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MR Unit 3

The document discusses various statistical analysis methods used in market research, including conjoint analysis, factor analysis, cluster analysis, and discriminant analysis. Conjoint analysis helps firms understand customer preferences for product features, while factor analysis condenses data into fewer variables. Cluster analysis groups observations based on shared characteristics, and discriminant analysis classifies data into categories based on predictor variables.

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Chandrakant Thorat
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7 views16 pages

MR Unit 3

The document discusses various statistical analysis methods used in market research, including conjoint analysis, factor analysis, cluster analysis, and discriminant analysis. Conjoint analysis helps firms understand customer preferences for product features, while factor analysis condenses data into fewer variables. Cluster analysis groups observations based on shared characteristics, and discriminant analysis classifies data into categories based on predictor variables.

Uploaded by

Chandrakant Thorat
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Unit 3 MR

CONJOINT ANALYSIS
• Conjoint analysis is a form of statistical analysis that firms use in
market research to understand how customers value different
components or features of their products or services. It’s based on
the principle that any product can be broken down into a set of
attributes that ultimately impact users’ perceived value of an item or
service.
• Conjoint analysis is typically conducted via a specialized survey that
asks consumers to rank the importance of the specific features in
question. Analyzing the results allows the firm to then assign a value
to each one.
Uses
• Conjoint Analysis in Pricing
• Conjoint analysis works by asking users to directly compare different
features to determine how they value each one. When a company
understands how its customers value its products or services’
features, it can use the information to develop its pricing strategy.
• E.g. If a software company determines through conjoint analysis that
its users highly value one feature above the others, it might choose to
place that feature behind a paywall.
• conjoint analysis is a method of learning what features a customer is
willing to pay for and whether they’d be willing to pay more.
• Conjoint Analysis in Sales & Marketing
• When a company knows which features its customers value most, it
can lean into them in its advertisements, marketing copy, and
promotions.
• A company may find that its customers aren’t uniform in assigning
value to different features. In such a case, conjoint analysis can be a
powerful means of segmenting customers based on their interests
and how they value features—allowing for more targeted
communication.
• Conjoint Analysis in Research & Development
• The insights gleaned can help determine which new features are
added to its products or services, along with whether there’s enough
market demand for an entirely new product.
• For example, consider a smartphone manufacturer that conducts a
conjoint analysis and discovers its customers value larger screens over
all other features. With this information, the company might logically
conclude that the best use of its product development budget and
resources would be to develop larger screens.
Factor Analysis
• Factor analysis is a way to condense the data in many variables into a
just a few variables. For this reason, it is also sometimes called
“dimension reduction.” You can reduce the “dimensions” of your data
into one or more “super-variables.”
• You ask several questions all driving at different, but closely related,
aspects of customer satisfaction:
• How satisfied are you with our product?
• Would you recommend our product to a friend or family member?
• How likely are you to purchase our product in the future
Types of factor analysis

• Principal component analysis


• Exploratory factor analysis
• Confirmatory factor analysis
Principal component analysis
• Factor analysis assumes the existence of latent factors within the
dataset, and then works backward from there to identify the factors.
• In contrast, principal component analysis (also known as PCA) uses
the variables within a dataset to create a composite of the other
variables.
• With PCA, you're starting with the variables and then creating a
weighted average called a “component,” similar to a factor.
Exploratory factor analysis
• In exploratory factor analysis, you're forming a hypothesis about
potential relationships between your variables.
• You might be using this approach if you're not sure what to expect in
the way of factors.
• Exploratory factor analysis ultimately helps understand how many
factors are present in the data and what the skeleton of the factors
might look like.
• The process involves a manual review of factor loadings values for
each data input, which are outputs to assess the suitability of the
factors.
Confirmatory factor analysis
• Now that you have a hypothesis from exploratory factor analysis,
confirmatory factor analysis is going to test that hypothesis of
potential relationships in your variables.
• This process is essentially fine-tuning your factors so that you land at
a spot where the factors make sense with respect to your objectives.
• The sought outcome of confirmatory factor analysis is to achieve
statistically sound and digestible factors for yourself or a client.
Cluster Analysis
• Cluster analysis is a form of exploratory data analysis in which
observations are divided into groups that share common
characteristics. Those groups are compared and contrasted with other
groups to derive information about the observations.
• The type of data that is best suited for k-means clustering is numerical
data, specifically continuous data
Clustering Methods
• Partitioning algorithms
• A typical algorithmic strategy is partitioning, which involves breaking a big
issue into smaller subproblems that may be solved individually and then
combining their solutions to solve the original problem.
• Hierarchy algorithms
• Hierarchical clustering algorithms enables data exploration at various
granularity levels [1]. One is the divisive method where the top-down strategy
is followed, and another is an agglomerative method where the bottom-up
approach is followed. The process agglomerative technique follows clusters
which are formed from identical items by properly combining them
repeatedly into bigger clusters to establish the hierarchy’s various levels.
• Density-based algorithms
• The density-based clustering algorithm identifies places where points are
clustered and where they are separated by vacant or sparse regions. Points
not belonging to a cluster are designated as noise. Points’ timestamps may be
utilized as a secondary criterion for discovering clusters of data in both space
and time.
• Grid-based algorithms
• In these algorithms, the data space is partitioned into a finite number of cells
to form a grid structure. Clusters correspond to regions that are the
connected cells with more density. As most grid-based clustering algorithms
rely on calculations of cell density, these algorithms may be considered
density-based.
Single linkage rule
• In the beginning of the agglomerative clustering process, each element is in
a cluster of its own. The clusters are then sequentially combined into larger
clusters, until all elements end up being in the same cluster. At each step,
the two clusters separated by the shortest distance are combined. The
function used to determine the distance between two clusters, known as
the linkage function, is what differentiates the agglomerative clustering
methods.
• In single-linkage clustering, the distance between two clusters is
determined by a single pair of elements: those two elements (one in each
cluster) that are closest to each other. The shortest of these pairwise
distances that remain at any step causes the two clusters whose elements
are involved to be merged.
Discriminant Analysis
• Discriminant function analysis is the statistical analysis used to analyze data
when the dependent variable or outcome is categorical and independent
variable or predictor variable is parametric. It is a parametric technique to
determine which weightings of quantitative variables or predictors best
discriminates between two or more than two categories of dependent
variables and does so better than chance. Discriminant analysis is used to
find out the accuracy of a given classification system in predicting the
sample into a particular group. Discriminant analysis includes the
development of discriminant functions for each sample and deriving a
cutoff score that is used for classifying the samples into different groups.
Discriminant function analysis is a statistical analysis used to find out the
accuracy of a given classification system or predictor variables.

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