A Financial analysis firm conducted a study on factors affecting consumers selection of financial

products. The questions in the survey were asked on rating scale of 1 to 7. The variables
considered are listed below

Sr
No
. Variable Description
Depth of products and services to meet
1 the range of your investment needs
2 Ability to resolve problems
Multiple providers' products to choose
3 from
4 Quality of advice
5 Knowledge of representatives or advisors you deal with
Sr
No
.
Variable Description
Representative knowing your overall
6 situation and needs
7 Degree to which my provider knows me
Likelihood to Recommend Primary
8 Provider to Someone I Know
Likelihood of Continuing to Use Primary
Provider at Least at the Same Level as
9 Now

A factor analysis was conducted on the data and the results are given below
KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .811

Bartlett's Test of Sphericity Approx. Chi-Square 1520.784
df 36
Sig. .000

Communalities

Initial Extraction
Depth of products and services to meet the .489 .696
range of your investment needs
Ability to resolve problems .431 .516
Multiple providers' products to choose from .441 .543
Quality of advice .546 .608
Knowledge of representatives or advisors .586 .635
you deal with
Representative knowing your overall .600 .723
situation and needs
Degree to which my provider knows me .576 .624
Likelihood to Recommend Primary Provider .388 .623
to Someone I Know
Likelihood of Continuing to Use Primary .357 .575
Provider at Least at the Same Level as Now

Extraction Method: Principal Axis Factoring.

Total Variance Explained

 Extraction Sums of Squared Rotation Sums of Squared
Initial Eigenvalues Loadings Loadings

% of Cumulative % of Cumulative % of Cumulative

Factor Total Variance % Total Variance % Total Variance %

1 3.929 43.657 43.657 3.549 39.432 39.432 2.512 27.910 27.910

2 1.527 16.964 60.620 1.127 12.523 51.955 1.702 18.907 46.818

3 1.172 13.024 73.645 .766 8.512 60.466 1.228 13.649 60.466

4 .519 5.768 79.413

5 .480 5.339 84.751

6 .403 4.480 89.232

7 .389 4.324 93.556

8 .335 3.728 97.283

9 .244 2.717 100.000

Extraction Method: Principal Axis Factoring.

Factor Matrixa

Factor
1 2 3
Depth of products and services to meet the range of your investment needs .680 .076 .477
Ability to resolve problems .654 -.022 .297
Multiple providers' products to choose from .509 .056 .425
Quality of advice .725 -.237 -.162
Knowledge of representatives or advisors you deal with .768 -.182 -.113
Representative knowing your overall situation and needs .754 -.103 -.380
Degree to which my provider knows me .749 -.085 -.237
Likelihood to Recommend Primary Provider to Someone I Know .337 .700 -.136
Likelihood of Continuing to Use Primary Provider at Least at the Same Level .209 .721 -.105
as Now

Extraction Method: Principal Axis Factoring.

a. 3 factors extracted. 12 iterations required.

Rotated Factor Matrixa

Factor
1 2 3
Depth of products and services to meet the range of .251 .786 .124
your investment needs
Ability to resolve problems .358 .620 .061
Multiple providers' products to choose from .151 .643 .078
Quality of advice .727 .279 -.034
Knowledge of representatives or advisors you deal with .718 .346 .018
Representative knowing your overall situation and needs .829 .123 .145
Degree to which my provider knows me .741 .238 .132
Likelihood to Recommend Primary Provider to Someone .131 .113 .770
I Know
Likelihood of Continuing to Use Primary Provider at .007 .065 .756
Least at the Same Level as Now

Extraction Method: Principal Axis Factoring.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 5 iterations.

Answer following questions

a) Interpret the output
b) Identify and name the factors
c) Is there any variable/s which should not be included in the analysis?
d) Can you say that factor analysis is relevant in this case? Why?
(8 Marks)
A) The Bartlett's test is significant, and KMO is >0.5 indicating the FA can be done on the data. Each
extraction communalities are > 0.5. Cumulative of total explained variance is 60.466%(extraction)
which is >60%. Rotated factor matrix is a simple structure matrix for all variables ( each variable
is loaded on exactly one factor
B)

Factor
1 2 3
Depth of products and services to meet the range of your investment .251 .786 .124
needs
Ability to resolve problems .358 .620 .061
Multiple providers' products to choose from .151 .643 .078
Quality of advice .727 .279 -.034
Knowledge of representatives or advisors you deal with .718 .346 .018
Representative knowing your overall situation and needs .829 .123 .145
Degree to which my provider knows me .741 .238 .132
Likelihood to Recommend Primary Provider to Someone I Know .131 .113 .770
Likelihood of Continuing to Use Primary Provider at Least at the .007 .065 .756
Same Level as Now

1(Interface Related)
Quality of advice
Knowledge of representatives or Ability to resolve problems
advisors you deal with
Representative knowing your
overall situation and needs
Factor
2(Product Related) 3(Loyalty/Repeat)
Depth of products and Likelihood to Recommend Primary
services to meet the range of Provider to Someone I Know
your investment needs
Likelihood of Continuing to Use Primary
Provider at Least at the Same Level as
Now
Multiple providers' products
to choose from.
Degree to which my provider
knows me

Factor 1 is dominant and most important factor, factor 2 is second and last is factor 3

C) Is there any variable/s which should not be included in the analysis? NO

Since anti image matrix not given, one cannot find the diagonal elements of
correlations matrix (of anti image ) which should be > 0.5
Each extraction communalities are > 0.5. and
each variable is loaded on exactly one factor ( only one factor loading is > 0.5 and rest are < 0.4)

D) Yes
The Bartlett's test is significant, and KMO is >0.5 indicating the FA can be done on the data. Each
extraction communalities are > 0.5. Cumulative of total explained variance is 60.466%(extraction)
which is >60%. Rotated factor matrix is a simple structure matrix for all variables ( each variable
is loaded on exactly one factor