 Factor Analysis refers to the method for determining the number and nature of underlying

variables among larger number of measures. It is a method for determining k underlying

variables from n sets of measures, k being less than n. A factor is a construct, a hypothetical
entity that is assumed to underlie tests, scales, items, and indeed measures of almost any kind.

Types of Factor Analysis: -

 Exploratory factor analysis- It assumes that any variable or indicator can be associated with
any factor. Moreover, it is the most common method used by researchers. Furthermore, it isn’t
based on any prior theory.
 Confirmatory Factor Analysis- It is used to determine the factors loading and factors of
measured variables, and to confirm what it expects on the basis of pre-established
assumption. 

 Applications of factor analysis

 Marketing
Marketing is defined as the act of promoting a good or a service or even a brand.
When it comes to Factor Analysis in marketing, one can benefit immensely from
this statistical method. In order to boost marketing campaigns and accelerate
success, in the long run, companies employ Factor Analysis techniques that help to
find a correlation between various variables or factors of a marketing campaign.

Moreover, FA also helps to establish connections with customer satisfaction and

consequent feedback after a marketing campaign in order to check its efficacy and impact
on the audiences. That said, the realm of marketing can largely benefit from Factor
Analysis and trigger sales with respect to much-enhanced feedback and customer
satisfaction reports.

 Data Mining
In data mining, Factor Analysis can play a role as important as that of artificial
intelligence. Owing to its ability to transform a complex and vast dataset into a group of
filtered out variables that are related to each other in some way or the other, FA eases out
the process of data mining.
For data scientists, the tedious task of finding relationships and establishing correlation
among various variables has always been full of obstacles and errors. However, with the
help of this statistical method, data mining has become much more advanced.

 Machine Learning
Machine Learning and data mining tools go hand in hand. Perhaps this is the reason
why Factor Analysis finds a place among Machine Learning tools and techniques. As
Factor Analysis in machine learning helps in reducing the number of variables in a
given dataset to procure a more accurate and enhanced set of observed factors, various
machine learning algorithms are put to use to work accordingly.
They are trained well with humongous data to rightly work in order to give way to
other applications. An unsupervised machine learning algorithm, FA is largely used for
dimensionality reduction in machine learning. Thereby, machine learning can very
well collaborate with Factor Analysis to give rise to data mining techniques and make
the task of data research massively efficient.

 Nutritional Science
Nutritional Science is a prominent field of work in the contemporary scenario. By
focusing on the dietary practices of a given population, Factor Analysis helps to
 establish a relationship between the consumption of nutrients in an adult’s diet and
the nutritional health of that person. Furthermore, an individual’s nutrient intake and
consequent health status have helped nutritionists to compute the appropriate
quantity of nutrients one should intake in a given period of time.

Business
The application of Factor Analysis in business is rather surprising and satisfactory.
Remember the times when business firms had to employ professionals to dig out patterns
from past records in order to lay a road ahead for strategic business plans. Well, gone are
the days when so much work had to be done. Thanks to Factor Analysis, the world of
business can use it for eliminating the guesswork and formulating more accurate and
straightforward decisions in various aspects like budgeting, marketing, production, and
transport.