(Big) Data Analytics for Business

Segmentation in the Boating Industry

T. Evgeniou and J. Niessing
INSEAD

Every factor analysis has three basic decision points

Decide the number of factors

Choose an extraction method

Choose a rotation method

Correlation matrix of the 29 attitudes as a pre-step

Q1_1_When buying a boat I do a lot of shopping around and visit multiple dealers Q1_2_When buying a boat getting the lowest price is more important than the boat brand Q1_3_The brand of boat I buy says a lot about who I am Q1_4_I only consider buying a boat from a reputable brand Q1_5_I am willing to pay a premium for a brand with a reputation for high quality Q1_6_Owning a boat is a way of rewarding myself for my hard work Q1_7_Owning a boat gives me a sense of achievement Q1_8_When buying a boat functionality is more important than style Q1_9_I see my boat as a status symbol Q1_10_When buying a boat I rely more on expert opinion than my own e g consumer reports salespeople Q1_11_I tend to perform minor boat repairs and maintenance on my own Q1_12_When it comes to boating I tend to prefer a basic boat with little to no frills Q1_13_When buying a boat I tend to buy the latest and greatest Q1_14_When buying accessories for my boat I tend to buy the latest and greatest Q1_15_I am serious about the technology on my boat Q1_16_People tend to come to me for advice about boating Q1_17_I consider myself more knowledgeable about boating than the rest of my boating peers Q1_18_Boating gives me a feeling of adventure Q1_19_Boating allows me to experience nature Q1_20_When not on my boat I often find myself doing boating related activities Q1_21_Boating helps me escape from everyday life and relax Q1_22_Boating helps me stay active Q1_23_Boating allows me to excel in the sports that I am passionate about e g fishing racing water sports Q1_24_Boating gives me an outlet to socialize with family and or friends Q1_25_Being in charge of my boat is very important to me Q1_26_Having a powerful boat is what is most important to me Q1_27_Boating is the number one thing I do with my spare time Q1_28_Boating is my true passion in life Q1_29_Boating is one of many things I do in my spare time
Q1_1_When buying a boat I do a lot of shopping around and visit multiple dealers 1.00 0.008983 0.1075 0.1983 0.1835 0.2678 0.1846 0.08861 0.0778 0.1071 0.1449 -0.05305 0.1225 0.1785 0.2611 0.1572 0.1478 0.2533 0.274 0.1941 0.2353 0.2315 0.1876 0.2091 0.2271 0.1038 0.1268 0.176 0.2016
Q1_2_When buying a boat getting the lowest price is more important than the boat brand 0.008983 1.00 -0.02956 -0.2101 -0.2058 -0.03727 0.02025 0.1967 0.08722 0.1583 0.04285 0.3702 0.006216 -0.03048 -0.07769 -0.01528 0.03892 -0.03771 -0.03631 0.05335 -0.09945 -0.07645 0.002847 -0.0755 0.008886 0.0738 0.04546 0.01602 -0.02895
Q1_3_The brand of boat I buy says a lot about who I am 0.1075 -0.02956 1.00 0.2636 0.3997 0.3401 0.4436 -0.05102 0.5789 0.1356 0.09649 -0.08893 0.4845 0.4615 0.3762 0.3872 0.379 0.2379 0.1414 0.3856 0.182 0.2814 0.3396 0.2277 0.358 0.471 0.4008 0.4253 0.1659
Q1_4_I only consider buying a boat from a reputable brand 0.1983 -0.2101 0.2636 1.00 0.3667 0.2015 0.1753 0.003764 0.1676 0.1001 0.0588 -0.1598 0.2727 0.2941 0.2961 0.1821 0.1749 0.1845 0.1855 0.1833 0.183 0.2335 0.1642 0.2291 0.218 0.1923 0.165 0.2124 0.1865
