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DataCamp Machine Learning for Marketing Analytics in R MACHINE LEARNING FOR MARKETING ANALYTICS IN R Principal Component Analysis for CRM Data Verena Pflieger Data Scientist at INWT Statistics DataCamp Machine Learning for Marketing Analytics

  1. DataCamp Machine Learning for Marketing Analytics in R MACHINE LEARNING FOR MARKETING ANALYTICS IN R Principal Component Analysis for CRM Data Verena Pflieger Data Scientist at INWT Statistics

  2. DataCamp Machine Learning for Marketing Analytics in R

  3. DataCamp Machine Learning for Marketing Analytics in R PCA helps to... handle multicollinearity create indices visualize and understand high-dimensional data

  4. DataCamp Machine Learning for Marketing Analytics in R Data for PCA str(dataCustomers, give.attr = FALSE) Classes ‘tbl_df’, ‘tbl’ and 'data.frame': 989 obs. of 16 variables: $ nOrders : int 104 17 5 18 21 2 18 12 14 7 ... $ nItemsOrdered : int 138 21 6 27 41 2 29 14 19 13 ... $ nItemsSold : int 66 4 3 3 35 1 11 11 9 2 ... $ salesOrdered : num 37813 10653 1226 31529 17935 ... $ salesSold : num 18031 1500 759 3803 14246 ... $ returnRatio : num 0.522 0.81 0.5 0.889 0.146 ... $ shareOwnBrand : num 0.54 0.48 1 0.15 0.63 0 1 1 0.42 0.31 ... $ shareSale : num 0.52 0.67 0.17 0.19 0.12 0 0.28 0.07 0.37 ... $ shareVoucher : num 0.09 0.1 0.5 0.07 0 0 0.52 0.29 0.16 0 ... $ crDuration : int 1472 1506 1453 1340 1449 749 997 1513 1499 ... $ monetaryReturnRatio: num 0.523 0.859 0.381 0.879 0.206 ... $ meanDaysBetwOrders : int 14 94 363 79 72 749 59 138 115 254 ... $ salesPerOrder : num 173.4 88.2 151.8 211.3 678.4 ... $ salesPerItem : num 273 375 253 1268 407 ... $ itemsPerOrder : num 1.33 1.24 1.2 1.5 1.95 1 1.61 1.17 1.36 ... $ itemsSoldPerOrder : num 0.63 0.24 0.6 0.17 1.67 0.5 0.61 0.92 0.64 ...

  5. DataCamp Machine Learning for Marketing Analytics in R Correlation Structure library(corrplot) dataCustomers %>% cor() %>% corrplot()

  6. DataCamp Machine Learning for Marketing Analytics in R MACHINE LEARNING FOR MARKETING ANALYTICS IN R Let's practice!

  7. DataCamp Machine Learning for Marketing Analytics in R MACHINE LEARNING FOR MARKETING ANALYTICS IN R PCA Computation Verena Pflieger Data Scientist at INWT Statistics

  8. DataCamp Machine Learning for Marketing Analytics in R Status Quo # Variances of all variables before any data preparation lapply(dataCustomers, var) $nOrders $salesOrdered [1] 264.3989 [1] 202384132 $nItemsOrdered $salesSold [1] 506.5496 [1] 9345112 $nItemsSold $returnRatio [1] 56.35125 [1] 0.0836261 ...

  9. DataCamp Machine Learning for Marketing Analytics in R Standardization dataCustomers <- dataCustomers %>% scale() %>% as.data.frame() # Check variances of all variables lapply(dataCustomers, var) $nOrders $salesOrdered [1] 1 [1] 1 $nItemsOrdered $salesSold [1] 1 [1] 1 $nItemsSold $returnRatio [1] 1 [1] 1 ...

