Flashcards in Round 2 Lecture 5 Deck (14)

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1

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Why Segment the Market?

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-A basic belief in Marketing is to deliver the right products, to the right people, in the right way

-If that is done successfully, one will be able to attract a greater price premium and one will be able to retain customers better.

2

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Major Segmentation Variables

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Demographics

Geographic

Purchasing Approaches

Personal Characteristics (psychographics)

3

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survey

### Measure consumer attitudes (needs, preferences)

4

## factor analysis

### Find latent psychological drivers

5

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Use cluster analysis to identify prototypical customer profiles (segments)

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In some cases, product offering can be optimized for each cluster

Communications can be designed to appeal to particular clusters

6

## factor analyisis

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-Develop factors, also called “super-variables”, “meta- attributes” or “general constructs” that describe consumer attitudes, beliefs. Etc.

- Reduce redundancies in survey items

- Create uncorrelated “super variables” for regression,

clustering, etc.

7

## The objective of the factor analysis is to

### represent each of the original variables (X) as a linear combination of a smaller set of factors (F)

8

## Goal of factor analysis

### To reduce the number of variables and identify underlying constructs (i.e., factors) that can be managed and are actionable

9

## Input of factor analysis

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The responses to your survey questions for each respondent

10

## Output of factor analysis

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(1) The factor loadings and variance-explained percentages,

(2) a set of independent factors scores (the “new Xs”)

11

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Steps for Factor Analysis

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1. Decide on the number of factors

2. Derive the factor solution

3. Interpret each of the factors

4. Evaluate the quality of the fit

5. Save the factor scores for use in subsequent analyses

12

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Rotation is

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a transformation of the initial solution into a new solution which is easier to interpret

• Orthogonal rotation (varimax, quartimax, minimax)

• Oblique rotation

13

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The % of variance explained by your K factor solution

### gives you an indication of the quality of the overall fit.

14