Residents who were either morally opposed to the lottery, or who felt the state of Arizona would be better off without a lottery, were asked demographic questions only, and screened out of the remainder of the survey. Questions were also asked concerning general attitudes about life, advertising media, and leisure activities. The survey took approximately 25 minutes to complete and respondents were not paid for their participation. The data analysis in a market segmentation study employs both factor analysis and cluster analysis. Factor analysis is used to define factor scores for each individual that describe characteristics that can be used for grouping consumers into homogeneous groups.
Cluster analysis is used to perform the grouping.
Once the groups are identified, the groups most likely to have interest in a product are identified and targeted in the marketing plan. We now discuss this general process in more detail. Factor Analysis Factor analysis is a statistical tool used to represent information contained in a large set of variables with a smaller set of variables. That is, an underlying assumption of factor analysis is that there are a few latent factors that are manifest in the values of many observable variables. For example, the desire for wealth might be a latent factor in our lottery example.