How to get more out of your data using structural equation models

SAS Business AnalyticsSingapore Conference 2011

How to Get More Out of Your Data

Using Structural Equation Models?

Tan Teck KiangNanyang Technological University

25 May 2011, 15:00-15:30The Fullerton Hotel

Content

• Another Mining Tool - Structural Equation Model

• What is SEM?• Areas of Application• Examples– Tourist Royalty– Airline Services

• References

Mining Tools – Enterprise Miner

• Decision Tree• Cluster Analysis• Logistic Regression• Neural network• ……

• Structural Equation Model ?

PROC CALIS

SAS/STAT

What is SEM?

• SEM model translates a series of cause-effect variables into a composite model that describes the relationships of these variables and show the extent of these relationships.

Areas of Application for SEM

• Business research– Marketing, Management, Economics, Organization

• Survey Research • Behavioral and Social Sciences

– Psychology, Sociology, Psychiatry, Criminal Science, Family Studies, Political Science, Developmental Research, and Social Work

• Medical Research– Nursing, Pharmacy, Epidemiology, and Sport Science

• Environmental Science• Education

– Student Achievement, Policy Studies, and Counseling • Longitudinal Study

Airline Services

• How price, airline service quality, value, passenger satisfaction and airline image determine passengers’ future behavioral intentions?

Airline Services

Source: Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

Determine Relationships

Source: Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

-ve

-ve +ve

-ve

Airline Services

Source: Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

-ve

+ve

+ve

+ve

Tourist Royalty

• Benefits of maintaining a solid base of loyal customers.

• SEM helps tourism managers to develop and implement effective relationship marketing strategies.

• Examining interrelationships among image, quality, satisfaction, trust and the tourists’ behavior variables.

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

Tourist Royalty

MeasurementModel

StructureModel+

How to measure Loyalty and Quality?

Specify the relationship of Loyalty and Quality.

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

QualityThe lodging facilities and rooms are cleanThe lodging employees have a clean and neat appearanceThe clients are treated cordially and affably.The lodging employees know the functions that they carry out.The lodging foods are well presented and flavorful.

LoyaltyI will speak well about this lodging service to other peopleI will recommend the lodging if someone ask for my adviseI will encourage my friends and relatives to visit this lodgingIn the next vacation I intend to return to this lodgingI would come continually even if the lodging price will increase

Measurement Model

Quality

FacilitiesClean

EmployeeNeat

Treated Cordially

Employees Know

Functions

FoodFlavorful

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

Structure Model

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

Structure Model

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

0.52 Direct Effect

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

0.52 Direct Effect

Indirect Effect

Indirect Effect = 0.52 x 0.46 = 0.24Total Effect = 0.04 + 0.24 = 0.28

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

0.52

0.76

0.41

0.77

0.14

Indirect Effect (1)

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

0.52

0.76

0.41

0.77

0.14

Indirect Effect (2)

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

0.52

0.76

0.41

0.77

0.14

Indirect Effect (3)

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

0.52

0.76

0.41

0.77

0.14

Indirect Effect (4)

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

0.52

0.76

0.41

0.77

0.14

Indirect Effect (5)

Source: Loureiro and Gonzalez (2008). The importance of quality, satisfaction, trust, and image in relation to rural tourist loyalty, Journal of Travel and Tourism Marketing, V 25(2), 117-136.

Satisfaction

Loyalty

Quality

Trust

Image

0.46

0.04

0.23

0.27

0.52

0.76

0.41

0.77

0.14

R2 0.86

Back to Airline Services

Airline Services

Source: Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

0.42

0.42

0.21

-0.08

0.11

n.s.

0.53

0.290.59

0.640.18

n.s.

n.s.

R2 0.78

Airline Services – Satisfaction

Source: Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

0.42

0.420.64

0.290.59

Passenger Satisfaction

• Passenger satisfaction had a significant effect on airline image and passengers’ behavioral intentions.

• Passenger satisfaction depend on service quality and passengers’ value perceptions.

Proc Calis Data = Airline;PathIntentions <--- Satisfaction,Intentions <--- Price,Intentions <--- Value,Intentions <--- Image,…

Value <--- Price,Value <--- Quality;Run;

Summary

• SEM – About cause and effect relationships– Quantify the extent

• Likely Effects and their Impacts – Examine likely consequences if one of the factors

turn as unexpected – Decision Making (Scenario Analysis)

• SAS Syntax

References

• Kumar et al (2007). The association of consumer expectations, experiences and satisfaction with newly prescribed medications. Quality of Life Research, 16, 1127-1136.

• Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

Thank You

Eng 01

InitialPerformance

Growth inPerformance

Eng 02 Eng 03 Eng 04 Eng 05 Eng 06 Eng 07

Gender

Parent

StudentEmotionalProblem

Education – Longitudinal Study

Airline Services

Source: Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

-ve

+ve

+ve

+ve

Airline Services

Source: Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

0.42

0.42

0.21

-0.08

Airline Services – Service Quality

Source: Park, J.-W., Robertson, R., and Wu, C.-L. (2006). Modeling the impact of airline service quality and marketing variables on passengers’ future behavioural intentions, Transportation Planning and Technology, 29(5), 359-381.

0.42

0.42

0.21

0.53

0.290.59

0.64

Airline Services Quality

• Service quality is a driver of passenger satisfaction and perceived value.

• Airlines should strive to develop strategies for improving service quality.