BUSINESS ANALYTICS

Unit - lV
Tools Used For Data Analytics

1. Introduction to Data Analytics Software

Data analytics software plays a crucial role in transforming raw data into actionable insights,
enabling organizations to make informed decisions. As the volume of data generated continues
to grow, the demand for effective data analytics tools has surged. This introduction will cover
the key aspects of data analytics, the types of software available, and the skills needed to excel
in this field.

What is Data Analytics?

Data analytics is the process of examining raw data to draw meaningful conclusions and
insights. It involves various techniques and tools to collect, clean, analyze, and visualize data,
ultimately helping businesses make data-driven decisions.
The primary goal is to identify patterns and trends that can inform strategic actions, enhancing
operational efficiency and customer understanding

Real-Life Example: A Retail Store Chain

Imagine you’re a manager at a clothing retail chain. You want to boost sales and understand
customer behavior better. Here's how you can use data analytics software:
Step-by-Step Example:
1. Collect Data
o Use Excel to gather sales data from all store branches.
o Example columns: Date, Product Sold, Store Location, Sales Amount, Customer
Age.
2. Clean & Organize
o Use Excel or Google Sheets to remove duplicates or fix missing values.
3. Analyze Data
o Use Power BI to identify:
 Which store sells the most?
 What product is most popular among 18–25-year-olds?
 What time of year has the highest sales.
4. Visualize Insights
o Use Tableau to create charts that show:
 Sales trends over months
 Customer demographics by location
5. Make Business Decisions
o Based on the insights, you might:
 Increase inventory of popular items
 Launch targeted promotions for specific age groups
 Offer discounts during low-sales months

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1.1 Types of Data Analytics Software with Examples

Data analytics software can be categorized into four main types, each serving a unique purpose
in analyzing data and providing insights. Understanding these types is crucial for BBA students,
as they can apply these concepts in real-world business scenarios. Here’s a breakdown of each
type along with practical examples.

Types of Data Analytics

There are four major types of data analytics:
1. Predictive (forecasting)
2. Descriptive (business intelligence and data mining)
3. Prescriptive (optimization and simulation)
4. Diagnostic analytics

1. Descriptive Analytics: Descriptive analytics answers the question, "What has happened?" It
summarizes historical data to provide insights into past performance and trends. This type of
analytics is foundational, as it lays the groundwork for further analysis.
 Example: A retail company uses descriptive analytics to analyze sales data from the
previous year. By generating reports that show monthly sales figures, customer
demographics, and product performance, the company can identify peak sales periods
and popular products. For instance, they might discover that sales of winter clothing
spike in November and December, allowing them to plan inventory and marketing
strategies accordingly.
 Software Tools: Common tools for descriptive analytics include Microsoft Excel, Google
Analytics, and Tableau, which help visualize data through charts and dashboards.

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2. Diagnostic Analytics: Diagnostic analytics goes a step further by answering the question,
"Why did this happen?" It examines data to identify relationships and causes behind trends
observed in descriptive analytics.
 Example: Continuing with the retail company, after noticing a spike in winter clothing
sales, they use diagnostic analytics to investigate why this occurred. They analyze
customer feedback, weather data, and marketing campaign performance. They might
find that a targeted advertising campaign during the holiday season significantly
influenced sales, or that a particularly cold winter drove demand for jackets and coats.
 Software Tools: Tools like SAS, R, and Python (with libraries such as Pandas) are often
used for diagnostic analytics, as they allow for deeper statistical analysis and data
manipulation.

3. Predictive Analytics: Predictive analytics answers the question, "What is likely to happen in
the future?" It uses historical data and statistical algorithms to forecast future outcomes,
helping businesses anticipate trends and make proactive decisions.
 Example: A bank employs predictive analytics to assess the likelihood of loan defaults
among its customers. By analyzing past loan performance, customer credit scores, and
economic indicators, the bank can identify which customers are at higher risk of
defaulting. This allows them to adjust lending criteria or offer financial counseling to at-
risk customers.

 Software Tools: Predictive analytics often utilizes machine learning platforms like IBM
Watson, Google Cloud AI, and specialized software like RapidMiner or KNIME.

