FUNDAMENTALS OF BUSINESS ANALYTICS

SAMPLING &
ESTIMATION
Learning Objectives:

• At the end of this module, students will be able to:

• Define Sampling
• Identify the different sampling methods
• Understand Estimation
 SAMPLING AND DATA COLLECTION
• Sampling is defined as the “a process or method of drawing a representative group of
individuals or cases from a particular population” (Encyclopedia Britannica, 2017).
• This process is associated with the fact that it is more effective and efficient to study
samples taken from a population.
History of Sampling

Bethlehem (2009) reiterated that sampling theory became a legitimate area of study in
statistics through the works of Anders Kaier of the Norwegian Statistical Bureau. In his published
study in 1895, Kaier presented his “Representative Method” of selecting samples based on the
population. The Representative Method received both praises and criticisms of scholars, and
these prompted Kaier and other statisticians to address and improve the method. The
Representative Method’s lack of random selection was improved by Bowley in 1906. The works
of both Kaier and Bowley led to the rise of probability and nonprobability sampling.
STATISTICAL SAMPLING

A sampling plan is a description of the approach that is used to obtain samples from a
population prior to any data collection
activity.
• A sampling plan states
• the objectives of the sampling activity,
• the target population,
• the population frame (the list from which the sample is selected),
• the method of sampling,
• the operational procedures for collecting the data, and
• the statistical tools that will be used to analyze the data.
 A Sampling plan for a Market Research Study
A company wants to understand how golfers might respond to a membership program that provides
discounts at golf courses in the golfers’ locality as well as across the country.
• The objective of a sampling study might be to estimate the proportion of golfers who would likely
subscribe to this program.
• The target population might be all golfers over 25 years old. However, identifying all golfers in America
might be impossible.
• A practical population frame might be a list of golfers who have purchased equipment from national
golf or sporting goods companies through which the discount card will be sold.
• The operational procedures for collecting the data might be an e-mail link to a survey site or direct-mail
questionnaire.
• The data might be stored in an Excel database;
• statistical tools such as PivotTables and simple descriptive statistics would be used to segment the
respondents into different demographic groups and estimate their likelihood of responding positively.
Sampling Methods
Sampling methods can be subjective or probabilistic.
• Subjective methods
• include judgment sampling, in which expert judgment is used to select the
sample (survey the “best” customers),
• and convenience sampling, in which samples are selected based on the ease with
which the data can be collected (survey all customers who happen to visit this
month).
• Probabilistic methods
PROBABILITY SAMPLING
• The use of probability sampling is guided by the probability theory particularly the law of
large numbers and the central limit theorem. The assumption is that as the number of
samples selected from the population increases, the likelihood that the statistic obtained
from these samples become closer to the expected or actual values from the population
and will follow a normal distribution..
Different techniques of probability sampling:
• Simple Random Sampling
• Stratified Sampling
• Cluster Sampling
• Systematic Sampling
• Multistage Sampling
PROBABILITY SAMPLING
• Simple Random Sampling - In simple random sampling, the researcher only implements
a selection that ensures that every member of the population has an opportunity to be
selected.

• Stratified Sampling - This is a probability sampling technique where a heterogenous

group was further classified into homogenous groups or strata where the samples will be
selected. The number of samples selected per stratum corresponds to the percentage of
the stratum to the entire population.

• Cluster Sampling - This type of probability sampling technique is similar to stratified

sampling. The only difference is that not all of the strata are selected. Instead, the
researcher will first select a number of strata from which the samples will be randomly
taken from.
PROBABILITY SAMPLING
• Systematic Sampling - In systematic sampling, selection of samples starts from a random
point and will be carried over based on a fixed interval. Some researchers conduct
systematic sampling by generating a random number that will serve as the starting point
and the interval.

• Multistage Sampling - This is the combination of the probability sampling techniques

mentioned above.
NON-PROBABILITY SAMPLING
This type of sampling is only used when researchers are not concerned about
generalizing the results of the study to the population. Instead, the researcher
only aims to get data for specific cases.

• Quota Sampling
• Purposive Sampling
• Convenience Sampling
 NON-PROBABILITY SAMPLING
Quota Sampling - In quota sampling, the researcher only ensures that a
number of samples will be selected from all the strata.

Purposive Sampling - Purposive sampling is the selection of participants

on the premise that they met the criteria of the researcher. Snowball or
chain sampling is an example of purposive sampling.

Convenience Sampling - Convenience sampling relies solely on

availability.
ESTIMATING POPULATION PARAMETERS
• Estimation involves assessing the value of an unknown population parameter—
such as a population mean, population proportion, or population variance—
using sample data.

• Estimators are the measures used to estimate population parameters; for

example, we use the sample mean x to estimate a population mean m. The
sample variance s2 estimates a population variance s2, and the sample
proportion p estimates a population proportion p.
• A point estimate is a single number derived from sample data that is used to
estimate the value of a population parameter
Interval Estimate

• An interval estimate provides a range for a population characteristic based on

a sample.
• Intervals are quite useful in statistics because they provide more information
than a point estimate.
• Intervals specify a range of plausible values for the characteristic of interest
and a way of assessing “how plausible” they are.
Confidence interval

• A confidence interval is a range of values between which the value of the

population parameter is believed to be, along with a probability that the
interval correctly estimates the true (unknown) population parameter.
• This probability is called the level of confidence, denoted by 1 - a, where a is
a number between 0 and 1. The level of confidence is usually expressed as a
percent; common values are 90%, 95%, or 99%. (Note that if the level of
confidence is 90%, then a = 0.1.)
• The margin of error depends on the level of confidence and the sample size.
Prediction Interval

• A prediction interval is one that provides a range for predicting the value of a
new observation from the same population.
• This is different from a confidence interval, which provides an interval estimate
of a population parameter, such as the mean or proportion. A confidence
interval is associated with the sampling distribution of a statistic, but a
prediction interval is associated with the distribution of the random variable
itself.
Sampling Error

• Sampling (statistical) error. This occurs for samples are only a subset of the total
population. Sampling error is inherent in any sampling process, and although it
can be minimized, it cannot be totally avoided

• Nonsampling error. An error that occurs when the sample does not represent
the target population adequately.
Reference:

• Evans, J. (2016). Business Analytics (2nd ed.). Pearson.