8/6/2019 Factor Analysis - Group 4

1/17

FACTOR ANALYSISGroup 4

1

8/6/2019 Factor Analysis - Group 4

2/17

FACTOR ANALYSIS Factor analysis is a statistical method used to describe

variability among observed variables in terms ofa potentially

lowernumber o f unobserved variables called factors.

Its a general name denoting a class of Procedures primarily

used for data reduction and summarization.

Variables are not classified as either dependent or

independent. Instead, the whole set of interdependentrelationships among variables is examined in orderto define

a set ofcommon dimensions called Factors.

2

8/6/2019 Factor Analysis - Group 4

3/17

PURPOSE

To identify underlying dimensionscalled Factors, thatexplain

thecorrelationsamongaset ofvariables.

-- lifestylestatementsmaybe used to measurethe

psychographic profile ofconsumers.

To identifyanew, smallerset of uncorrelated variablesto

replacethe originalset ofcorrelated variables forsubsequent

analysissuchas Regression or Discriminant Analysis.

-- psychographic factorsmaybe used asindependent

variablesto explainthe differencebetweenloyaland

nonloyalcustomers.

3

8/6/2019 Factor Analysis - Group 4

4/17

ASSUMPTIONS Models are usually based on linear relationships

Models assume that the data collected are interval scaled

The data should be amenable for f actor analysis. It should

not be such that a variable is only correlated with itselfand

no correlation exists with any othervariables. This is like an

Identity Matrix. Factor analysis cannot be done on such

data.

4

8/6/2019 Factor Analysis - Group 4

5/17

METHODS

STAGE 1 :

FACTOR EXTRACTION PROCESS

STAGE 2 :

ROTATION OF PRINCIPAL COMPONENTS

5

8/6/2019 Factor Analysis - Group 4

6/17

FACTOR ANALYSIS IN

MARKETING

Thebasicstepsare:

Identifythesalientattributesconsumers useto evaluate products

inthiscategory.

Usequantitativemarketing researchtechniques (suchassurveys)to collect data fromasample of potentialcustomers

concerningtheir ratings ofallthe productattributes.

Inputthe datainto astatistical programand runthe factor

analysis procedure.Thecomputer willyield aset of underlying

attributes (or factors).

Usethese factorsto construct perceptualmapsand other product

positioning devices.

6

8/6/2019 Factor Analysis - Group 4

7/17

ADVANTAGES

It reduces datacomplexityby reducingthenumber of

variables

Factor Analysiscanbe used to identifyhidden dimensions or

constructs whichmaynotbeapparent from directanalysis

Itiseasyand ensures descionmaking

7

8/6/2019 Factor Analysis - Group 4

8/17

DISADVANTAGES

Usefulness depends onthe researchers'abilityto collecta

sufficientset of productattributes.Ifimportantattributesare

missed thevalue ofthe procedureis reduced.

Ifsets of observed variablesarehighlysimilarto each otherand distinct from otheritems, factoranalysis willassigna

single factorto them.Thismaymakeitharderto identify

factorsthatcapturemoreinteresting relationships.

Namingthe factorsmay requirebackground knowledge ortheorybecausemultipleattributescanbehighlycorrelated

forno apparent reason.

8

8/6/2019 Factor Analysis - Group 4

9/17

9

8/6/2019 Factor Analysis - Group 4

10/17

10

8/6/2019 Factor Analysis - Group 4

11/17

11

8/6/2019 Factor Analysis - Group 4

12/17

12

8/6/2019 Factor Analysis - Group 4

13/17

13

8/6/2019 Factor Analysis - Group 4

14/17

14

8/6/2019 Factor Analysis - Group 4

15/17

15

8/6/2019 Factor Analysis - Group 4

16/17

16

8/6/2019 Factor Analysis - Group 4

17/17

THANK YOU

17