4. Prescriptive Analytics: Prescriptive analytics answers the question, "What should we do?" It
provides recommendations for actions based on predictive analytics insights, helping
organizations optimize their strategies.
 Example: A logistics company uses prescriptive analytics to optimize delivery routes. By
analyzing traffic patterns, weather conditions, and delivery schedules, the software can
recommend the most efficient routes for drivers. For instance, if the system predicts
heavy traffic on a particular route, it might suggest an alternative path that saves time
and fuel costs.
 Software Tools: Tools like IBM SPSS, Oracle Analytics Cloud, and advanced BI tools like
Thought Spot are commonly used for prescriptive analytics, as they can simulate various
scenarios and provide actionable insights.

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1.2 open source and proprietary software

1. Open Source Software (OSS) in Data Analytics
Definition: Open source software is freely available for use, modification, and distribution. Its
source code is accessible to anyone, encouraging community collaboration and customization.
Features:
 Free of cost: No licensing fees.
 Highly customizable: Users can modify the software as needed.
 Community-supported: Large communities provide support, updates, and plugins.
 Flexibility: Can be integrated with other tools.

Examples of Open Source Data Analytics Software:

 R: A programming language widely used for statistical analysis and data visualization.
 Python (with libraries like Pandas, NumPy, Scikit-learn): Popular for data manipulation,
machine learning, and analytics.
 Jupyter Notebooks: An open-source environment for data analysis and visualization.
 Apache Hadoop and Spark: Frameworks for big data processing.

Real-Life Example:
A small business uses Python scripts and Jupyter Notebooks to analyze customer data for free,
creating sales reports and predictive models without purchasing expensive software.

2. Proprietary (Commercial) Software in Data Analytics

Definition: Proprietary software is owned by a company or individual. It requires purchasing a
license, and the source code is usually closed and not accessible to users.
Features:
 Paid software: Usually involves licensing fees.
 User support: Vendors provide technical support, updates, and documentation.
 Ease of use: Often designed with user-friendly interfaces, requiring less technical
knowledge.
 Integrated solutions: Usually come with comprehensive features and tools.

Examples of Proprietary Data Analytics Software:

 Tableau: Popular for its drag-and-drop interface, data visualization, and ease of use.
 Microsoft Power BI: Business analytics tool with strong integration with Microsoft
products.
 SAS: Comprehensive statistical analysis and predictive modeling suite.
 IBM SPSS: Specialized in statistical analysis, widely used in research.

Real-Life Example:
A large corporation invests in Tableau to create interactive dashboards and reports for
executives, simplifying complex data analysis for strategic decision-making.

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Aspect Open Source Software Proprietary Software

Cost Free, open source Paid, licensed
Customization Highly customizable Limited, vendor-controlled
Support Community-based support Vendor support and training
Examples Python, R, Hadoop, Jupyter Tableau, Power BI, SAS, SPSS
Suitability Budget-constrained users, researchers, Enterprises needing robust support
developers and features

2. Introduction to Descriptive statistics using MS – Excel

Descriptive statistics are summary measures that quantitatively describe the main
features of a dataset. They help you understand your data by providing metrics such as mean
(average), median, mode, standard deviation, minimum, maximum, and more. These statistics
are essential for business, research, and academic analysis because they offer insights into the
data’s central tendency, variability, and overall distribution
Why Use Excel for Descriptive Statistics?
Microsoft Excel is widely used for data analysis in business and academics. It offers built-in tools-
especially the Analysis ToolPak-to quickly calculate descriptive statistics, making it accessible
even for beginners.

What are Descriptive Statistics?

Descriptive statistics summarize key features of a dataset without making inferences about a
larger population. They include measures such as:
1. Measures of Central Tendency:
 Mean: The average of the dataset.
 Median: The middle value when the data is sorted.
 Mode: The most frequently occurring value.
2. Measures of Dispersion:
 Range: The difference between the maximum and minimum values.
 Variance: The average of the squared differences from the mean.
 Standard Deviation: A measure of how spread out the values are around the mean.
3. Other Statistics:
 Count: The number of observations in the dataset.
 Minimum and Maximum: The smallest and largest values in the dataset.

