrial relations, training and development, and diversity
management, this book is geared towards managers, professionals, upper-level students,
administrators, and researchers seeking current information on the integration of HRM
technologies.
In Recruiting and training of staff.
To identify areas of weakness where improvement is needed.
To identify compensation programs such as pension schemes.
To identify areas where investment is needed.
It may even help a potential problem from growing out of control.

Applications:
Statistical reports provide a summary of business activities which improves the capability of
making more effective decisions regarding future activities.

Time series analysis is used for studying the behavior of prices, production and consumption of
commodities, money in circulation, and bank deposits and clearings.
Multiple regressions used to study the measurement of consumer attitudes.

Demand analysis is used to study the relationship between the price of a commodity and its
output (supply).

Factor analysis used to study the consumer’s life styles, attitudes, interests, activities, and
personality measures
Trend analysis and correlation are common when making economic forecasts.

Random sampling is frequently used by accounting firms when accounts like travel expenses
are relatively small and inconsequential.
Regression analysis is one of the most prevalent statistical techniques employed in finance.