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Marketing Research 10th Edition

Chapter Twenty-one Factor and Cluster Analysis http://www.drvkumar.com/mr10/ Marketing Research 10th Edition .

Factor Analysis  Combines questions or variables to create new factors  Combines objects to create new groups Uses in Data Analysis http://www.drvkumar.com/mr10/  To identify underlying constructs in the data from the groupings of variables that emerge  To reduce the number of variables to a more manageable set Marketing Research 10th Edition .

drvkumar.) Methodology  Principal Component Analysis   Common Factor Analysis  http://www.Factor Analysis (Contd.com/mr10/ Summarizes information in a larger set of variables to a smaller set of factors Uncovers underlying dimensions surrounding the original variables Marketing Research 10th Edition .

Factor Analysis .drvkumar.com/mr10/ Marketing Research 10th Edition .Example http://www.

.. it is expressed as X1 = I11F1 + I12F2 + e1 X2 = I21F1 + I22F2 + e2 ..en are error variances http://www...Principal Component Analysis • Since the objective of factor analysis is to represent each of the variables as a linear combination of a smaller set of factors. Where Xn = in1 f1 + in2f2 + X1.com/mr10/ Marketing Research 10th Edition .. . In1.F2 are the two standardized factor I11...In2 are factor loadings e1. . Xn represent standardized scores enscores F1.drvkumar..

. . . .com/mr10/ Govt(y2) Train(x5) Size(x1) 4 1 44 1 2000 5.0 6 116 5 http://www. . .drvkumar. .5 6 2 3 4 1 46 1 1000 6. . . .Illustration Respid Will(y1) Exp(x6) Rev(x2) Years(x3) Prod(x4) 1 4 5 1 49 1 1000 5.5 4 3 5 4 1 54 1 1000 6.5 9 . . . .0 3 118 3 4 1 54 1 1000 7. 115 4 3 1 45 1 2000 6.0 5 5 4 3 1 50 1 2000 6. . .8 11 117 3 4 1 46 0 1000 7. .5 7 Marketing Research 10th Edition . .0 7 4 2 3 1 31 0 3000 6. . . . .5 7 6 5 4 1 69 1 1000 5. . .0 4 119 4 3 1 49 1 1000 6.5 7 120 4 5 1 54 1 4000 6. .Export Data Set . . .

Description of Variables Variable Description http://www.drvkumar.com/mr10/ Corresponding Name in Output Scale Values Willingness to Export (Y1) Will 1(definitely not interested) to 5 (definitely interested) Level of Interest in Seeking Govt Assistance (Y2) Govt 1(definitely not interested) to 5 (definitely interested) Employee Size (X1) Size Greater than Zero Firm Revenue (X2) Rev In millions of dollars Years of Operation in the Domestic Market (X3) Years Actual number of years Number of Products Currently Produced by the Firm (X4) Prod Actual number Training of Employees (X5) Train 0 (no formal program) or 1 (existence of a formal program) Management Experience in International Operation (X6) Exp 0 (no experience) or 1 (presence of experience) Marketing Research 10th Edition .

0 are retained Marketing Research 10th Edition .Factors Factor ▫ A variable or construct that is not directly observable but needs to be inferred from the input variables ▫ All included factors (prior to rotation) must explain at least as much variance as an “average variable” Eigenvalue Criteria http://www.com/mr10/ ▫ Represents the amount of variance in the original variables that is associated with a factor ▫ Sum of the square of the factor loadings of each variable on a factor represents the eigenvalue ▫ Only factors with eigenvalues greater than 1.drvkumar.

How Many Factors . in order of extraction.Criteria Scree Plot Criteria http://www.drvkumar.  The shape of the plot determines the number of factors Marketing Research 10th Edition .com/mr10/  A plot of the eigenvalues against the number of factors.

com/mr10/ Marketing Research 10th Edition . and only those factors that are statistically significant are retained http://www.How Many Factors: Criteria (Contd.) Percentage of Variance Criteria ▫ The number of factors extracted is determined so that the cumulative percentage of variance extracted by the factors reaches a satisfactory level Significance Test Criteria ▫ Statistical significance of the separate eigenvalues is determined.drvkumar.

drvkumar.com/mr10/ The amount of the variable variance that is explained by the factor Marketing Research 10th Edition .Common Terms Factor Scores ▫ Values of each factor underlying the variables Factor Loadings ▫ Correlations between the factors and the original variables Communality ▫ http://www.

Factor Rotations  Solutions generated by factor analysis for a data set.drvkumar. http://www.com/mr10/ Marketing Research 10th Edition .

such that the orthogonality is not preserved anymore. or very low (close to zero). to make interpretation of the resulting factors easier.Factor Rotations (Contd.  The first rotated factor will no longer necessarily account for the maximum variance and the amount of variance each factor accounts for has to be recalculated. while the total variance explained by the rotated factors still remains the same.)   Varimax (orthogonal) rotation  Each factor tends to load high (1 or 1) on a smaller number of variables and low. Promax (oblique) rotation  http://www.  The variance explained by each unrotated factor is simply rearranged by the rotation.com/mr10/ The factors are rotated for better interpretation. on other variables.drvkumar. Marketing Research 10th Edition .

Extraction using Principal Component Method Unrotated Factor Loadings http://www.com/mr10/ Factor Score Coefficient Marketing Research 10th Edition .drvkumar.

com/mr10/ Marketing Research 10th Edition .Extraction using Principal Component Method Factor Rotation Not significantly different from unrotated values http://www.drvkumar.

drvkumar.com/mr10/ ▫ The factor extraction procedure is similar to that of principal component analysis except for the input correlation matrix ▫ Communalities or shared variance is inserted in the diagonal instead of unities in the original variable correlation matrix ▫ The total amount of variance that can be explained by all the factors in common factor analysis is the sum of the diagonal elements in the correlation matrix ▫ The output of common factor analysis depends on the amount of shared variance Marketing Research 10th Edition .Common Factor Analysis http://www.

com/mr10/ Marketing Research 10th Edition .Common Factor Analysis – Results (Contd.drvkumar.) http://www.