Friday, April 3, 2009

The CHAID Analysis


CHAID stands for Chi Square Automatice Interaction Detection. Its utility for business analysts is visualizing relationships between data with categorized values, with a tree image. According to this article can be especially useful for analyzing surveys, customer profiling and customer targeting.

The article provides an image of "Potential Customer Indexing," for customer targeting. The study is about penetrating a market for "residential services." The first node contains information about existing contracts in the market and the percentage of households in the target market, included in the study. The next step is selecting a variable that will sub-divide data. The variable in this study is highrise buildings. The areas in the target market are then broken down by how many high rise dwellings they have. From there they predict where they will have the most increase in business.

1 comment:

  1. The pattern in a number of these articles seems to suggest that DTs need highly structured data to work. Without having read the rest of the posts yet, it seems to me this is something that you will need to come to grips with.