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Factor Analysis. Factor Analysis. A data reduction technique designed to represent a wide range of attributes on a smaller number of dimensions. Factor Analysis.

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factor analysis2
Factor Analysis
  • A data reduction technique designed to represent a wide range of attributes on a smaller number of dimensions.
factor analysis3
Factor Analysis
  • For example, suppose that a bank asked a large number of questions about a given branch. Consider how the following characteristics might be more parsimoniously represented by just a few constructs (factors).
factor analysis5
Factor Analysis

- Benefits include: (1) a more concise representation of the marketing situation and hence communication may be enhanced; (2) fewer questions may be required on future surveys; and, (3) perceptual maps become feasible.

- Ideally, interval data (e.g., a rating on a 7 point scale), regarding the perceptions of consumers are required regarding a number of features, such as those noted above for the bank are gathered.

slide10

Cumulative percent of variance explained.

We are looking for an eigenvalue above 1.0.

slide14

Expensive

Exciting

Luxury

Distinctive

Not Conservative

Not Family

Not Basic

Appeals to Others

Attractive Looking

Trend Setting

Reliable

Latest Features

Trust

slide15

Expensive

Exciting

Luxury

Distinctive

Not Conservative

Not Family

Not Basic

Appeals to Others

Attractive Looking

Trend Setting

Reliable

Latest Features

Trust

What shall these components be called?

slide16

Expensive

Exciting

Luxury

Distinctive

Not Conservative

Not Family

Not Basic

Appeals to Others

Attractive Looking

Trend Setting

Reliable

Latest Features

Trust

TRENDY

EXCLUSIVE

RELIABLE

slide17

Calculate Component Scores

EXCLUSIVE

= (Expensive + Exciting + Luxury + Distinctive – Conservative – Family – Basic)/7

TRENDY

= (Appeals to Others + Attractive Looking + Trend Setting)/3

RELIABLE

= (Reliable + Latest Features + Trust)/3

cluster analysis24
Cluster Analysis
  • A mechanism for grouping objects, frequently used for segmentation.
slide26

Vacation Anyone?

Relaxation

Distant Vacation

Adventure

Historical

Local Vacation

No Vacation

cluster analysis27
Cluster Analysis
  • It would be possible to run factor analysis and then examine clusters after this.
  • Two fundamental types of clustering exist: (1) hierarchical; and, (2) k-means.