Factor Analysis
Factor analysis is a method for investigating whether a number of variables of interest Y1, Y2, : : :, Yl, are linearly related to a smaller number of unobservable factors F1, F2, : : :, Fk .
According to Mark Lummas 2012, a factor analysis is mainly used for interpretation of data and in analyzing the underlying relationships between variable and other underlying factors that may determine consumer behavior. Instead of grouping responses and response types, factor analysis segregates the variable and groups these according to their co relevance.
Types of Factor analysis
There are mainly three types of factor analysis that are used for different kinds of market research and analysis.
• Exploratory factor analysis
Exploratory factor analysis is used to measure the underlying factors that affect the variables in a data structure without setting any predefined structure to the outcome.
• Confirmatory factor analysis
Confirmatory factor analysis is used as tool in market research and analysis to reconfirm the effects and correlation of an existing set of predetermined factors and variables that affect these factors. Structural equation modeling hypothesizes a relationship between a set of variables and factors and tests these casual relationships on the linear equation model.
• Structural equation modeling
Structural equation modeling can be used for exploratory and confirmatory modeling alike, and hence it can be used for confirming results as well as testing hypotheses.
Uses of factor analysis in market research and analysis
Factor analysis has proved to be very beneficial in psychological research and analysis of variables that determine clientele behavior:
It helps to make sense of large data with interlinked relationships
It may point out relationships that may not have been obvious
It can point out to the underlying relationships with respect to consumer tastes, preferences, etc.
It is easier to condense and correlate data through factor analysis and also to draw conclusions from the data gathered in psychlogical research and analysis.
It can be used to form empirical clusters of variables and underlying factors that affect them
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