Factor Analysis

Factor Analysis

The observants were asked to rate the following questions on a scale from 1 to 7 with respect to HDFC (1 = strongly disagree, 7= strongly agree), their agreement or disagreement with a set of 18 statements relating to their perceptions and some attributes of the banking services. The objective of doing factor analysis was to find underlying factors which would be fewer than 18 in number, but would be linear combination of some of the original 18 variables.

1. Quick service (saves time)
2. Trust on the bank (reduces risk)
3. Good return on my investment (makes money)
4. Better user interface for mobile and online banking (Simplification)
5. Availability of parking (reduces effort)
6. Good ambience (sensory appeal)
7. Wide range of products and services (variety)
8. Well behaved staff (attractiveness)
9. Waiting lounge (Aesthetics)
10. Proper communication on time (information)
11. Special privileges & offers (rewards)
12. Quick online payment (avoid hassles)
13. Proximity of number of working ATMs (reduces effort)
14. Good customer grievance redressal system (reduce anxiety)
15. Availability of sufficient lockers (provide access)
16. Easy disbursement of loan (hope)
17. Availability of personal banker (affiliation and belonging)
18. Good long-term investment options (Heirloom)

As evident from below table, we find that the six factors extracted together account for 75.59 % of the total variance. Hence, we have reduced the number of variables from 18 to 6 underlying factors.

[pic 1]

Looking at the below table we see that the variables Quick Service, variety of products and services, well behaved staff, waiting lounge, hassle free online payment, proximity of no. of working ATMs, Customer redressal and personal banker have a loading of above 0.4 on factor 1. Therefore, this factor can be interpreted as ‘Customer Service’

Trust on Bank, Better UI for online banking, privileges and offer and long-term investment have loading on Factor 2. These variables are clubbed into a single factor called ‘Convenience’

Good ambience and Timely communication have loading on Factor 3. These two variables can be termed as ‘Responsiveness’

‘Loan Approval’ as Factor 4. ‘Good return on investment’ as Factor 5. ‘Locker availability’ as Factor 6.

[pic 2]

Regression between factor and NPS Score

Equation 1:

NPS= 6.333 + 0.44 * Customer Service + 0.465 * Responsiveness

38.4 % of variance in dependent variable is explained by these factors.

[pic 3]

[pic 4]

Regression between factors and customer satisfaction score

Equation 2:

Customer Satisfaction = 4.758 +         0.321 * Customer service + 0.493 * Responsiveness