# Factor analysis using SPSS

By Priya Chetty on February 4, 2015

Factor 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 factor 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 that influence customers to buy coca-cola. Some of the variables identified as being influential include cost of the product, quality of product, availability of a product, the quantity of product, the respectability of product, the prestige attached to the product, experience with the product, and popularity of the product. From this, you designed a questionnaire to solicit customers’ views on a seven/five-point scale, where 1 = not important and 7/5 = very important.

## Factor analysis in SPSS

• Step 1: From the menu bar select Analyze and choose Data Reduction and then CLICK on Factor. Highlight related variables and send them to “Variables”. Nothing has to be put into “Selection Variables”.  (See Figure 1 below).
• Step 2: CLICK on the DESCRIPTIVES button and its dialogue box will load on the screen. Within this dialogue box select the following check boxes Univariate Descriptives, Coefficients, Determinant, KMO and Bartlett’s test of sphericity, and Reproduced. CLICK on Continue to return to the Factor Analysis dialogue box (figure 2).
• Step 3: From the dialogue box CLICK on the EXTRACTION button and its dialogue box will load on the screen. Select the check box for Scree Plot (untick the “Unrotated Factor Solution” option). CLICK on Continue to return to the Factor Analysis dialogue box (figure 3).
• Step 4: From the dialogue box CLICK on the ROTATION button and its dialogue box will load on the screen. CLICK on the radio button next to Varimax to select it. CLICK on Continue to return to the Factor Analysis dialogue box (figure 4).
• Step 5: From the dialogue box CLICK on the OPTIONS button and its dialogue box will load on the screen. CLICK on the check box of Suppress absolute values less than to select it. Type 0.50 in the text box. CLICK on Continue to return to the Factor Analysis dialogue box. Click on OK to run the procedure. The dialogue box should be completed as shown below (Figure 5).
• Step 6: Finally, CLICK on OK on the Main Dialog Box, and the results would appear in the Output SPSS file. The interpretation of the Analysis Results has been presented in the next article.
• Step 7: The next article will discuss the interpretation of its output i.e. Interpretation of Factor Analysis using SPSS.

Priya is the co-founder and Managing Partner of Project Guru, a research and analytics firm based in Gurgaon. She is responsible for the human resource planning and operations functions. Her expertise in analytics has been used in a number of service-based industries like education and financial services.

Her foundational educational is from St. Xaviers High School (Mumbai). She also holds MBA degree in Marketing and Finance from the Indian Institute of Planning and Management, Delhi (2008).

Some of the notable projects she has worked on include:

• Using systems thinking to improve sustainability in operations: A study carried out in Malaysia in partnership with Universiti Kuala Lumpur.
• Assessing customer satisfaction with in-house doctors of Jiva Ayurveda (a project executed for the company)
• Predicting the potential impact of green hydrogen microgirds (A project executed for the Government of South Africa)

She is a key contributor to the in-house research platform Knowledge Tank.

She currently holds over 300 citations from her contributions to the platform.

She has also been a guest speaker at various institutes such as JIMS (Delhi), BPIT (Delhi), and SVU (Tirupati).