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 Using MS Excel for Descriptive Statistics

Excel provides tools to calculate these measures easily, such as functions (AVERAGE(),
MEDIAN(), MODE(), etc.) and Data Analysis ToolPak.

Step-by-step Example

Suppose you are a business student analyzing the monthly sales (in units) of a product over 12
months:

Month Sales Month Sales

Jan 150 Jul 190
Feb 200 Aug 230
Mar 180 Sep 200
Apr 220 Oct 240
May 170 Nov 210
Jun 210 Dec 250

How to calculate descriptive statistics in Excel:

1. Enter data into cells A1:B13 (with headers).
2. Calculate Mean:
 In cell B15, type: =AVERAGE(B2:B13)
 The result shows the average monthly sales.
3. Calculate Median:
 In cell B16, type: =MEDIAN(B2:B13)
4. Calculate Mode:
 In cell B17, type: =MODE.SNGL(B2:B13) (for latest Excel versions)
5. Calculate Range:
 In cell B18, type: =MAX(B2:B13)-MIN(B2:B13)
6. Calculate Standard Deviation:
 In cell B19, type: =STDEV.S(B2:B13)

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Visualizing Data:

 Use Insert Chart (e.g., Column Chart) to visualize sales patterns over months.

Summary
Measure Excel Formula Explanation
Mean =AVERAGE(range) Average sales over months
Median =MEDIAN(range) Middle sales value
Mode =MODE.SNGL(range) Most common sales value
Range =MAX(range)-MIN(range) Difference between highest and lowest
Standard Deviation =STDEV.S(range) Variability or spread of sales
Using MS Excel to perform descriptive statistics is easy and effective for summarizing data,
making it ideal for business analysis, reports, and decision-making.

2.1 Running Descriptive Statistics with Example

Descriptive statistics are summary measures that describe and summarize features of a
dataset, such as its center, spread, and frequency. Running descriptive statistics typically
involves calculating measures like mean, median, mode, range, standard deviation, and creating
frequency distributions or visual summaries.

Step-by-Step Example
Scenario
Suppose you have the following dataset representing the marks of 10 students:
{1, 4, 6, 1, 8, 15, 18, 1, 5, 1}

1. Calculate the Mean (Average)

 Definition: The mean is the sum of all values divided by the number of values.

 Calculation:
Sum = 1 + 4 + 6 + 1 + 8 + 15 + 18 + 1 + 5 + 1 = 60
Number of observations = 10
Mean = 60 / 10 = 61

2. Find the Mode

 Definition: The mode is the value that appears most frequently in the dataset.

 Calculation:
The value "1" appears 4 times, more than any other value.
Mode = 1

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3. Calculate the Range

 Definition: The range is the difference between the maximum and minimum values.

 Calculation:
Maximum = 18, Minimum = 1
Range = 18 - 1 = 17

4. Compute the Sample Variance

 Definition: Variance measures how much the data varies from the mean.

 Example with a different dataset:

For data {7, 11, 15, 18, 36, 43}, the sample variance can be calculated as shown in.

5. Frequency Distribution
 Definition: Shows how often each value occurs in the dataset.

 Example:

o 1: 4 times

o 4: 1 time

o 5: 1 time

o 6: 1 time

o 8: 1 time

o 15: 1 time

o 18: 1 time

6. Visual Summary (Optional)

 Histograms or bar charts can be used to visually summarize the distribution of values.

Real-Life Example: Medication Study

A pharmaceutical company tests a new medication on 200 patients:

 Average blood pressure reduction: 15 mmHg (mean)

 Standard deviation: 5 mmHg (spread of responses)

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 Frequency distribution: Histogram shows how many patients experienced each level of
reduction

These descriptive statistics help the company understand the typical response and variability
before making broader inferences.

Summary Table of Descriptive Statistics

Statistic What it Shows Example Value
Mean Average of the data 6
Mode Most frequent value 1
Range Spread between max and min 17
Frequency How often each value appears 1 appears 4x
Standard Deviation Variation from the mean (see example)
2.1 Interpreting Results in Descriptive Statistics
Interpreting results in descriptive statistics means understanding what the calculated numbers
(like mean, median, mode, standard deviation, etc.) actually tell you about your data. This
process helps you summarize, compare, and communicate the key features of your dataset in a
meaningful way.