Q1_5_I am willing to pay a premium for a brand with a reputation for high quality 0.1835 -0.2058 0.3997 0.3667 1.00 0.2929 0.2854 -0.03322 0.3287 0.1357 0.06923 -0.1725 0.4504 0.4599 0.4176 0.3553 0.3184 0.2342 0.1842 0.3229 0.1873 0.2737 0.2934 0.2492 0.2903 0.3372 0.294 0.325 0.1778
Q1_6_Owning a boat is a way of rewarding myself for my hard work 0.2678 -0.03727 0.3401 0.2015 0.2929 1.00 0.546 0.04036 0.3489 0.1245 0.1461 -0.1154 0.2857 0.3138 0.3143 0.2718 0.2362 0.4375 0.3555 0.354 0.4242 0.4088 0.3179 0.367 0.42 0.3074 0.3447 0.3924 0.2715
Q1_7_Owning a boat gives me a sense of achievement 0.1846 0.02025 0.4436 0.1753 0.2854 0.546 1.00 -0.005651 0.4908 0.1217 0.1152 -0.1091 0.3489 0.3619 0.3449 0.3091 0.2852 0.4009 0.2815 0.3633 0.3274 0.3902 0.3044 0.3328 0.4194 0.3865 0.3706 0.3994 0.2406
Q1_8_When buying a boat functionality is more important than style 0.08861 0.1967 -0.05102 0.003764 -0.03322 0.04036 -0.005651 1.00 -0.09188 0.08512 0.1426 0.2354 -0.04788 -0.02173 0.06132 0.02284 0.04813 0.07381 0.09498 0.04331 0.06314 0.05412 0.09931 0.0186 0.09906 -0.04454 0.0292 0.04579 0.09732
Q1_9_I see my boat as a status symbol 0.0778 0.08722 0.5789 0.1676 0.3287 0.3489 0.4908 -0.09188 1.00 0.143 0.05987 -0.04386 0.4801 0.4267 0.3327 0.3892 0.3656 0.218 0.0744 0.3659 0.1435 0.2325 0.2887 0.2304 0.3191 0.5027 0.3997 0.4025 0.1147
Q1_10_When buying a boat I rely more on expert opinion than my own e g consumer reports salespeople 0.1071 0.1583 0.1356 0.1001 0.1357 0.1245 0.1217 0.08512 0.143 1.00 -0.08855 0.1223 0.1614 0.1051 0.1111 -0.03012 -0.02844 0.1406 0.09459 0.09628 0.07687 0.09113 0.06955 0.1312 0.07601 0.1348 0.07711 0.06922 0.05107
Q1_11_I tend to perform minor boat repairs and maintenance on my own 0.1449 0.04285 0.09649 0.0588 0.06923 0.1461 0.1152 0.1426 0.05987 -0.08855 1.00 0.08748 0.07991 0.1345 0.205 0.3192 0.308 0.1119 0.1233 0.25 0.1291 0.1701 0.1921 0.0773 0.2489 0.09386 0.157 0.1829 0.1659
Q1_12_When it comes to boating I tend to prefer a basic boat with little to no frills -0.05305 0.3702 -0.08893 -0.1598 -0.1725 -0.1154 -0.1091 0.2354 -0.04386 0.1223 0.08748 1.00 -0.1131 -0.1652 -0.1677 -0.02316 0.01641 -0.1194 -0.09364 0.008689 -0.1682 -0.1144 -0.03205 -0.1693 -0.0547 -0.06386 0.002133 -0.009516 -0.03549
Q1_13_When buying a boat I tend to buy the latest and greatest 0.1225 0.006216 0.4845 0.2727 0.4504 0.2857 0.3489 -0.04788 0.4801 0.1614 0.07991 -0.1131 1.00 0.6382 0.4577 0.4271 0.4259 0.2035 0.1111 0.3868 0.1354 0.2301 0.3187 0.1963 0.3234 0.481 0.3981 0.4041 0.1903
Q1_14_When buying accessories for my boat I tend to buy the latest and greatest 0.1785 -0.03048 0.4615 0.2941 0.4599 0.3138 0.3619 -0.02173 0.4267 0.1051 0.1345 -0.1652 0.6382 1.00 0.4999 0.4272 0.3976 0.2493 0.1773 0.4065 0.2082 0.2852 0.3565 0.209 0.3533 0.4649 0.3934 0.4049 0.2109
Q1_15_I am serious about the technology on my boat 0.2611 -0.07769 0.3762 0.2961 0.4176 0.3143 0.3449 0.06132 0.3327 0.1111 0.205 -0.1677 0.4577 0.4999 1.00 0.4117 0.3943 0.3164 0.2634 0.407 0.21 0.3264 0.353 0.2655 0.428 0.3732 0.3504 0.3784 0.2449
Q1_16_People tend to come to me for advice about boating 0.1572 -0.01528 0.3872 0.1821 0.3553 0.2718 0.3091 0.02284 0.3892 -0.03012 0.3192 -0.02316 0.4271 0.4272 0.4117 1.00 0.6314 0.2029 0.138 0.5216 0.1584 0.30 0.3996 0.1941 0.3858 0.402 0.4758 0.4964 0.202
