Statistical Tools and their Usage - Factor Analysis
Factor Analysis is a data reduction technique. Given a large number of attributes, factor analysis identifies a few underlying dimensions by grouping the attributes based on the correlation between the attributes. For example, price of a product, the cost after sales service, and maintenance expense can be identified as a part of single dimension: Total Cost
Diagrammatic Representation
Attributes such as Insomnia, Nausea and Suicidal Tendency can be collectively described by a single term: Depression. Here three variables/attributes have been represented by a single factor.

Implementations of Factor Analysis
Factor analysis is usually more meaningful when it is followed by subsequent procedures such as clustering. Following are some of the applications of this method:
Factoring in Marketing Research
While factor analysis is used in several fields such as psychometrics, psychology, physical sciences, etc, we will focus on the topic relevant in this module: marketing research. The procedure for utilizing factor analysis in a typical marketing research study is as follows:
Industry examples requiring usage of this tool
Factor Analysis Assumptions
For this method to be valid, certain assumptions must hold true:
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