# Discriminant Analysis

Discriminant analysis is a group classification method similar to regression analysis, in which individual groups are classified by making predictions based on independent variables. Discriminant analysis is a very popular tool used in statistics and helps companies improve decision making, processes, and solutions across diverse business lines. In marketing, this technique is commonly used to predict customer trends; in finance, it’s applied in areas such as bank loan application approval; in image recognition, it can be very accurate in instances of pattern recognition.

Discriminant analysis is a modern business approach that drives successful strategies and propels decision making to new heights. Business leaders, business analysts, and data scientists can use this technique and the accompanying results to formulate new designs and processes that can be used to provide value across the entire organization.

## Discrimination Analysis and its Applications

Discriminant analysis is used to analyze different data sets so that new items can be classified. It’s a popular statistical tool because it has widespread use across different industries, and businesses can analyze specific problems by determining what independent variables have the most significant outcome on a dependent variable. The results are often very reliable as you can define an issue or question, locate the discriminant function and discover its significance, and interpret the results and gauge the validity.

• Linear Linear discriminant analysis is often used in machine learning applications and pattern classification. It’s also commonly used for dimensionality reduction, which minimizes the number of variables that are being considered.
• Quadratic Similar to linear discrimination analysis, but with observations made from the normal distribution, with each class having its own covariant matrix. In machine learning, it separates the measurements for two or more event categories.
• Canonical Measures the connection or correlation between two unique sets of variables, which are split into different groups (X and Y), so that the relationship between the two variables can be further explored.
• Gaussian Also called normal distribution, this method involves a distribution that is dependent on the mean and standard deviation of a data set. Data scientists often use this when working on artificial intelligence (AI) projects.

## Discriminant Analysis in Business

Businesses use discriminant analysis to help grasp meaning from data sets so that they can drive creative, competitive solutions surrounding the customer experience, personalization, marketing, making predictions, and many other popular strategic purposes. Its applications are only increasing and indicating signs of being more and more useful moving into the future, with new techniques being adapted for many emerging business challenges.

• Human Resources Used to measure potential candidate job performance by using background information to predict how they will perform if hired.
• Industrial Can predict when machine parts might break down or need repairs based on performance indicators.
• Sales and Marketing Can predict market trends that have an effect on new products or services.

## Discriminant Analysis Process

Cross tabulation and chi-square make use of data during the discrimination analysis process by displaying and interpreting it in more readable and understandable ways. Data has meaning, and in a business context, people need to make sense of it so that hypotheses and strategies can be tested and measured, and important information can be more easily identified and categorized.

Here are a few business scenarios, for example:

• Classification Businesses might classify inventories and products by materials, size, type, color, or shape.
• Prediction Organizations use data to predict a number of decisions and behaviors across the organization in order to determine the right path or strategy to take.
• Pattern Recognition Distinguishes data according to certain elements or criteria and is an integral part of machine learning.

## Benefits of Discriminant Analysis

There are many benefits of discriminant analysis, especially today in the age of data. As so many businesses have the opportunity to drive growth, profitability, competitiveness, and strategic advantage through the analysis of data sets, this statistical method is a proven effective advantage for specific business drivers.

• ### Accelerate Trusted Decision Making

Test and measure business hypothesis and strategies to ensure decision making is informed and accurate.

• ### Predict Patterns and Behaviors

Helps tailor experiences for clients and customers.

• ### Solve Challenges

Business can use data to overcome many modern challenges.

• ### Machine Learning

Use data analytics and machine learning.

• ### Improve Marketing

Aid marketing and advertising for products and services.

## Empower Business Decision Making with Discriminant Analysis

Research Optimus (ROP) assists businesses all over the globe in their strategic development with market research and analysis services that support the use of discriminant function analysis across industries.

Mutual Fund Managers