Business Research

•A process of determining, acquiring,

analyzing, synthesizing, and disseminating
relevant business data, information, and
insights to decision makers in ways that
mobilize the organization to take
appropriate business actions that,
in turn, maximize business performance

1-1
Research Should Reduce Risk
The primary
purpose of research
is to reduce the level
of risk of a
marketing decision
What’s Changing in Business
that Influences Research

New
New Research
Research Information Technological
Technological
Perspectives
Perspectives Overload Connectivity
Connectivity

Shifting
Shifting
Computing
Computing Global
Global
Power
Power &
& Speed
Speed Economics
Economics
Factors
Factors
Battle
Battle for
for Critical
Analytical
Analytical Scrutiny of
Talent
Talent Business
Government
Government
Intervention
Intervention
The Marketing Research Industry:
Evolution of the Industry
Charles Coolidge Parlin is known as the “father
of marketing research.”

4
 Marketing Research: A Brief History

• Pre-Marketing Research Era: colonization to the

Industrial Revolution
• Early Development Era: Industrial Revolution to 1920
• Questionnaire Era: 1920-1940
• Quantitative Era: 1940 to 1960
• Organizational Acceptance Era: 1960 to 1980
• PC Technology Era: 1980 to 1990
• Globalization-Online Era: since 1990
Scope of Marketing Research
Marketing research can be used in:
Product Management: One of the major scope of
marketing research is to manage the current products
and new products. In product management Marketing
Research is helpful in
Competitive Intelligence – To understand the
competitive product strategy.
Pre-launch strategy for new products
 Test Marketing – To monitor the performance of the
brand by launching in a select area and then taking it
across the country. In other words it is a small-scale
product launch used to determine the likely acceptance
of the product when it is introduced into a wider
market.
 Concept testing - to test the acceptance of a concept
by target consumers.
Sales analysis: Marketing research is used to study the
sales trend and make suitable strategies when required. It
is used to
Assess market potential
Estimation of demand for a product
Market share estimation
Study seasonal variation for a product
Market segmentation studies
Estimate size of the market
Need analysis to find out where the product fits in
Corporate Research: Marketing Research is used to
analyze the corporate effectiveness. Some examples are:
Assessing the image of the company
Knowledge of the company activities
Advertising Research: Advertising is an arena in which
Marketing Research is extensively used. Some scope are:
Readership feedbacks – Mainly carried out for
newspapers and magazines
Advertising Recall – To assess the recall of television or
other advertising and thereby assess its effectiveness.
Syndicated Research: This is compiled by agencies on a
regular basis and sold to organizations on subscription
basis.
Role of Marketing Research in
Managerial Decision Making
Four Stages of Market Planning Process
Situation analysis
Strategy development
Marketing program development
Implementation
Situation Analysis
Analysis of
Market environment
Market characteristics
Consumer behavior

Research Approaches
Organize information obtained from prior studies
(secondary)
Focus groups
Strategy Development
Market Research Provides Information to Assist
Management With Three Critical Decisions
What business should we be in?
How will we compete?
What are the objectives for the business?
Marketing Program Development

Programs embrace specific tasks

Action program usually focuses on a single objective
in support of one element of overall business
strategy
Implementation
Starts with decision to proceed to a new
program or strategy
Commitment to objectives, budgets and
timetables
Specific measurable objectives must be set for
all elements of marketing program
"Did the elements achieve their objectives?"
“Should the marketing program be continued,
discontinued, revised or expanded?"
P & G Luring Women with their
Feminine Toothpaste
P & G has came out with “Rejuvenating Effects” a
gender specific toothpaste targeting the female
customers, who do 82% of the grocery shopping.
The flavor and package of the product was
decided on the basis of the results from a
customer survey filled out by women.
Though, the product is priced slightly higher
than the other brands P & G hopes to make
women think about the toothpaste in the same
light as skin care lotions and shampoo.
Who thinks they were right to try.
Marketing Research Types

Basic research

Applied research
Basic Research
Attempts to expand the limits
of knowledge
Not directly involved in the
solution to a pragmatic
problem
Basic Research Example
Do consumers experience
cognitive dissonance in low-
involvement situations?
Applied Research
Conducted when a decision must be
made about a specific real-life problem
Applied Research Example
Should McDonalds add Italian pasta
dinners to its menu?
Marketing research told McDonald’s it
should not
Should Procter & Gamble add a high-
priced home teeth bleaching kit to its
product line?
Research showed Crest Whitestrips
would sell well at a retail price of $44
Types of Market Research
By Source By Methodology By Objectives

