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Harnessing Social Media Commercial Potential

Identifying Corporate Strategies to Monetise a Brand’s Fanbase

Master's Thesis 2010 131 Pages

Communications - Public Relations, Advertising, Marketing, Social Media

Excerpt

Table of contents

Acknowledgements

Abstract

List of tables

List of figures

Table of contents

Abbreviations & Glossary

Chapter 1: Introduction 1.1 Background to the research 1.2 Purpose of the research 1.3 The contribution of the research 1.4 Scope and limitations 1.5 Structure of the document 1.6 Conclusion

Chapter 2: Literature review and theoretical background 2.1 Communication as a human need 2.1.1 Basic linear communication models 2.1.2 Many-to-many communication models 2.4 Consumer driven ecosystem 2.4.1 Definition of ‘Social Media’ 2.4.2 The connective tissue of the web 2.4.3 eWOM and brand value opportunities 2.5 Impact on traditional media landscape 2.6 Explaining the evolution 2.7 Shifts in budget focus 2.8 Could Social Media be another bubble? 2.8.1 Case study: Obama’s presidential campaign 2.9 External strategic challenges 2.9.1 Recession pressures 2.9.2 Diversity of consumer behaviour 2.9.3 Demographics and characteristics 2.9.4 User generated content and the culture of generosity 2.9.5 Building relationships and trust 2.10 Internal corporate barriers 2.10.1 Diversity of stakeholders 2.10.2 Corporate culture paradigm shift 2.10.3 Tracking efficiency and measuring Social Media ROI 2.11 Future trends 2.11.1 Sharing on the move 2.11.2 Crowd sourcing of information through co-creation 2.11.3 Filtering clutter 2.11.4 Corporations look to scale 2.12 Summary 2.13 Research propositions

Chapter 3: Primary research 3.1 Introduction 3.2 Research methodology 3.3 Definition of research population 3.4 Sampling frame & data collection 3.5 Questionnaire structure 3.6 Data reliability 3.7 Analysis of Quantitative data 3.8 Techniques used within the data analysis 3.8.1 Pearson Chi-squared test of independence 3.8.2 ANOVA Test 3.8.3 Testing for normality of the distribution 3.8.4 Linear regression 3.9 Detailed data analysis 3.9.1 Descriptive statistics 3.10 Factors motivating consumers to engage with corporates? Which reasons are the most important to them? (Q1) 3.10.1 Developing a framework of consumer engagement 3.10.2 Answering Q1 3.10.3 Driving Factors of Social Media Engagement 3.11 What are the barriers limiting corporates in their attempts to use SM to monetise fans? (Q2) 3.11.1 Prioritising barriers to the engagement process 3.12 Does a relationship exist between consumer engagement, purchasing and WOM recommendation? (Q3)

Chapter 4: Findings 4.1 Summing up on Q1 4.2 Summing up on Q2 4.3 Summing up on Q3

Chapter 5: Conclusions and recommendations 5.1 Measuring ROI 5.2 Thin Relationships 5.3 Legitimate barriers 5.4 Social objects and content types 5.5 Social Media strategic integration

Chapter 6: Conclusion

References

Appendix A

Appendix B

Acknowledgements

I would like to thank my family for believing in me and their full support during the course of this research, and the huge sacrifices that they had to offer for the past two years in order for this research to be completed on time, in particular Nagia my wife, my son Marwan, my father Fathi and Amal my mother.

I am also very grateful for the support that I received from my professor Dr. Ailsa Kolsaker who was as excited about the topic as much as I was and provided me with timely response, encouragement and valuable feedback throughout the project. And also my boss Helen for her flexibility and allowing me after-hours access and time to finalise my dissertation.

A special thank you for Sam for the valuable SPSS tips, Christine for proofreading and Toluna.com for providing me access to their powerful tools that helped me reach desired participant sample and conduct the research to the desired level of quality.

