Very often, marketing managers are interested in key drivers of overall evaluatory constructs like Satisfaction , Engagement, Trust etc. These constructs are themselves broad in scope and meaning and we need to rely on multiple parameters to measure these. On the explanatory side as well, we may be explained in broad evaluations like product quality, service quality etc. which again can only be measured by multiple variables. In a Corporate Reputation model, for example, we might be interested in understanding the relative impact of Product Quality, CSR , Ethical Business Practices etc. on overall Corporate Reputation. These are all broad constructs that cannot directly be measured. We call them Latent Variables and measure each of them using a set of items actually administered in the survey. The end-objective of such models is to a) understand granular levers for impacting the final construct of interest and b) understanding relative impact of these broad dimensions while ensuring that we have sufficiently reliable measurement of the various impactors of the final construct. At HBG we use SEM primarily for key driver analysis.
SEM models provide neat elegant background structures where survey items are grouped into different broad dimensions for studying a construct of interest. Metrics around these broad dimensions can also be developed and tracked over time.