Discriminant Analysis, Discriminant Analysis, Factor Analysis, Cluster Factor Analysis, Cluster

Analysis, Multidimensional Analysis, Multidimensional scaling and Conjoint scaling and Conjoint

analysisanalysis

Discriminant AnalysisDiscriminant Analysis

A technique for analyzing A technique for analyzing marketing research data when marketing research data when the criterion/dependent variable the criterion/dependent variable is categorical and the is categorical and the predictor/independent variable predictor/independent variable are interval in natureare interval in nature

Objectives of discriminant Objectives of discriminant analysisanalysis1.1. Development of discriminant functions Development of discriminant functions

(linear combinations of the predictor (linear combinations of the predictor which will best discriminate between the which will best discriminate between the categories of the criterion)categories of the criterion)

2.2. Examination whether significant Examination whether significant differences exist among the groupdifferences exist among the group

3.3. Determination of which predictor Determination of which predictor variables contribute to most of the variables contribute to most of the intergroup differencesintergroup differences

4.4. Classification of cases to one of the Classification of cases to one of the groups based on the values of the groups based on the values of the predictor variablespredictor variables

5.5. Evaluation of the accuracy of Evaluation of the accuracy of classificationclassification

Similarities and Differences Similarities and Differences among ANOVA, Regression and among ANOVA, Regression and Discriminant AnalysisDiscriminant Analysis Similarities:Similarities:

Number of dependent variables - 1Number of dependent variables - 1 Number of independent variables - Number of independent variables -

MultipleMultiple DifferencesDifferences

Nature of dependent variable: Nature of dependent variable: Metric, Metric, CategoricalMetric, Metric, Categorical

Nature of independent variable: Nature of independent variable: categorical, metric, metriccategorical, metric, metric

Steps involved in Discriminant Steps involved in Discriminant AnalysisAnalysis

1.1. Formulate the problemFormulate the problem

2.2. Estimate the discriminate Estimate the discriminate function coefficientfunction coefficient

3.3. Determine the significance of Determine the significance of the discrimination functionthe discrimination function

4.4. Interpret the resultsInterpret the results

5.5. Assess the validity of Assess the validity of discriminant analysisdiscriminant analysis

Marketing Research ApplicationsMarketing Research Applications

In term of demographic characteristics, how In term of demographic characteristics, how do customers who exhibit store loyalty differ do customers who exhibit store loyalty differ from those who do notfrom those who do not

Do heavy, medium and light users of soft Do heavy, medium and light users of soft drink differ in terms of their consumption of drink differ in terms of their consumption of frozen foodfrozen food

What psychographic characteristics help What psychographic characteristics help differentiate between price-sensitive and differentiate between price-sensitive and non-price sensitive buyers of groceriesnon-price sensitive buyers of groceries

Does the various market segment differ in Does the various market segment differ in their media consumption habitstheir media consumption habits

In terms of lifestyles, what are the differences In terms of lifestyles, what are the differences between heavy patrons of general stores and between heavy patrons of general stores and Mall storesMall stores

Factor analysisFactor analysis

A class of procedures primarily used for data A class of procedures primarily used for data reduction and summarizationreduction and summarization

It is use in the following circumstancesIt is use in the following circumstances1.1. To identify underlying dimensions/factors To identify underlying dimensions/factors

that explain correlations among a set of that explain correlations among a set of variablesvariables

2.2. To identify a new, smaller set of To identify a new, smaller set of uncorrelated variables to replace the uncorrelated variables to replace the original set of correlated variables in original set of correlated variables in subsequent multivariate analysissubsequent multivariate analysis

3.3. To identify a smaller set of salient To identify a smaller set of salient variables from a larger set for use in variables from a larger set for use in subsequent multivariate analysissubsequent multivariate analysis

Steps involved in factor Steps involved in factor analysisanalysis

1.1. Formulate the problemFormulate the problem

2.2. Construct the correlation matrixConstruct the correlation matrix

3.3. Determine the method of factor Determine the method of factor analysisanalysis

4.4. Determine the number of factorsDetermine the number of factors

5.5. Rotate the factorsRotate the factors

6.6. Interpret the factorsInterpret the factors1.1. Calculate the factor scoresCalculate the factor scores

2.2. Select the surrogate variablesSelect the surrogate variables

7.7. Determine the model fitDetermine the model fit

Marketing Research Marketing Research ApplicationApplication Identifying the underlying variables on which to group Identifying the underlying variables on which to group

the customers ( new car buyers may be grouped the customers ( new car buyers may be grouped based on the relative emphasis they place on based on the relative emphasis they place on economy, convenience, performance, comfort and economy, convenience, performance, comfort and luxury.)luxury.)