Abstract

In today's people centric world, there is no doubt that internet technologies effectively provide possibilities to fulfil the basic human need to communicate. However, there is a need for academic research that determines the factors that influence purchasing decisions or trigger word-of-mouth (WOM) endorsements amongst consumers on social media (SM) channels; with the aim of identifying critical components of an effective digital communication strategy. Doing so would enable a corporate to create opportunities for brands through harnessing the power of this evolving medium to monetise their follower base.

To fill this academic gap, this research focuses on exploring these factors through studying consumer engagement motives, as well as the reasons behind connecting with brands via SM during different purchasing decision lifecycle phases [comprising: brand awareness, product consideration, sales conversion and post-purchase support].

The researcher was able to verify different research propositions to discover misalignments between engagement motives of UK SM consumers and the current corporate approach in exploiting SM opportunities. In doing so, the researcher has adopted a holistic approach through conducting quantitative empirical research that captures the opinions of a UK-representative sample of 335 respondents. This acts as the primary data to accompany the full literature review of industry journals, academic studies, current web resources as well as relevant industry seminars acting as secondary research material.

The main findings reveal that a corporate needs to treat SM platforms as two-way communication channels rather than as a short-term marketing tool. Trust and relationships are built over time between a corporate and the target audience through valuable engagements by identifying the behaviour of the top influencers and engaging with them on the right channel.

According to the research findings, factors like gender, age group, level of experience with SM tools, use of wireless devices and different personality types all directly affect consumer-to-consumer and consumer-to-brand engagement on SM channels.

To fully exploit the commercial aspects of SM, a corporate needs an effective SM engagement strategy that builds conversations and fulfils the ranges of needs of different consumers. This is done by providing the most relevant content to their needs within each phase of the purchase decision cycle. Research shows [see Chapter 4; Findings, page 104] consumers are interested in receiving and sharing tips and content relating to their stage in the cycle, compared to generic branded news or targeted advertising. Furthermore, consumers indicated that marketing messages can be perceived as an interruption to the natural consumer-to-consumer communication flow. The research also distinguishes between propensities to engage with a brand, and purchasing or WOM advocacy that might not be directly related.

Consequently, many engagement barriers are created as a result of this misalignment between corporate assumptions and actual consumer engagement motivations that unnecessarily lead to loss of opportunities. If identified and studied carefully, corporates could adapt their digital communication strategies to fully harness SM potential, and thereby monetise a brand fanbase.

The researcher has developed a number of strategic frameworks that could help marketers understand the dynamics of this complex ecosystem in order to align their goals with real-life consumer expectations.

List of tables

Table 1. Comparative Estimates: UK Online Advertising Spending. 2009-2014 (billions)

Table 2. Top social networking websites by total minutes

Table 3. Weighted quotas of invited participants

Table 5. Which age group do you fall into?

Table 6. Are you a male or female?

Table 7. Chi-Square Tests – Age vs. SM Usage

Table 8. Chi-Square Tests – Gender vs. SM Usage

Table 9. Mean score analysis for SMengage by age groups

Table 10. Mean score analysis for SMengage by gender

Table 11. Mean score analysis for SMengage by # of SM sites used

Table 12. Mean score analysis for SMengage by # years using internet

Table 13. Mean score analysis for SMengage by # of years using SM sites

Table 14. Mean score analysis for SMengage by usage of mobile SM

Table 15. Mean score analysis for SMengage by frequency of using SM sites in past week

Table 16. Mean score analysis for SMengage by position within purchase life cycle (Q27)

Table 17. Model Summary

Table 18. Coefficients a

Table 19. Model Summary

Table 20. Coefficients

Table 23a. Q14_Table important – Communicating with brands via Social Media builds trust over time

Table 23b. Q14_Table important – Communicating with brands via Social Media builds positive perception about those brands for me

Table 23c. Q14_Table important – Communicating with brands via Social Media makes those brands more approachable to me

Table 24. Q25_Table technology influences – Social Networking sites are a perfect way to keep in touch with my favourite brands

Table 25. Q25_Table technology influences – I don’t mind receiving advertisements and marketing messages from brands that I don’t communicate with

Table 26. Q25_Table technology influences – Social Networking sites are a perfect way to discover new brands

Table 27. Q25_Table technology influences – I don’t mind receiving advertisements and marketing messages from brands that I don’t communicate with

Table 28. Q25_Table technology influences – I don’t mind receiving advertisements and marketing messages from brands that I communicate with on SM

Table 29. Level of importance of Social Media features (Q17 & Q25)

Table 30. Identifying the 33rd and 66th percentile

Table 31. Purchasing by engagement group

Table 32. Repeat consumer by engagement group

Table 33. Recommendation by engagement group

Table 34. Q12_Fan or follower – Are you fan or follower of any brand on Social Media websites?

