DISCRIMINANT ANALYSIS

FLOW OF PRESENTATION

DISCRIMINANT ANALYSIS OBJECTIVES CHARACTERISTICS DISCRIMINANT ANALYSIS MODEL APPLICATIONS OF DA APPLICATIONS FOR MARKETING RESEARCH

DISCRIMINANT ANALYSIS

Discriminant analysis is a statistical procedure which allows us to classify cases in separate categories to which they belong on the basis of a set of characteristic independent variables called predictors or discriminant variables.
Discriminant analysis is used to analyze relationships between a non-metric dependent variable and metric or dichotomous independent variables. Discriminant analysis attempts to use the independent variables to distinguish among the groups or categories of the dependent variable. DA looks at the discrimination between two groups

OBJECTIVES OF DISCRIMINANT ANALYSIS

Examination of whether significant differences exist among the groups, in terms of the predictor variables. Determining which predictor variables count most in explaining inter-group differences. Evaluation of the accuracy of classification.

Classification of cases to one of the groups based on the values of the predictor variables.

CHARACTERISTICS

Develops a linear combination of independent variables and uses it to predict group membership. Predicts categorical dependent variable based on group differences using a linear combination of independent variables. Discriminant function a linear combination of independent variables that bests discriminates between the dependent variable groups.

DISCRIMINANT ANALYSIS MODEL

The discriminant analysis model involves linear combinations of the following form
D = b0 + b1 X 1 + b2 X 2 + b3 X 3 + . . . + bkX k Where: D = discriminant score

b 's
X 's

=
=

discriminant coefficient or weight

predictor or independent variable

The coefficients, or weights (b), are estimated so that the groups differ as much as possible on the values of the discriminant function. This occurs when the ratio of between-group sum of squares to within-group sum of squares for the discriminant scores is at a maximum.

APPLICATIONS OF DA

DA is especially useful to understand the differences and factors leading consumers to make different choices allowing them to develop marketing strategies which take into proper account the role of the predictors. Examples Determinants of customer loyalty Shopper profiling and segmentation Determinants of purchase and non-purchase

APPLICATIONS FOR MARKETING RESEARCH

These techniques are important in marketing research because most business problems are multidimensional and can only be understood when multivariate techniques are used.

Product research to distinguish between heavy, medium, and

light users of a product in terms of their consumption habits and lifestyles.

Image research to discriminate between customers that exhibit

favorable perceptions of a store or company and those who do not.

Advertising research to determine how market segments differ

in media consumption habits.

Direct marketing to identify characteristics of consumers who

respond to direct marketing solicitations and those who do not.

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