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Factor Analysis

  • Factor analysis is a data reduction technique that tries to reduce a list of attributes or other measures to their essence; that is, a smaller set of ‘factors’ that capture the patterns seen in the data. Marketers and researchers who study a product, service, or industry professionally sometimes perceive many more distinctions within their category than do their consumers. This can lead to questionnaires containing attribute lists that consumers see as somewhat or largely synonymous. Factor analysis tells you how many different core factors the consumers perceived out of the list of attributes they rated.
  • The main benefits of factor analysis are that the analyst can focus their attention on the unique core elements instead of the redundant attributes, and as a data ‘pre-processor‘ for regression models.

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