Table 35. Q12_Fan or follower – Are you fan or follower of any brand on Social Media website?

Table 36. Q18 Have you ever purchased any product or service from the brands you connect with on Social Media?

Table 37. Q21 Did you recommend any of the brands you connect with on Social Media to your friends or family?

Table 38. SM strategy planning and prioritisation matrix

Table 4 Final distributed questionnaire questions after modifications from the pilot

List of figures

Figure 1. Social Media Landscape

Figure 2. Maslow's Theory of Human Motivation

Figure 3. The Linear Model of Communication

Figure 4. Common Field of Experience model

Figure 5. The Transactional Model of communication

Figure 6. The Conversation Prism Model

Figure 7. The Content Grid Model

Figure 8. Social Media Platform Groups According to Functionality

Figure 9. Advertising expenditure by medium

Figure 10. Average person’s daily media consumption habits

Figure 11. Share of Time Spent on online activity in US

Figure 12. UK internet sectors share of total internet

Figure 13. Facebook daily visitors in UK vs other top websites

Figure 14. Proportion of adults who access social networking sites at home

Figure 15. Facebook UK's members age groups

Figure 16. Percent of each generation in each Social Technographics category

Figure 17. Fields in The Database of Intentions as of Early 2010

Figure 18. Area that is Responsible for the Creation/Maintenance of the Social Media Communication Plan According to US Companies, May 2010 (% of respondents)

Figure 19. Consumer loyalty drives profitability in the long term

Figure 20. Current SM Strategy Budgets

Figure 21. Social Networks have the greatest mobile web reach in the UK and US Unique Mobile Internet Audience (000s) Q4 2008

Figure 22. Hybrid Integration Model leverages social media capabilities

Figure 23. Age groups of invited representative sample

Figure 24. Actual age groups of responding participants

Figure 25. Independence of Gender vs. Social Media usage in UK

Figure 26. The SM corporate engagement index “SMengage”

Figure 27. Histogram Dependent Variable: SMengage

Figure 28. Spectrum of online relationships and ROI

Figure 29. Turning passive consumers into brand advocates to achieve ROI

Figure 30. Calculating SM campaign traction by comparing performance

Figure 31. Social Media Monitoring, Metrics and measurement tools by category

Figure 32. The ups and downs of social networking around the world

Figure 33. Framework showing how a brand need to indirectly communicate with ‘connectors’ and ‘mavens’ to achieve WOM throughout the purchase decision cycle

Figure 34. Building trust through different decision stages to achieve eWOM

Figure 35. Indirect interactions create a SweetSpot between SM with other channels

Figure 36. Types of Smartphones currently used by participants

Figure 37. Most Social Media tools used by questionnaire participants

Figure 38. Total online experience length vs. social media experience on PC and mobile

Figure 39. How many times have you accessed social media in the past week?

Figure 40. Number of participants following a brands on Social Media sites

Figure 41. Participants’ agreement with Social Media sites and tools’ statements

Figure 42. Main reasons for joining Social Media sites

Figure 43. Purchasing Decision Cycle Stages

Figure 44. Percent of each generation in each Social Technographics category

Abbreviations & Glossary

- B2B Business to Business

- B2C Business to Consumer

- Broadband A service or connection generally defined as being ‘always on’ and providing a bandwidth greater than narrowband (Ofcom, 2010).

- CMOs Chief Marketing Officers

· Corporate A company or institution. Authorised to act as a single entity and recognised as such in law (OxfordDictionaries, 2009) .