- Primary - Qualitative - Exploratory

- Secondary - Quantitative - Descriptive
- Causal
(or experimental)
Types of Market Research: By Source

Primary Collection of data specifically for the problem or

project in hand
Secondary Based on data previously collected for purposes
other than the research in hand (e.g. published articles,
government stats, etc)
Primary research
Benefits Drawbacks
•Directly relevant to the •Time consuming
business
•Often expensive
•Up-to-date data obtained
•Results may be misleading
•Competitors do not have if the sample size is too
access to the findings small, questions are unclear
or there is interviewer bias
Secondary research
Benefits Drawbacks
•Often quick and easy to •Data may not be reliable or
collect up-to-date

•A wide range of secondary •May not be totally relevant

data is available, especially
on the internet •May not be in a form that is
easily interpreted and
analysed
 TABLE 4.2
Criteria for Evaluating Secondary Data
_______________________________________________________________
Criteria Issues Remarks
_______________________________________________________________

Specifications/ Data collection method Data should be

Methodology Response rate reliable, valid,
Quality of data and generalizable
Sampling technique to the problem
Sample size at hand.
Questionnaire design
Field work
Data analysis

Error/ Examine errors in: Assess accuracy by

Accuracy Approach, Research design, comparing data
Sampling, Data collection, from different
Data analysis, Reporting sources.

Currency Time lag between collection Census data are

and publication. periodically
Frequency of updates updated by
syndicated firms.
 TABLE 4.2 (Continued)
Criteria for Evaluating Secondary Data
___________________________________________________________________
Criteria Issues Remarks
___________________________________________________________________

Objective Why were the data The objective will

collected? determine the
relevance of data.

Nature Definition of key variables Reconfigure the

Units of measurement data to increase
Categories used their usefulness,
Relationships examined if possible.

Dependability Expertise, credibility, Data should be

reputation and obtained from an
trustworthiness of the original rather
source. than an acquired
source.
__________________________________________________________________
 Types of Market Research: By Methodology

Qualitative Quantitative
Type of Question Probing Simple
Sample Size Small Large
Information per respondent High Low(ish)
Questioner’s skill High Low(ish)
Analyst’s skill High High
Type of analysis Subjective, Objective,
Interpretative Statistical
Ability to replicate Low High
Areas probed Attitudes Choices
Feelings Frequency
Motivations Demographics
Types of Market Research: By Objective
• Exploratory Preliminary data needed to develop an idea
further. Eg outline concepts, gather insights,
formulate hypotheses
• Descriptive Describe an element of an ideas precisely. Eg
who is the target market, how large is it, how will it
develop
• Causal Test a cause and effect relationship, Eg. price
elasticity. Done through experiment
 The Market Research Process
1. Defining the 2. Developing 3. Collecting 4. Analysing 5. Presenting
problem and the research the the the findings
objectives plan information information

Steps
Distinguish between Decide on Information is Statistical Overall conclusions
the research type - budget collected manipulation of to be presented
needed e.g. - data sources according to the data rather than
the plan (It is collected (e.g. overwhelming
- exploratory - research
approaches often done by regression) or statistical
- descriptive subjective
- research external firms) methodologies
- causal instruments analysis of focus
- sampling plan groups
- contact methods

Comments
If a problem is The plan needs This phase is Significant Can take various
vaguely defined, to be decided the most costly difference in forms:
the results can upfront but and the most type of analysis - oral presentation
have little flexible enough liable to error according to - written conclusions
bearing on the to incorporate whether market supported by analysis
key issues changes/ research is
- data tables
iterations quantitative or
qualitative
What is Good Research?
Following the standards of the scientific method
Purpose clearly defined
Research process detailed
Research design thoroughly planned
Limitations frankly revealed
High ethical standards applied
Adequate analysis for decision-maker’s needs
Findings presented unambiguously
Conclusions justified
Researcher’s experience reflected

