Presented at SAS Business Analytics 2011 event in Singapore.

1. SAS Business Analytics
Singapore Conference 2011
How to Get More Out of Your Data
Using Structural Equation
Models?
Tan Teck Kiang
Nanyang Technological University
25 May 2011, 15:00-15:30
The Fullerton Hotel

2. Content
• Another Mining Tool - Structural Equation
Model
• What is SEM?
• Areas of Application
• Examples
– Tourist Royalty
– Airline Services
• References

3. Mining Tools – Enterprise Miner
• Decision Tree
• Cluster Analysis
• Logistic Regression PROC
• Neural network CALIS
• ……
SAS/STAT
• Structural Equation Model ?

4. 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.

5. 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

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

7. 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.

8. Determine Relationships
-ve
-ve
-ve +ve
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.

9. Airline Services
+ve
-ve
+ve
+ve
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.

10. 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.

11. Tourist Royalty
Satisfaction
Quality
Loyalty
Image
Trust
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.

12. Measurement Structure
Model + Model
How to Specify the
measure relationship of
Loyalty and Loyalty and
Quality? Quality.

13. Quality
The lodging facilities and rooms are clean
The lodging employees have a clean and neat appearance
The clients are treated cordially and affably.
The lodging employees know the functions that they carry out.
The lodging foods are well presented and flavorful.
Loyalty
I will speak well about this lodging service to other people
I will recommend the lodging if someone ask for my advise
I will encourage my friends and relatives to visit this lodging
In the next vacation I intend to return to this lodging
I would come continually even if the lodging price will increase
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.

14. Measurement Model
Employees
Facilities Employee Treated Food
Know
Clean Neat Cordially Flavorful
Functions
Quality

15. Structure Model
Satisfaction
Quality
Loyalty
Image
Trust
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.

16. Structure Model
Satisfaction
Quality
0.46
0.04
Loyalty
0.27
Image
0.23
Trust
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.

17. 0.52 Satisfaction Direct
Effect
Quality
0.46
0.04
Loyalty
0.27
Image
0.23
Trust
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.

18. Indirect 0.52 Satisfaction Direct
Effect Effect
Quality
0.46
0.04
Loyalty
0.27
Image
0.23
Indirect Effect = 0.52 x 0.46
= 0.24
Total Effect = 0.04 + 0.24 Trust
= 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.

19. Indirect 0.52 Satisfaction
Effect (1)
Quality 0.41
0.46
0.77 0.04
Loyalty
0.27
Image
0.23
0.76
0.14
Trust
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.

20. Indirect 0.52 Satisfaction
Effect (2)
Quality 0.41
0.46
0.77 0.04
Loyalty
0.27
Image
0.23
0.76
0.14
Trust
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.

21. Indirect 0.52 Satisfaction
Effect (3)
Quality 0.41
0.46
0.77 0.04
Loyalty
0.27
Image
0.23
0.76
0.14
Trust
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.

22. Indirect 0.52 Satisfaction
Effect (4)
Quality 0.41
0.46
0.77 0.04
Loyalty
0.27
Image
0.23
0.76
0.14
Trust
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.

23. Indirect 0.52 Satisfaction
Effect (5)
Quality 0.41
0.46
0.77 0.04
Loyalty
0.27
Image
0.23
0.76
0.14
Trust
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.

24. 0.52 Satisfaction
Quality 0.41
R2 0.86
0.46
0.77 0.04
Loyalty
0.27
Image
0.23
0.76
0.14
Trust
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.

25. Back to Airline Services

26. Airline Services
n.s.
0.29
0.11 0.42
0.59
-0.08 R2 0.78
0.21
0.53 0.18 0.64
0.42
n.s.
n.s.
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.

27. Airline Services – Satisfaction
0.29
0.42
0.59
0.64
0.42
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.

28. 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.

29. Proc Calis Data = Airline;
Path
Intentions <--- Satisfaction,
Intentions <--- Price,
Intentions <--- Value,
Intentions <--- Image,
…
Value <--- Price,
Value <--- Quality;
Run;

30. 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

31. 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.

32. Thank You

33. Education – Longitudinal Study
Student
Gender Emotional
Problem
Parent
Initial Growth in
Performance Performance
Eng 01 Eng 02 Eng 03 Eng 04 Eng 05 Eng 06 Eng 07

35. Airline Services
+ve
-ve
+ve
+ve
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.

36. Airline Services
0.42
-0.08
0.21
0.42
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.

37. Airline Services – Service Quality
0.29
0.42
0.59
0.21
0.53 0.64
0.42
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.

38. Airline Services Quality
• Service quality is a driver of passenger
satisfaction and perceived value.
• Airlines should strive to develop strategies for
improving service quality.