Statistical Report: Factor Analysis in Marketing to Understand Consumer Preferences

Introduction

In marketing, understanding consumer preferences is critical for developing effective products and services that meet customer needs. One common approach to analyzing consumer behavior is through factor analysis, a multivariate statistical technique used to identify underlying relationships between variables. This report focuses on applying factor analysis to explore consumer preferences by grouping related variables, such as product features and customer satisfaction factors.

Objectives of the Report

The primary objective of this statistical report is to demonstrate how factor analysis can be used to:

Identify key factors that influence consumer preferences.

Reduce the number of variables related to product features and satisfaction into a smaller set of meaningful factors.

Provide insights that can inform marketing strategies and product development.

Data Overview

For this analysis, we collected survey data from $500$ consumers regarding their preferences for a new smartphone product. The survey includes $12$ variables representing various product features and customer satisfaction factors:

Battery Life

Camera Quality

Screen Resolution

Design Aesthetics

Processing Speed

Storage Capacity

Ease of Use

Customer Support Satisfaction

Brand Reputation

Price

Overall Satisfaction

Recommendation Likelihood

Results:

Table $1$: KMO and Bartlett's Test of Sphericity

Test

Value

Kaiser$-$Meyer$-$Olkin $($KMO$)$

$0\mathrm{.}823$

Bartlett's Test

Chi$-$Square: $756\mathrm{.}45$

Degrees of Freedom $($df$)$

$66$

Significance $($p$-$value$)$

$0\mathrm{.}000$

Table $2$: Eigenvalues and Explained Variance

Factor

Eigenvalue

Percentage of Variance Explained $(\%)$

Cumulative Variance Explained $(\%)$

$1$

$4\mathrm{.}21$

$35\mathrm{.}10$

$35\mathrm{.}10$

$2$

$3\mathrm{.}25$

$27\mathrm{.}10$

$62\mathrm{.}20$

$3$

$1\mathrm{.}92$

$16\mathrm{.}00$

$78\mathrm{.}20$

$$

Table $3$: Factor Loadings After Varimax Rotation

Variables

Product Quality Factor

Customer Experience Factor

Value$-$for$-$Money Factor

Battery Life

$0\mathrm{.}78$

Camera Quality

$0\mathrm{.}85$

Screen Resolution

$0\mathrm{.}82$

Design Aesthetics

$0\mathrm{.}71$

Processing Speed

$0\mathrm{.}76$

Storage Capacity

$0\mathrm{.}68$

Ease of Use

$0\mathrm{.}80$

Customer Support Satisfaction

$0\mathrm{.}83$

Brand Reputation

$0\mathrm{.}78$

Price

$0\mathrm{.}88$

Overall Satisfaction

$0\mathrm{.}82$

Recommendation Likelihood

$0\mathrm{.}79$

$$

$$

Table $4$: Summary of Factors and Related Variables

Factor

Related Variables

Description of Factor

Product Quality

Battery Life, Camera Quality, Screen Resolution, Design Aesthetics, Processing Speed, Storage Capacity

Represents the technical and physical features of the smartphone that contribute to overall product quality.

Customer Experience

Ease of Use, Customer Support Satisfaction, Brand Reputation

Captures aspects of customer interaction with the product and brand, including user$-$friendliness and support services.

Value$-$for$-$Money

Price, Overall Satisfaction, Recommendation Likelihood

Reflects the consumer's perception of the balance between product cost and overall satisfaction, including likelihood to recommend the product.

$$

Question $1$: Write Statistical Report about tables $1,2,3$ and $4?$