29
Problems Encountered by Researchers in India
Lack of scientific training in the methodology of
research
There is insufficient interaction between the university
research departments on one side and business
establishments, government departments and research
institutions on the other side
Most of the business units in our country do not have the
confidence
Research studies overlapping one another are
undertaken quite often for want of adequate information
There does not exist a code of conduct for researchers
Many researchers in our country also face the difficulty
of adequate and timely secretarial assistance
Library management and functioning is not satisfactory
There is also the problem that many of our libraries are
not able to get copies of old and new Acts/Rules,
reports and other government publications in time
There is also the difficulty of timely availability of
published data
Problem of conceptualization and also problems
relating to the process of data collection
In 2002, Westjet added service to two new Ontario
destinations, London and Toronto. As Westjet expanded
into Eastern Canada it began to run into competition from
Montreal-based discount carrier Jetsgo, which started in
2002.
In 2003 Jetsgo expanded into Western Canada to compete
directly on flights between Calgary and Toronto and
Montreal. In the first six months of 2004, Westjet’s net
earnings were $8.0 million compared to $15.5 million
during the first six months of 2003. Both Jetsgo and
Westjet modeled themselves on the highly successful US
Carrier Southwest Airlines. Both airlines offered the same
schedules, the same service, and the same fares. With
little to differentiate the two airlines Westjet began to
look at a way to increase passenger loyalty especially on
the longer haul domestic flights.
 Management Decision Problem
How to attract more loyal customers
Marketing Research Problem
Identify the factors that influence loyalty of airline
passengers
Marketing Research Objective
How to differentiate Westjet from the competition.
Exploratory research revealed that the consumer’s choice
of an airline is influenced by safety, ticket price, frequent
flyer program, convenience of scheduling and brand name.
Westjet had to find a way to differentiate itself.
 Solution.

Secondary data, like the J. D. Power and Associates survey on “current

and future trends in the airline food industry” indicated that “food
service is a major contributor to customer loyalty”. This survey also
emphasized the importance of food brands.
The following research questions and hypothesis may be posed
RQ1 How important is food for the airline customers?
H1 Food is an important factor for airline travelers
H2 Travelers value branded food
H3 Travelers prefer larger food portions, but with consistent quality
H4. Travelers prefer exotic food.
 
This kind of research helped Westjet to define their marketing
research problem and approach. Focus groups and surveys were
conducted to check customers perceptions of food in Westjet aircraft.
The results provided support for all the hypothesis.
Westjet Airlines then made a few changes: new “culinary menus” larger
portions of food, new coffee and branded products, eg. Bernard
Callebaut chocolates.. This has resulted in better service increasing
customer satisfaction fostering loyalty
Research Design: Definition

A research design is a framework or

blueprint for conducting the marketing
research project. It details the procedures
necessary for obtaining the information
needed to structure or solve marketing
research problems.
 A Classification of Market Research Designs

Research Design

Exploratory Research
Design Conclusive Research
Design

Descriptive
Causal Research
Research

Cross-Sectional Longitudinal
Design Design
Tasks Involved In a Research Design

Define the Information Needed

Design the Exploratory, Descriptive, and/or Causal

Phases of the Research

Specify the Measurement and Scaling Procedures

Construct a Questionnaire

Specify the Sampling Process and the Sample Size

Develop a Plan of Data Analysis

THE CONCEPT OF MEASUREMENT AND
SCALING

MEASUREMENT CAN BE DEFINED AS A

STANDARDIZED PROCESS OF ASSIGNING
NUMBERS OR OTHER SYMBOLS TO CERTAIN
CHARACTERISTICS OF THE OBJECTS OF
INTEREST
MEASUREMENT PROCESS
CONSISTS OF

CONSTRUCT DEVELOPMENT
SCALE MEASUREMENT
TO UNDERSTAND CONSTRUCT DEVELOPMENT
AND SCALE DEVELOPMENT

WE MUST UNDERSTAND THE TERM OBJECT

WHAT IS AN OBJECT ?
IT REFERS
TO ANY TANGIBLE ITEM IN A PERSON’S
ENVIRONMENT
THAT CAN BE
CLEARLY AND EASILY
IDENTIFIED THROUGH THE SENSES -
 IT HAS TWO PROPERTIES:

OBJECTIVE PROPERTIES
SUBJECTIVE PROPERTIES
OBJECTIVE PROPERTIES
RESEARCHERS DO NOT MEASURE THE OBJECTS
PER SE BUT RATHER THE ELEMENTS THAT
MAKES UP THE OBJECT