- Digital Britain The Government report, published in June 2009, outlining a ‘strategic vision for ensuring that the UK is at the leading edge of the global digital economy’ (Ofcom, 2010).

- eWOM Word-of-mouth referral that can spread over electronic channels, where ‘people networks’ promote the message without outside influence or management (CorkingPR, 2009).

- Generation X Is the generation born after the baby boom ended, generally referring to those born between 1965 and 1978 (DemandMade, 2010).

- Generation Y The generation of people born in the 1980s and 1990s, also known as the Millennial Generation (Wikipedia, 2010).

- GPS The GPS (global positioning system) is a ‘constellation’ of 24 well-spaced satellites that orbit the Earth and make it possible for people with ground receivers to pinpoint their geographic location (Ofcom, 2010).

- Internet A global network of networks, using a common set of standards (e.g. internet protocol), accessed by users with a computer via a service provider (Ofcom, 2010).

- Infographics Information graphics or infographics are visual representations of information, data or knowledge. These graphics are used where complex information needs to be explained quickly and clearly (Newsom et al., 2004).

- Internet-enabled mobile phone A mobile phone which allows its user to access the internet via in-built access technology such as GPRS or WCDMA (Ofcom, 2010).

- Smartphone A mobile phone that offers more advanced computing ability and connectivity than a contemporary basic 'feature phone’ (Ofcom, 2010).

- Social Objects The reason two people are engaging in socialising among themselves (Macleod, 2007).

- Social networking site (SNS) A website that allows users to join communities and interact with friends or to others that share common interests (Ofcom, 2010).

- Social Media (SM) A combination of social networking sites and mobile applications that allows users to join communities and interact with friends or to others that share common interests (Ofcom, 2010).

- Return on Investment (ROI) A financial term; a measure of budget spent on a campaign, versus the income generated through the activity (CorkingPR, 2009).

- Unique Audience The number of different people visiting a website or using an application (Ofcom, 2010).

- Web 2.0 A perceived ‘second generation’ of web-based communities and hosted services - such as social networking sites and wikis, which facilitate collaboration and sharing between users (Ofcom, 2010).

- WOM Word-of-mouth referrals.

Chapter 1: Introduction

1.1 Background to the research

The history of communication marks the history of mankind, and since the communication process encompasses a great deal of human activity, humanity continues to create an infinite variety of visual and verbal expression tools from the cave paintings to digital messages transmitted online. Therefore, communication is a basic human need that is fundamental to the all social organisation (Andersen et al., 2008, Wood, 2009).

In today's people-centric world, there is no doubt that internet technological advances effectively provides possibilities to fulfil the basic human need to communicate. Moreover, new forms of interactive online media channels have emerged, encouraging ongoing connections and relationship building not only amongst consumers and each other but also between them and their favourite brands in ways that were not possible before (Goessl, 2010). Those new channels — or what is known as Social Media (SM) — are an evolution of the same basic human need to communicate, which creates opportunities for corporates to monetise this as an effective marketing tool.

During recessions, corporates expect more out of their advertising budgets. A prominent mass media channel like SM can provide marketers with cost efficient outreach opportunities to distribute their corporate messages to recipients. If supported by the rapid convergence between online and mobile technologies, SM can trigger changes in web behaviour through WOM that can spread over electronic channels, known as ‘eWOM’ (Chan et al., 2007).

For a corporate to leverage those opportunities, it needs to understand the dynamics governing the evolving medium and accept possibilities that the communication process is happening for different motives than those assumed by marketers. For instance, some consumers can perceive marketing messages as an interruption to natural communication flow among friends, while others seek ways to connect with brands and know about special offers.

It therefore seems reasonable for the researcher to begin the quest by investigating human communication dynamics to help corporates better engage with consumers in a very challenging consumer-centric market, after understanding factors motivating or de-motivating consumers from SM engagement, especially with brands. Only then, can they influence those factors and monetise their fanbase.

1.2 Purpose of the research

Currently, there is a paucity of academic research that adopts a holistic approach to exploring the dynamics of consumer behaviour on SM channels. The aim of the research is to identify the main factors and critical components of an effective corporate SM strategy.