Determining the brand attributes that influence Determining the brand attributes that influence consumer choice. (toothpaste brands might be consumer choice. (toothpaste brands might be evaluated in terms of protection against cavities, evaluated in terms of protection against cavities, whiteness of teeth, taste, fresh breath and price)whiteness of teeth, taste, fresh breath and price)

Understand the media consumption habits of the target Understand the media consumption habits of the target market. The users of ready to eat food may be heavy market. The users of ready to eat food may be heavy viewers of cable TV, see a lot more movies, and listen viewers of cable TV, see a lot more movies, and listen to western musicto western music

Identifying the characteristics of price-sensitive Identifying the characteristics of price-sensitive consumers (these consumers might be methodical, consumers (these consumers might be methodical, economy minded and home centered)economy minded and home centered)

Cluster AnalysisCluster Analysis

A class of techniques used to classify A class of techniques used to classify objects/cases into relatively homogeneous objects/cases into relatively homogeneous groups called clusters. groups called clusters.

Objects in each cluster tend to be similar to Objects in each cluster tend to be similar to each other and dissimilar to other clustereach other and dissimilar to other cluster

A.k.a. classification analysis/numerical A.k.a. classification analysis/numerical taxonomytaxonomy

Both cluster analysis and discriminant Both cluster analysis and discriminant analysis is used for classification but in analysis is used for classification but in cluster analysis there is no a priori cluster analysis there is no a priori information about the group/cluster information about the group/cluster membershipmembership

Steps involved in cluster Steps involved in cluster analysisanalysis

Formulate the problemFormulate the problem Select a distance measureSelect a distance measure Select a clustering procedureSelect a clustering procedure Decide on the number of clusterDecide on the number of cluster Interpret and profile clusterInterpret and profile cluster Assess the validity of clusteringAssess the validity of clustering

Marketing Research Marketing Research ApplicationApplication

Segmenting the marketSegmenting the market Understanding buyer behaviourUnderstanding buyer behaviour Identifying new product Identifying new product

opportunitiesopportunities Selecting test marketsSelecting test markets Reducing dataReducing data

Multidimensional scalingMultidimensional scaling

A class of procedures for representing A class of procedures for representing perceptions and preferences of perceptions and preferences of respondents spatially by means of a respondents spatially by means of a visual display.visual display.

MDS has been used in marketing to MDS has been used in marketing to identify:identify:

1.1. The number and nature of dimensions The number and nature of dimensions consumer use to perceive different consumer use to perceive different brands in the market placebrands in the market place

2.2. The positioning of current brands on The positioning of current brands on these dimensionsthese dimensions

3.3. The positioning of consumers’ ideal The positioning of consumers’ ideal brand on these dimensionsbrand on these dimensions

Steps in MDSSteps in MDS

Formulate the problemFormulate the problem Obtain input dataObtain input data Select an MDS procedureSelect an MDS procedure Decide on the number of Decide on the number of

dimensionsdimensions Label the dimensions and Label the dimensions and

interpret the configurationsinterpret the configurations Assess reliability and validityAssess reliability and validity

Marketing Research Marketing Research ApplicationApplication

1.1. Image measurementImage measurement2.2. Market segmentationMarket segmentation3.3. New product developmentNew product development4.4. Assessing advertising Assessing advertising

effectivenesseffectiveness5.5. Pricing analysisPricing analysis6.6. Channel decisionsChannel decisions7.7. Attitude scale constructionAttitude scale construction

Conjoint AnalysisConjoint Analysis

A technique that attempts to A technique that attempts to determine the relative importance determine the relative importance consumers attach to salient consumers attach to salient attributes and the utilities they attach attributes and the utilities they attach to the levels of attributesto the levels of attributes

It seeks to develop the It seeks to develop the part-worth/utility functions describing part-worth/utility functions describing the utility consumers attach to the the utility consumers attach to the levels of each attribute. levels of each attribute.

It is complementary to MDSIt is complementary to MDS

Steps involved in Conjoint Steps involved in Conjoint AnalysisAnalysis

Formulate the problemFormulate the problem Construct the stimuliConstruct the stimuli Decide on the form of input dataDecide on the form of input data Select a conjoint analysis Select a conjoint analysis

procedureprocedure Interpret the resultsInterpret the results Assess reliability and validityAssess reliability and validity

Market Research ApplicationMarket Research Application

Determining the relative importance Determining the relative importance of attributes in the consumer choice of attributes in the consumer choice processprocess

Estimate market share of brands that Estimate market share of brands that differ in attribute levelsdiffer in attribute levels

Determining the composition of most Determining the composition of most preferred brandpreferred brand

Segmenting the market based on Segmenting the market based on similarity of preferences for attribute similarity of preferences for attribute levelslevels