Interpretation analysis

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Interpretation analysis is used to find factors among observed variables. In other words, if your data contains many variables, you can use factor analysis to reduce the number of variables. Factor analysis groups variables with similar characteristics together. Therefore with factor analysis you can produce a small number of factors from a large number of variables which is capable of explaining the observed variance in the larger number of variables. One can use the reduced factors for further analysis.

When is interpretation analysis applied?

You may be interested to investigate the reasons why customers buy a product such as a particular brand of soft drink (e.g. coca cola). Several variables were identified which influence customer to buy coca cola. Some of the variables identified as being influential include cost of product, quality of product, availability of product, quantity of product, respectability of product, prestige attached to product, experience with product, and popularity of product. From this, you designed a questionnaire to solicit customers’ view on a seven/five point scale, where 1 = not important and 7/5 = very important.