Key Steps to Interpreting Descriptive Statistics

1. Describe the Sample Size
 The number of data points (sample size) gives context to your results. For example, a
mean calculated from 10 data points may be less reliable than one from 1,000 data
points.
2. Describe the Center of Your Data
 Mean: The average value, showing the typical data point.
 Median: The middle value, useful if your data has outliers.
 Mode: The most frequently occurring value, highlighting common outcomes.

Example:
If the mean score on a test is 75, most students scored around 75.
3. Describe the Spread of Your Data
 Standard Deviation: Shows how much values typically differ from the mean. A small
standard deviation means most values are close to the mean; a large one means more
variability.
 Range: The difference between the highest and lowest values, indicating the overall
spread.

Example:
If the standard deviation of ages in a group is low, most people are about the same age.
4. Assess the Shape and Distribution
 Skewness: Indicates if your data is symmetric or has a longer tail on one side. Negative
skew means a longer left tail; positive skew means a longer right tail.

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 Kurtosis: Shows how peaked or flat the distribution is compared to a normal

distribution5.
 Visual Tools: Use histograms, box plots, or individual value plots to see data distribution
and spot patterns or outliers.

5. Compare Groups or Variables

 Use these statistics to compare different groups. For example, compare the mean
salaries of two departments to see which earns more.
Example Interpretation
Suppose you analyze the ages of 100 employees:
 Mean age: 35 years
 Median age: 34 years
 Mode: 32 years
 Standard deviation: 5 years
 Range: 22–48 years
 Skewness: Slightly positive

Interpretation:
 The average (mean) age is 35, with most employees clustered near this value.
 The small standard deviation (5) indicates that most employees are close in age.
 The range (22–48) shows the youngest and oldest employees.
 Slight positive skewness suggests there are a few older employees pulling the mean
slightly above the median.

Why Interpretation Matters

 Summarizes complex data into understandable insights.
 Highlights patterns, trends, and outliers for better decision-making.
 Provides a foundation for further statistical analysis or business actions.

2.2 Plotting of charts and its inferences.

Plotting charts is a crucial aspect of data visualization, allowing us to represent complex data in
a clear and concise manner. By utilizing various chart types, we can effectively communicate
insights and trends within the data. In this response, we will explore the process of plotting
charts and making inferences, accompanied by examples.

Plotting charts is a fundamental part of data analysis and descriptive statistics. Charts transform
raw numbers into visual stories, making it easier to spot trends, patterns, and outliers, and to
communicate results effectively. The type of chart you choose depends on your data and the
story you want to tell.

Chart Type Best For Example Inference

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Bar Chart Categorical data (counts, frequencies) Which product category sells most units

Pie Chart Proportion of categories within a whole Market share of different brands

Line Graph Data trends over time Sales growth across months

Histogram Distribution of continuous numerical Most common test score range in a class
data

Box Plot Spread and outliers in numerical data Comparing income distributions between two
regions

Scatter Relationship between two numeric Correlation between advertising spend and sales
Plot variables

1. Line Graphs
A line chart graphically displays data that changes continuously over time. Each line graph
consists of points that connect data to show a trend (continuous change). Line graphs have an
x-axis and a y-axis. In the most cases, time is distributed on the horizontal axis.

Uses of line graphs:

 When you want to show trends. For example, how house prices have increased over time.
 When you want to make predictions based on a data history over time.
 When comparing two or more different variables, situations, and information over a given
period of time.

Example:
The following line graph shows annual sales of a particular business company for the period of
six consecutive years:

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Note: the above example is with 1 line. However, one line chart can compare multiple trends by
several distributing lines.

2. Bar Charts
Bar charts represent categorical data with rectangular bars (to understand what is categorical
data see categorical data examples). Bar graphs are among the most popular types of graphs
and charts in economics, statistics, marketing, and visualization in digital customer experience.
They are commonly used to compare several categories of data.
Each rectangular bar has length and height proportional to the values that they represent.

