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Discriminant function analysis allows organizations to get critical insights into core business strategies and strategic policies.
Estimates suggest that India could account for one third of the total global market by 2020 and O2I is at the forefront of the Data Analytics Offshoring Revolution. One of the services we offer is Discriminant Analysis, a technique for classifying a set of observations into predefined classes.
At Outsource2india, we use Discriminant Analysis to distinguish between two or three sets of objects or people, based on the knowledge of some of their characteristics. Examples include: the selection process for a job, the admission process for an educational programme in a college, or the division of a group of people into potential buyers and non-buyers.
Want to get critical business insights to select the right people or process and turbocharge your business? Get O2I to work for you with Discriminant Analysis.
Discriminant Function Analysis is used by credit rating agencies to rate individuals, to classify them into good lending risks or bad lending risks. Other industries where Discriminant Function Analysis is useful is retailing (to find good and bad store locations based on certain characteristics), automobiles or durables (to identify repeat buyers versus brand switchers). Discriminant Function Analysis can also be used to validate the findings of cluster analysis, by trying to find if the clusters are sufficiently different from one another.
To use linear discriminant function analysis to classify objects into two or more groups, we need knowledge of some variables (characteristics) related to them. Typically, these groups would be users/non-users of a product, or potentially successful/unsuccessful salesmen in a sales or marketing company, or high-risk/low-risk consumers in a credit card industry.
In each of these cases, we need to know variables related to these respondents in each one of these groups. For example, the income levels of people, the frequency and magnitude of their purchases, and their attitudes maybe useful in predicting if they are good credit risks.
Interested in picking the winners in your business? Contact O2I for discriminant function analysis.
Discriminant Function Analysis works by building a mathematical model of the relationship between the independent variables (characteristics) and the outcome or dependent variable, which is where we classify the good/bad, loyal/disloyal or good/bad credit risk.
The model built by the researcher is used to make important business decisions such as whether to classify the next applicant for a loan into a good or bad credit risk, or whether a particular product promotion should be targeted at a loyal customer.
There are several checks to determine if the model built is a good one. Accuracy of the model is tested thoroughly by estimating accuracy of classification, and testing is used for prediction and classification. A cutoff value for the classification decision is determined once a good model is found.
Want an experienced researcher to build a reliable model for discriminant function analysis? Contact O2I with your requirements.
Once we find the coefficients of the model, our approach is to find a cutoff value for making the classification decision. The future cases are classified using this cutoff value as one of the pre-specified categories. Once the model is frozen, it is used over a period of time to test its accuracy. Based on its performance, it can be fine-tuned by adding or dropping some of the independent variables. SPSS (Statistical Package for the Social Sciences) provides many ways of building the discriminant model.
Outsource2india’s experienced researchers have in-depth knowledge of the process and are adept at analyzing and interpreting results.
Want to know if a potential client is a good credit risk? Or identify repeat buyers versus brand switchers?
Discriminant Function Analysis with SPSS is one of the many Research and Analysis outsourcing services provided by O2I. Research and Analysis gives your organization critical business insights into core business strategies. Outsource2india has the necessary technology, advanced data analytical capability, domain expertise and business intelligence that creates high levels of measurable business value to customers.
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