Q1_17_I consider myself more knowledgeable about boating than the rest of my boating peers 0.1478 0.03892 0.379 0.1749 0.3184 0.2362 0.2852 0.04813 0.3656 -0.02844 0.308 0.01641 0.4259 0.3976 0.3943 0.6314 1.00 0.1709 0.1219 0.4456 0.1255 0.2584 0.3631 0.1486 0.3624 0.3981 0.4379 0.4625 0.2094
Q1_18_Boating gives me a feeling of adventure 0.2533 -0.03771 0.2379 0.1845 0.2342 0.4375 0.4009 0.07381 0.218 0.1406 0.1119 -0.1194 0.2035 0.2493 0.3164 0.2029 0.1709 1.00 0.4873 0.2811 0.4728 0.437 0.2903 0.4227 0.3722 0.2386 0.2467 0.3128 0.2992
Q1_19_Boating allows me to experience nature 0.274 -0.03631 0.1414 0.1855 0.1842 0.3555 0.2815 0.09498 0.0744 0.09459 0.1233 -0.09364 0.1111 0.1773 0.2634 0.138 0.1219 0.4873 1.00 0.213 0.44 0.38 0.2436 0.3658 0.3239 0.1394 0.1756 0.232 0.2788
Q1_20_When not on my boat I often find myself doing boating related activities 0.1941 0.05335 0.3856 0.1833 0.3229 0.354 0.3633 0.04331 0.3659 0.09628 0.25 0.008689 0.3868 0.4065 0.407 0.5216 0.4456 0.2811 0.213 1.00 0.2258 0.3346 0.4045 0.2375 0.4056 0.4034 0.5033 0.5203 0.2473
Q1_21_Boating helps me escape from everyday life and relax 0.2353 -0.09945 0.182 0.183 0.1873 0.4242 0.3274 0.06314 0.1435 0.07687 0.1291 -0.1682 0.1354 0.2082 0.21 0.1584 0.1255 0.4728 0.44 0.2258 1.00 0.4212 0.2391 0.4242 0.3022 0.1478 0.2356 0.2604 0.2943
Q1_22_Boating helps me stay active 0.2315 -0.07645 0.2814 0.2335 0.2737 0.4088 0.3902 0.05412 0.2325 0.09113 0.1701 -0.1144 0.2301 0.2852 0.3264 0.30 0.2584 0.437 0.38 0.3346 0.4212 1.00 0.3368 0.3828 0.3662 0.232 0.3458 0.3756 0.3412
Q1_23_Boating allows me to excel in the sports that I am passionate about e g fishing racing water sports 0.1876 0.002847 0.3396 0.1642 0.2934 0.3179 0.3044 0.09931 0.2887 0.06955 0.1921 -0.03205 0.3187 0.3565 0.353 0.3996 0.3631 0.2903 0.2436 0.4045 0.2391 0.3368 1.00 0.2303 0.3238 0.331 0.3904 0.4386 0.2344
Q1_24_Boating gives me an outlet to socialize with family and or friends 0.2091 -0.0755 0.2277 0.2291 0.2492 0.367 0.3328 0.0186 0.2304 0.1312 0.0773 -0.1693 0.1963 0.209 0.2655 0.1941 0.1486 0.4227 0.3658 0.2375 0.4242 0.3828 0.2303 1.00 0.3058 0.2051 0.2442 0.2547 0.2713
Q1_25_Being in charge of my boat is very important to me 0.2271 0.008886 0.358 0.218 0.2903 0.42 0.4194 0.09906 0.3191 0.07601 0.2489 -0.0547 0.3234 0.3533 0.428 0.3858 0.3624 0.3722 0.3239 0.4056 0.3022 0.3662 0.3238 0.3058 1.00 0.3364 0.3532 0.4013 0.2334
Q1_26_Having a powerful boat is what is most important to me 0.1038 0.0738 0.471 0.1923 0.3372 0.3074 0.3865 -0.04454 0.5027 0.1348 0.09386 -0.06386 0.481 0.4649 0.3732 0.402 0.3981 0.2386 0.1394 0.4034 0.1478 0.232 0.331 0.2051 0.3364 1.00 0.4504 0.4729 0.1499
Q1_27_Boating is the number one thing I do with my spare time 0.1268 0.04546 0.4008 0.165 0.294 0.3447 0.3706 0.0292 0.3997 0.07711 0.157 0.002133 0.3981 0.3934 0.3504 0.4758 0.4379 0.2467 0.1756 0.5033 0.2356 0.3458 0.3904 0.2442 0.3532 0.4504 1.00 0.6153 0.2336
Q1_28_Boating is my true passion in life 0.176 0.01602 0.4253 0.2124 0.325 0.3924 0.3994 0.04579 0.4025 0.06922 0.1829 -0.009516 0.4041 0.4049 0.3784 0.4964 0.4625 0.3128 0.232 0.5203 0.2604 0.3756 0.4386 0.2547 0.4013 0.4729 0.6153 1.00 0.2608
Q1_29_Boating is one of many things I do in my spare time 0.2016 -0.02895 0.1659 0.1865 0.1778 0.2715 0.2406 0.09732 0.1147 0.05107 0.1659 -0.03549 0.1903 0.2109 0.2449 0.202 0.2094 0.2992 0.2788 0.2473 0.2943 0.3412 0.2344 0.2713 0.2334 0.1499 0.2336 0.2608 1.00

