Introduction to Comparison of Categories

Think of all the ways we analyze categories in business: different industries, demographics such as gender, marketing segments, product categories, data measured at different time periods, geographical territories, and the like. We can also look at ordinal variables as categories, such as different age generations (“Baby Boomers,” “Generation X,” “Generation Y” and so on).

We often wish to investigate whether a continuous dependent variable – such as Sales – differs significantly across the categories or levels in one or more of these categorical or ordinal variables that we so often use. For example, you may be asking the question, ”do the average sales differ significantly between my geographical territories, and if so how?”

Figure 14.1 The core comparison of means relationship illustrates this core idea.

Figure 14.1 The core comparison of means relationship

This chapter will start you off on the analysis of such situations. There are two different ways in which the categories can arise, as discussed next.