  10. DataCamp Machine Learning for Marketing Analytics in R PCA Computation pcaCust <- prcomp(dataCustomers) str(pcaCust, give.attr = FALSE) List of 5 $ sdev : num [1:16] 2.1 1.84 1.3 1.2 1.12 ... $ rotation: num [1:16, 1:16] -0.439 -0.44 -0.33 -0.384 -0.352 ... $ center : Named num [1:16] -4.66e-17 1.90e-17 -1.24e-18 6.69e-18 ... $ scale : logi FALSE $ x : num [1:989, 1:16] -11.06 -1.67 0.53 -3.39 -3.81 ...

  11. DataCamp Machine Learning for Marketing Analytics in R Standard Deviations of the Components # Standard deviations pcaCust$sdev %>% round(2) [1] 2.10 1.84 1.30 1.20 1.12 1.07 0.80 0.78 0.72 0.61 0.48 0.37 0.26 [14] 0.21 0.17 0.13 # Variances (Eigenvalues) pcaCust$sdev ^ 2 %>% round(2) [1] 4.39 3.38 1.68 1.45 1.26 1.15 0.65 0.61 0.52 0.38 0.23 0.14 0.07 [14] 0.04 0.03 0.02 # Proportion of explained variance (pcaCust$sdev ^ 2/length(pcaCust$sdev)) %>% round(2) [1] 0.27 0.21 0.10 0.09 0.08 0.07 0.04 0.04 0.03 0.02 0.01 0.01 0.00 [14] 0.00 0.00 0.00

  12. DataCamp Machine Learning for Marketing Analytics in R Loadings and Interpretation # Loadings (correlations between original variables and components) round(pcaCust$rotation[, 1:6], 2)

  13. DataCamp Machine Learning for Marketing Analytics in R Values of the Observations # Value on 1st component for 1st customer sum(dataCustomers[1,] * pcaCust$rotation[,1]) [1] -11.05858 pcaCust$x[1:5, 1:6] PC1 PC2 PC3 PC4 PC5 PC6 [1,] -11.0585802 3.5750683 -4.1371495 0.28864769 -0.1045802 0.698612248 [2,] -1.6734771 -1.6630208 0.9498452 0.14091195 -1.2760898 -0.006310673 [3,] 0.5303018 -0.4672193 -0.1918865 1.77466781 0.4623840 -0.037466682 [4,] -3.3903118 -0.1274839 4.2217216 0.03710948 -0.1840454 0.164680941 [5,] -3.8069613 5.3971530 -1.2241316 -0.38341585 0.9721412 -2.142731490

  14. DataCamp Machine Learning for Marketing Analytics in R MACHINE LEARNING FOR MARKETING ANALYTICS IN R It's your turn!

  15. DataCamp Machine Learning for Marketing Analytics in R MACHINE LEARNING FOR MARKETING ANALYTICS IN R Choosing the Right Number of Principal Components Verena Pflieger Data Scientist at INWT Statistics

  16. DataCamp Machine Learning for Marketing Analytics in R No. Relevant Components: Explained variance # Proportion of variance explained: summary(pcaCust) Importance of components: PC1 PC2 PC3 PC4 PC5 PC6 PC7 Standard deviation 2.0951 1.8379 1.2960 1.20415 1.12301 1.07453 0.80486 Proportion of Variance 0.2743 0.2111 0.1050 0.09062 0.07882 0.07216 0.04049 Cumulative Proportion 0.2743 0.4855 0.5904 0.68106 0.75989 0.83205 0.87254 PC8 PC9 PC10 PC11 PC12 PC13 Standard deviation 0.78236 0.72452 0.61302 0.48428 0.36803 0.25901 Proportion of Variance 0.03826 0.03281 0.02349 0.01466 0.00847 0.00419 Cumulative Proportion 0.91079 0.94360 0.96709 0.98175 0.99021 0.99440 PC14 PC15 PC16 Standard deviation 0.20699 0.17126 0.13170 Proportion of Variance 0.00268 0.00183 0.00108 Cumulative Proportion 0.99708 0.99892 1.00000