Those components need to be studied in detail, for marketers to exploit the full potential of SM. Potential that is shown by phenomenal growth by successful websites such as Facebook, which attracted over 500 million unique subscribers in less than six years (Goessl, 2010, Smith, 2008).

This research will attempt to discover how a corporate can create opportunities to monetise their SM followers and fans, through exploring the inter-relationships between consumer communication motives, and whether their purchasing decisions and WOM endorsements can be influenced by their engagement with brands on SM during the different stages of the purchasing cycle ( brand awareness, product consideration, sales conversion and post-purchase support).

Whilst indications of those relationships have been established in a number of industry related articles and journals, no detailed investigation has been conducted in academic papers in recent years. This research proposes to fill that gap through investigating the current SM landscape a mix of primary and secondary data sources to discover possible gaps between consumer expectations, behaviour factors, and corporate approach in exploiting SM.

1.3 The contribution of the research

While some corporates are ahead of others when it comes to taking part in this revolution, what is apparent is that most are still testing different concepts to harness the marketing potential of SM with varying degrees of success and failure, which could be due to a number of possible factors.

The research will contribute to the body of knowledge through investigating the research propositions that corporate strategies lack full understanding of SM dynamics, creating (a) Gaps in understanding the SM ecosystem’s dynamics, and (b) Communication barriers between marketers and consumers due to using an improper communication approach or timing (Owyang et al., 2009).

This will help create an “Engagement Model” that marketers can utilise to evaluate best approaches to reach consumers and to gauge value of SM activities such as WOM and viral videos (Kokich, 2009, Palmer et al., 2009) while identifying opportunities to monetise SM.

1.4 Scope and limitations

Nowadays, hundreds of websites and mobile applications construct the SM landscape [Figure 1]. The research scope will be limited to examining current top traffic SM platforms that are also regularly used by different corporates and marketing agencies as part of their digital marketing and PR strategy and in particular websites that were launched to the public after 2004 including [Facebook, Twitter, YouTube, Flickr, Linkedin]. It will also cover new trends that are becoming part of the SM construct including the integration between mobile devices and social web [iPhone location based applications including ‘FourSquare’, and crowdsourcing applications like ‘Waze’] that, combined, create a new “web connective tissue” to form the current SM landscape. Other social networks focusing on dating, virtual 3D worlds, gambling, finance or gaming will not be covered by this research.

Figure 1. Social Media Landscape

Abbildung in dieser Leseprobe nicht enthalten

Source: FredCavaza.net (Cavazza, 2008)

Other limitations facing the researcher include limited access to top-level executives and confidential budget data related to investments in SM and ROI calculations, hence relying on secondary public data sources to discover corporate expectations from their SM activities.

1.5 Structure of the document

This document is divided into six chapters: Chapter 1 provides an overview of the topic background and research approach, including scope and limitations of the research. Chapter 2 provides an overview of the current social media landscape, while critically reviewing available literature to cover a wide spectrum of angles and give a multi-dimensional view of the interlinked SM ecosystem, including explanations of engagement theories and case studies. This chapter acts as a secondary source of research data that compliments the primary empirical research (Chapter 3).

Chapter 3 is the primary research including a description of the population, the sampling criteria, research methodology, as well as pilot and questionnaire questions. The data is analysed in depth and tested against the hypotheses using SPSS. Findings are then discussed in detail and summarised in Chapter 4. Overall strategic direction a corporate can take based on the above findings is discussed throughout Chapter 5. While Chapter 6 provides a conclusion and a number of original strategic models that were developed by the researcher as a proposal to answer the main question: How can a corporate fully exploit the commercial aspects of SM.

Full literature references are cited and provided as a list at the end of the document in Harvard style.

Appendices A and B include diagrams highlighting a number of trends related to the primary research findings as well as behaviour of the representative sample.

1.6 Conclusion

SM has triggered a new world of online communication opportunities, not only on the social level where consumers can exchange information with each other, but also on the business level providing real-time communication between corporates and consumers.

