As pointed out earlier, a real life situation is highly complex and it consists of several variables.
Application
Of Factor Analysis:
1. Model Building For New Product Development:
As
pointed out earlier, a real life situation is highly complex and it consists of
several variables. A model for the real life situation can be built by
incorporating as many features of the situation as possible. But then, with a
multitude of features, it is very difficult to build such a highly idealistic
model. A practical way is to identify the important variables and incorporate
them in the model. Factor analysis seeks to identify those variables which are
highly correlated among themselves and find a common factor which can be taken
as a representative of those variables. Based on the factor loading, some of
variables can be merged together to give a common factor and then a model can
be built by incorporating such factors. Identification of the most common
features of a product preferred by the consumers will be helpful in the
development of new products.
2. Model Building For Consumers:
Another application of factor
analysis is to carry out a similar exercise for the respondents instead of the
variables themselves. Using the factor loading, the respondents in a research
survey can be sorted out into various groups in such a way that the respondents
in a group have more or less homogeneous opinions on the topics of the survey.
Thus a model can be constructed on the groups of consumers. The results
emanating from such an exercise will guide the management in evolving
appropriate strategies towards market segmentation.
Tags : Research Methodology - Factor Analysis And Conjoint Analysis
Last 30 days 641 views