OBJECTIVE PROPERTIES ARE USED TO IDENTIFY

AND DISTINGUISH AN OBJECT FROM ANOTHER
SUBJECTIVE PROPERTIES
SUBJECTIVE PROPERTIES ARE ABSTRACT,
INTANGIBLE CHARACTERISTICS
THAT
CAN NOT BE
DIRECTLY OBSERVED OR MEASURED
CONSTRUCT DEVELOPMENT
CAN BE
VIEWED
AS
AN INTEGRATIVE PROCESS IN WHICH
RESEARCHERS FOCUS THEIR EFFORTS ON
IDENTIFYING

THE SUBJECTIVE PROPERTIES FOR WHICH DATA

SHOULD BE COLLECTED FOR SOLVING
THE DEFINED RESEARCH PROBLEM
OBJECTIVE PROPERTIES-
AIR PLANE

 NO. OF ENGINES
 HEIGHTS
 WEIGHT
 LENGTH
 SEATING CAPACITY
 PHYSICAL CHARACTERISTICS OF SEATS

 TYPE OF AIRPLANE
AIR PLANE
SUBJECTIVE PROPERTIES

QUALITY OF IN FLIGHT SERVICE

COMFORT ABILITY OF SEATS

SMOOTHNESS OF TAKE-OFF
AND LANDING ETC.
CONSUMER

OBJECTIVE PROPERTIES :
AGE, SEX,
MARITAL STATUS,
INCOME,
BRAND LAST PURCHASED,
RUPEE AMOUNT OF PURCHASES
TYPES OF PRODUCTS PURCHASED
 COLOR OF EYES AND HAIR
CONSUMER
SUBJECTIVE PROPERTIES

ATTITUDES TOWARDS A PRODUCT

BRAND LOYALTY
HIGH INVOLVEMENT PURCHASES
EMOTIONS (LOVE, FEAR, ANXIETY ETC)
INTELLIGENCE, PERSONALITY, RISK TAKER
SCALE MEASUREMENT
SCALING IS THE PROCESS OF CREATING A
CONTINUUM
ON WHICH
OBJECTS ARE LOCATED
ACCORDING TO THE AMOUNT OF THE
MEASURED CHARACTERISTIC THEY POSSESS
SCALE DEVELOPMENT IS
DESIGNING QUESTIONS
TO MEASURE
THE SUBJECTIVE PROPERTIES
OF
AN OBJECT
NOMINAL SCALE

NOMINAL SCALES ARE DEFINED AS THOSE THAT

USE ONLY LABEL;
THAT IS, THEY POSSESS ONLY THE
CHARACTERISTIC OF DESCRIPTION

THE RESPONSE DOES NOT INCLUDE ANY LEVEL

OF INTENSITY
IF ONE DESCRIBES RESPONDENTS IN A SURVEY
ACCORDING TO THEIR OCCUPATION—
BANKER, DOCTOR, COMPUTER PROGRAMMER
—
ONE HAS USED A NOMINAL SCALE
ORDINAL SCALE
AN ORDINAL SCALE IS OBTAINED BY RANKING
OBJECTS
OR ARRANGING THEM
IN ORDER
WITH REGARD TO SOME
COMMON VARIABLE
ORDINAL- SCALED QUESTIONS
PLEASE RANK EACH BRAND IN TERMS OF YOUR
PREFERENCE
PLEASE PLACE “1”
BY YOUR FIRST CHOICE,
“2”
BY YOUR SECOND CHOICE, AND SO ON
I. SONY
II. VIDEOCON
III. SAMSUNG
IV. LG
V. BPL
VI. PHILLIPS
INTERVAL SCALE
INTERVAL SCALES ARE THOSE IN WHICH THE
DISTANCE
BETWEEN EACH DESCRIPTOR IS KNOWN
IT DEMONSTRATES ABSOLUTE DIFFERENCES
BETWEEN EACH SCALE POINT
 THAT IS:
IF YOU WERE ASKED TO EVALUATE A STORE’S SALES
PEOPLE BY SELECTING A SINGLE DESIGNATION
FROM THE LIST OF

EXTREMELY FRIENDLY
VERY FRIENDLY
SOME WHAT FRIENDLY
SOME WHAT UNFRIENDLY
VERY UNFRIENDLY
EXTREMELY UNFRIENDLY
THE RESEARCHER WOULD PROBABLY ASSUME
THAT EACH DESIGNATION WAS ONE UNIT AWAY
FROM THE PRECEDING ONE