** = correlation is significant at 1% level; * = correlation is significant at 5% level

Number of Factors

There are three commen ways to select the number of factors:

  1. All factors with eigenvalue larger than 1

  2. Based on the cumulative variance we would like to explain (e.g. at least 50% for example).

  3. Pick the number of factrors corresponding to the "elbow" of the scree plot

The first two approaches to select the number of factors/derived variables are based on statistical criteria and can be seen in the following table:

Eigenvalues and explained variance

A common basic visualization when running the factor analysis is the Screeplot

The screeplot depicts the eigenvalues of the factors and thus allows gaining another quick overview on how many factors should be retained:

Extraction Method

The extraction method will produce factor loadings for every item on every extracted factor.

There at least five extraction methods. The evidence supports the use of one of these two:

  • principal axis factoring
  • maximum likelihood approaches (i.e. canonical factoring)

The extraction and rotation steps are usually specificed in the same command in R (next subsection shows such commands).

Rotation Method

Once an initial solution is obtained, the loadings are rotated. Rotation is a way of maximizing high loadings and minimizing low loadings so that the simplest possible structure is achieved.

There are two types of rotation:

  • no rotation

  • varimax, which is one of the key rotation methods used

Based on the critrion 'explained variance (65%)' we have selected 10 factors that could now be used for the segmentation

Instead of the derived constructs we could also use 'a' single statement from each factor as a proxy for the factor

Usually researchers pick the attitudes with the highest factor loading

NULL
Raw attributes with highest loading per factor: Boating Company
x
Factor 1 Q1_27_Boating is the number one thing I do with my spare time
Factor 2 Q1_18_Boating gives me a feeling of adventure
Factor 3 Q1_14_When buying accessories for my boat I tend to buy the latest and greatest
Factor 4 Q1_7_Owning a boat gives me a sense of achievement
Factor 5 Q1_4_I only consider buying a boat from a reputable brand
Factor 6 Q1_11_I tend to perform minor boat repairs and maintenance on my own
Factor 7 Q1_10_When buying a boat I rely more on expert opinion than my own e g consumer reports salespeople
Factor 8 Q1_8_When buying a boat functionality is more important than style
Factor 9 Q1_1_When buying a boat I do a lot of shopping around and visit multiple dealers
Factor 10 Q1_29_Boating is one of many things I do in my spare time