One axis of the bar chart presents the categories being compared. The other axis shows a
measured value.

Bar Charts Uses:

 When you want to display data that are grouped into nominal or ordinal
categories (see nominal vs ordinal data).
 To compare data among different categories.
 Bar charts can also show large data changes over time.
 Bar charts are ideal for visualizing the distribution of data when we have more than three
categories.

Example:
The bar chart below represents the total sum of sales for Product A and Product B over three
years.

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The bars are 2 types: vertical or horizontal. It doesn’t matter which kind you will use. The above
one is a vertical type.

3. Pie Charts
When it comes to statistical types of graphs and charts, the pie chart (or the circle chart) has a
crucial place and meaning. It displays data and statistics in an easy-to-understand ‘pie-slice’
format and illustrates numerical proportion.

Each pie slice is relative to the size of a particular category in a given group as a whole. To say it
in another way, the pie chart brakes down a group into smaller pieces. It shows part-whole
relationships.

To make a pie chart, you need a list of categorical variables and numerical variables.

Pie Chart Uses:

 When you want to create and represent the composition of something.
 It is very useful for displaying nominal or ordinal categories of data.
 To show percentage or proportional data.
 When comparing areas of growth within a business such as profit.
 Pie charts work best for displaying data for 3 to 7 categories.

Example:
The pie chart below represents the proportion of types of transportation used by 1000 students
to go to their school.

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Pie charts are widely used by data-driven marketers for displaying marketing data.

4. Histogram
A histogram shows continuous data in ordered rectangular columns (to understand what is
continuous data see our post discrete vs continuous data). Usually, there are no gaps between
the columns.
The histogram displays a frequency distribution (shape) of a data set. At first glance, histograms
look alike to bar graphs. However, there is a key difference between them. Bar Chart represents
categorical data and histogram represent continuous data.

Histogram Uses:
 When the data is continuous.
 When you want to represent the shape of the data’s distribution.
 When you want to see whether the outputs of two or more processes are different.
 To summarize large data sets graphically.
 To communicate the data distribution quickly to others.

Example:
The histogram below represents per capita income for five age groups.

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Histograms are very widely used in statistics, business, and economics.

5. Scatter plot
The scatter plot is an X-Y diagram that shows a relationship between two variables. It is used to
plot data points on a vertical and a horizontal axis. The purpose is to show how much one
variable affects another.

Usually, when there is a relationship between 2 variables, the first one is called independent.
The second variable is called dependent because its values depend on the first variable.

Scatter plots also help you predict the behavior of one variable (dependent) based on the
measure of the other variable (independent).

Scatter plot uses:

 When trying to find out whether there is a relationship between 2 variables.
 To predict the behavior of dependent variable based on the measure of the independent
variable.
 When having paired numerical data.
 When working with root cause analysis tools to identify the potential for problems.
 When you just want to visualize the correlation between 2 large datasets without regard to
time.

Example:
The below Scatter plot presents data for 7 online stores, their monthly e-commerce sales, and
online advertising costs for the last year.

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The orange line you see in the plot is called “line of best fit” or a “trend line”. This line is used to
help us make predictions that are based on past data.

The Scatter plots are used widely in data science and statistics. They are a great tool for
visualizing linear regression models.
More examples and explanation for scatter plots you can see in our post what does a scatter
plot show and simple linear regression examples.

Summary Table: Chart Types and Inferences

Chart Type What It Shows Typical Inference Example

Bar Chart Frequency/count by category Which category is most/least popular

Pie Chart Proportion of categories Market share distribution

Line Graph Changes over time Growth, decline, seasonality

Histogram Data distribution Most common value range, spread

Box Plot Spread, median, outliers Data symmetry, presence of outliers

Scatter Plot Variable relationships Correlation, clusters, anomalies

Plotting charts is an effective way to visualize data and draw meaningful inferences. In this
example, the line chart of monthly sales data provided insights into trends, monthly changes,
and potential areas for improvement. By analyzing the chart, the sales manager can make
informed decisions to enhance business performance and set realistic goals for future growth.

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