IN THESE CASES WE SAY THAT THE SCALE IS

“ASSUMED INTERVAL”
 INDICATE YOUR DEGREE OF AGREEMENT WITH FOLLOWING
STATEMENTS BY CIRCLING THE APPROPRIATE NUMBER

 STATEMENT STRONGLY STRONGLY

 AGREE DISAGREE
 I ALWAYS LOOK FOR BARGAINS 12 3 4 5
 I ENJOY BEING OUT DOORS 1 2 3 4 5
 I LOVE TO COOK 1 2 3 4 5
RATIO SCALE
RATIO SCALES ARE THE ONES IN WHICH
TRUE ZERO ORIGIN EXISTS—
SUCH AS
-ACTUAL NUMBER OF PURCHASES IN A
CERTAIN TIME PERIOD,
-RUPEES SPENT, MILES TRAVELED ETC.
A RATIO SCALE TENDS TO BE MOST
SOPHISTICATED SCALE
IN THE SENSE THAT IT ALLOWS THE
RESEARCHER
NOT ONLY TO IDENTIFY THE ABSOLUTE
DIFFERENCES BETWEEN EACH SCALE POINT
BUT ALSO TO MAKE
ABSOLUTE COMPARISONS BETWEEN THE
RESPONSES
APPROXIMATELY HOW MANY TIMES IN THE
LAST MONTH HAVE YOU PURCHASED ANY
THING OVER Rs.1000 IN VALUE AT NANZ
STORE?

0 1 2 3 4 5 MORE ( SPECIFY_ )
WHAT IS THE PROBABILITY THAT YOU WILL
USE A LAWYER’S SERVICES WHEN YOU ARE
READY TO MAKE A WILL?

______PERCENT
ASSESSING A RESPONDENT’S LIKING OF SOFTDRINKS WITH
NOMINAL ORDINAL, INTERVAL AND RATIO SCALES
NOMINAL SCALE

WHICH OF THE FOLLOWING SOFT DRINKS ON THE

FOLLOWING LIST DO YOU LIKE? CHECK ALL THAT APPLY

 COKE
 THUMS UP
 MOUNTAIN DEW
 PEPSI
 SEVEN UP
 SPRTIE
ORDINAL SCALE

PLEASE RANK THE SOFT DRINKS ON THE FOLLOWING LIST

ACCORDING TO YOUR DEGREE OF LIKING FOR EACH,
ASSIGNINIG MOST PREFERRED DRINK RANK=1 AND YOUR
LEAST PREFERRED DRINK RANK=6

 COKE
 THUMS UP
 MOUNTAIN DEW
 PEPSI
 SEVEN UP
 SPRTIE
INTERVAL SCALE

PLEASE INDICATE YOUR DEGREE OF LIKING OF EACH OF THE

SOFTDRINKS ON THE FOLLOWING LIST BY CHECKING THE
APPROPRIATE POSITION ON THE SCALE

DISLIKE DISLIKE LIKE LIKE A LOT

A LOT
COKE
THUMS UP
MOUNTAIN DEW
PEPSI
SEVEN UP
SPRTIE
RATIO SCALE

PLEASE DIVIDE 100 POINTS AMONG EACH OF THE FOLLOWING

SOFT DRINKS ACCORDING TO YOUR DEGREE OF LIKING FOR
EACH

 COKE
 THUMS UP
 MOUNTAIN DEW
 PEPSI
 SEVEN UP
 SPRTIE
TYPICAL RESEARCH REPORT STRUCTURE
1. Title Page
2. Abstract
3. Acknowledgements (optional)
4. Contents
 List of Tables
 List of Figures
5. Introduction
6. Literature Review
7. Methodology
8. Results
9. Discussion
10. Conclusions + Recommendations
11. Reference List
12. Appendices
 The t-test
Inferences about Population Means
Background
The t-test is used to test hypotheses about means
when the population variance is unknown (the usual
case). Closely related to z, the unit normal.
Developed by Gossett for the quality control of beer.
Comes in 3 varieties:
Single sample, independent samples, and dependent
samples.
What kind of t is it?
Single sample t – we have only 1 group; want to
test against a hypothetical mean.
Independent samples t – we have 2 means, 2
groups; no relation between groups, e.g., people
randomly assigned to a single group.
Dependent t – we have two means. Either same
people in both groups, or people are related, e.g.,
husband-wife, left hand-right hand, hospital
patient and visitor.
Nonparametric Test of Chi2
Used when too many assumptions are violated in T-
Tests:
Sample size to small to reflect population
Data are not continuous and thus appropriate for
parametric tests based on normal distributions.

