PLS and Success Factor Studies in Marketing

Abstract

While in consumer research the Cronbachs α LISREL-paradigm has emerged for a better separation of measurement errors and structural relationships, it is shown here that studies involving an evaluation of the effectiveness of marketing or organizational strategies based on structural relationships require the application of PLS. This is because we no longer distinguish between constructs and their reflecting measures but rather between abstract marketing policies (constructs) and their forming detailed marketing instruments (indicators). It is shown with the help of examples from literature that many studies of this type applying LISREL have been misspecified and would have better made use of the PLS approach. I also demonstrate the appropriate use of PLS in a study of success factors for e-businesses. I conclude with recommendations on the appropriate design of success factor studies, including the use of higher-order constructs and the validation of such studies.