  17. DataCamp Machine Learning for Marketing Analytics in R No. Relevant Components: Kaiser-Guttman Criterion Kaiser-Guttman criterion: Eigenvalue > 1 pcaCust$sdev ^ 2 [1] 4.38961593 3.37778445 1.67965616 1.44997580 1.26115351 1.15461579 [7] 0.64780486 0.61209376 0.52492468 0.37579685 0.23452736 0.13544710 [13] 0.06708362 0.04284504 0.02933027 0.01734481

  18. DataCamp Machine Learning for Marketing Analytics in R No. Relevant Components: Screeplot The screeplot or: "Find the elbow" screeplot(pcaCust, type = "lines") box() abline(h = 1, lty = 2)

  19. DataCamp Machine Learning for Marketing Analytics in R Suggested Number of Components by Criterion Explained Variance Kaiser-Guttman Screeplot 5 6 6

  20. DataCamp Machine Learning for Marketing Analytics in R The Biplot biplot(pcaCust, choices = 1:2, cex = 0.7)

  21. DataCamp Machine Learning for Marketing Analytics in R MACHINE LEARNING FOR MARKETING ANALYTICS IN R Hands on!

  22. DataCamp Machine Learning for Marketing Analytics in R MACHINE LEARNING FOR MARKETING ANALYTICS IN R Further Analysis and Learnings Verena Pflieger Data Scientist at INWT Statistics

  23. DataCamp Machine Learning for Marketing Analytics in R PC in Regression Analysis I mod1 <- lm(customerSatis ~ ., dataCustomers) library(car) vif(mod1) nOrders nItemsOrdered nItemsSold salesOrdered 29.482287 24.437448 10.390998 5.134720 salesSold returnRatio shareOwnBrand shareSale 9.685617 23.778800 1.571607 1.178773 shareVoucher crDuration monetaryReturnRatio meanDaysBetwOrders 1.213011 1.757509 10.632243 1.698369 salesPerOrder salesPerItem itemsPerOrder itemsSoldPerOrder 6.563474 4.557981 4.821610 15.949072

  24. DataCamp Machine Learning for Marketing Analytics in R PC in Regression Analysis II # Create dataframe with customer satisfaction and first 6 components dataCustComponents <- cbind(dataCustomers[, "customerSatis"], pcaCust$x[, 1:6]) %>% as.data.frame mod2 <- lm(customerSatis ~ ., dataCustComponents) vif(mod2) PC1 PC2 PC3 PC4 PC5 PC6 1 1 1 1 1 1 summary(mod1)$adj.r.squared [1] 0.8678583 summary(mod2)$adj.r.squared [1] 0.7123822

  25. DataCamp Machine Learning for Marketing Analytics in R PC in Regression Analysis III: Interpretation summary(mod2) Call: lm(formula = customerSatis ~ ., data = dataCustComponents) Residuals: Min 1Q Median 3Q Max -3.9279 -0.2411 0.0179 0.2865 1.4972 Coefficients: Estimate Std. Error t value Pr(>|t|) (Intercept) 2.985945 0.014039 212.682 < 2e-16 *** PC1 -0.175434 0.006704 -26.167 < 2e-16 *** PC2 0.296659 0.007643 38.815 < 2e-16 *** PC3 -0.012816 0.010838 -1.182 0.237 PC4 -0.116651 0.011665 -10.000 < 2e-16 *** PC5 0.101963 0.012508 8.152 1.09e-15 *** PC6 0.126677 0.013072 9.691 < 2e-16 *** - - - Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1 Residual standard error: 0.4415 on 982 degrees of freedom Multiple R-squared: 0.7141, Adjusted R-squared: 0.7124 F-statistic: 408.9 on 6 and 982 DF, p-value: < 2.2e-16

  26. DataCamp Machine Learning for Marketing Analytics in R

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