Saga of Factor Analysis in Marketing

Saga of F(Find) A (Analyze) C (Correlate) T (Tabulate) O (OLAP) R (Rotate) Analysis Continues….

In marketing factor analysis helps in studying the effect of changing one marketing variable and its outcome. Eg the change in sales also affect the bottom line of the company , so factor analysis in marketing helps companies determine which marketing efforts it should pursue , which efforts need work and which marketing efforts may meet the cutting room floor. 

Significance of Factor Analysis: 

It is used to get small set of variables (preferably uncorrelated ) from a large set of variables  ( most of which are correlated to each other ). It also helps to create indexes with variables that measure similar things (conceptually). Identify salient features attributes consumers use to evaluate products in this category, use factors to construct perceptual maps and other product positioning devices.

Principal Component analysis:

PCA is a mathematical procedure that uses an orthogonal transformational to convert a set of observations of possibly correlated variables into a set of values of uncorrelated variables called principal components. Mainly it is used for image compression without loss of any information. 

Steps in factor analysis

Problem Formulation, Construct correlation matrix, Select method of factor analysis , determine the number of factors, rotate the factors, interpret the factors, calculate factor scores and determine the model fit.

The appropriateness of using factor analysis can be checked by looking at the correlation matrix of using Bartlett’s test of sphericity,

Source: http://anthony.liekens.net/index.php/Computers/DataMining

Group : Marketing 5

Author : Apoorva Bhalerao

Roll No : 13009