Chi2 is another way of showing that some pattern in

data is not created randomly by chance.

Chi2 can be one or two dimensional.

Nonparametric Test of Chi2
Again, the basic question is what you are observing in
some given data created by chance or through some
systematic process?

(O  E ) 2
 
2

E
O  observedfrequency
E  exp ectedfrequecy
Nonparametric Test of Chi2
The null hypothesis we are testing here is that the
proportion of occurrences in each category are
equal to each other. Our research hypothesis is
that they are not equal.

Given the sample size, how many cases could we expect

in each category (n/#categories)? The
obtained/critical value estimation will provide a
coefficient and a Pr. that the results are random.
Cross-Tabs and Chi2
One often encounters chi2 with cross-tabulations,
which are usually used descriptively but can be used to
test hypotheses.
 Party Affiliation * gender (past, present) Crosstabulation

Count
gender (past, present)
Fem Male Total
Party Affiliation Dem 5 6 11
GOP 5 8 13
Total 10 14 24

Chi-Square Tests

Asymp. Sig. Exact Sig. Exact Sig.

Value df (2-sided) (2-sided) (1-sided)
Pearson Chi-Square .120b 1 .729
Continuity Correctiona .000 1 1.000
Likelihood Ratio .120 1 .729
Fisher's Exact Test 1.000 .527
Linear-by-Linear
.115 1 .735
Association
N of Valid Cases 24
a. Computed only for a 2x2 table
b. 1 cells (25.0%) have expected count less than 5. The minimum expected count is
4.58.
One-Way ANOVA
One-Way Analysis of Variance
One-Way ANOVA
The one-way analysis of variance is used to test the
claim that three or more population means are equal
This is an extension of the two independent samples
t-test
One-Way ANOVA
The response variable is the variable you’re
comparing
The factor variable is the categorical variable being
used to define the groups
We will assume k samples (groups)
The one-way is because each value is classified in
exactly one way
Examples include comparisons by gender, race,
political party, color, etc.
One-Way ANOVA
Conditions or Assumptions
The data are randomly sampled
The variances of each sample are assumed equal
The residuals are normally distributed
One-Way ANOVA
The null hypothesis is that the means are all
equal
H :       
0 1 2 3 k

The alternative hypothesis is that at least one

of the means is different
Think about the Sesame Street® game where three
of these things are kind of the same, but one of
these things is not like the other. They don’t all
have to be different, just one of them.
One-Way ANOVA
The statistics classroom is divided into three rows:
front, middle, and back
The instructor noticed that the further the students
were from him, the more likely they were to miss
class or use an instant messenger during class
He wanted to see if the students further away did
worse on the exams
One-Way ANOVA
The ANOVA doesn’t test that one mean is less
than another, only whether they’re all equal or at
least one is different.

H :   
0 F M B
One-Way ANOVA
A random sample of the students in each row was
taken
The score for those students on the second exam
was recorded
Front: 82, 83, 97, 93, 55, 67, 53
Middle: 83, 78, 68, 61, 77, 54, 69, 51, 63
Back: 38, 59, 55, 66, 45, 52, 52, 61
One-Way ANOVA
The summary statistics for the grades of each row
are shown in the table below

Row Front Middle Back

Sample size 7 9 8
Mean 75.71 67.11 53.50
St. Dev 17.63 10.95 8.96
Variance 310.90 119.86 80.29
Factor Analysis
Factor analysis is a class of procedures used for data
reduction and summarization.
It is an interdependence technique: no distinction
between dependent and independent variables.

Factor analysis is used:

To identify underlying dimensions, or factors, that explain
the correlations among a set of variables.
To identify a new, smaller, set of uncorrelated variables to
replace the original set of correlated variables.
Factor Analysis Model
The first set of weights (factor score coefficients)
are chosen so that the first factor explains the
largest portion of the total variance.

Then a second set of weights can be selected, so

that the second factor explains most of the residual
variance, subject to being uncorrelated with the
first factor.

This same principle applies for selecting

additional weights for the additional factors.
Statistics Associated with Factor Analysis
Communality. Amount of variance a variable shares
with all the other variables. This is the proportion of
variance explained by the common factors.
Eigenvalue. Represents the total variance explained
by each factor.
Factor loadings. Correlations between the variables
and the factors.
Factor matrix. A factor matrix contains the factor
loadings of all the variables on all the factors