It marks an eMarketing revolution with great potential as a new channel that can reach the huge consumer base a corporate can leverage to promote its brands. On the other hand, SM requires organisations to acquire new skills and competences in order to be able to communicate effectively with their consumers while minimising communication interruptions.

If communication is a human need, then organisations would do well to identify those needs to develop strategies that would influence and monetise their own follower base.

The following chapters of this research will try to visualise the dynamics of how this corporate/consumer relationship works in a lightning speed, growing market and how communication plays a great part in this growth.

Chapter 2: Literature review and theoretical background

2.1 Communication as a human need

According to Schutz (1966) “we communicate to meet a range of human needs”. Moving up Maslow’s hierarchy, we find that humans try to fit into social groups to achieve belonging, acceptance, and affirmation, and to be able to give back by sharing same thoughts and feelings with others. Therefore, we communicate to meet belonging needs by talking with others, listening and responding to what they say (Maslow, 1968a, Maslow, 1968b), all of which are fundamental concepts of SM interaction.

Scholars have also established evidence that communication is not only a human need but also a means for a healthier life, by showing connections between unfulfilled belonging needs and an increased risk of heart disease (Wood, 2009). According to Maslow (1968a), self-esteem is also shaped by those whom we interact with, and involves valuing and respecting ourselves and being valued and respected by others (Wood, 2009), which is similar to interactions among members of an online community for example [Figure 2].

Figure 2. Maslow's Theory of Human Motivation

Abbildung in dieser Leseprobe nicht enthalten

Source: Adapted from Toward a Psychology of Being (Maslow, 1968b)

2.1.1 Basic linear communication models

Early models that dealt with human communication were simplistic linear models with serious shortcomings compared to current, more sophisticated ones. For example, Laswell (1948) depicted communication as a linear, one-way process. Shannon and Weaver (1949) revised the model and offered “noise” as a cause of loss of information as the information flows in one direction from a Sender to a Receiver or Listener [Figure 3] who can’t send messages and only absorbs passively what the sender is transmitting (Wood, 2009).

Figure 3. The Linear Model of Communication

Abbildung in dieser Leseprobe nicht enthalten

Source: Adapted from The Mathematical Theory of Communication (Shannon et al., 1949)

Taking a different approach, the Schramm (1954) model focused on the importance of ‘ common field of experience’ among communicators, which leads to better understanding and less misunderstandings [Figure 4]. Although an improvement over older linear models, it failed to capture the dynamic nature of interpersonal communication and the ways it evolves over time (Wood, 2009).

Figure 4. Common Field of Experience model

Abbildung in dieser Leseprobe nicht enthalten

Source: Adapted from Interpersonal Communication: Everyday Encounters (1954, Wood, 2009)

Taking the above into consideration, one can argue that from an online communication perspective this noise and communicating without having a common interest is what is currently known as ‘spam’. This also applies to out-of-context marketing messages, randomly broadcasted without prior consent from recipients and results in the interruption to normal communication flow among community members.

2.1.2 Many-to-many communication models

Modern interactive models such as the ‘transactional model of interpersonal communication’ recognises such gaps and offers improvements by taking into account the non-sequential and simultaneous natures among communicators who assume multiple roles while interacting. The model [Figure 5] also implies that communicators affect each other and adapt how they interact leading to relationship changes and intimacy over time (Rothwell, 2004). The model emphasises how messages, noise, and personal fields of experience may vary over time forming a shared field of experience among all communicators (Wood, 2009), which is important for a corporate trying to affect consumer decisions; as it usually takes time to happen.

Figure 5. The Transactional Model of communication

Abbildung in dieser Leseprobe nicht enthalten

Source: Adapted from Interpersonal Communication: Everyday Encounters (Wood, 2009)

These concepts of simultaneous interaction and evolving relationships over time are very relevant to corporates investigating effective strategies to engage with online consumers. Furthermore, SM can provide the platform to build those relationships, intimacy and trust over time to positively influence the consumer experience. Corporates first need to understand the dynamic nature of the SM communication ecosystem before engaging with consumers; as linear, one-to-many mass broadcasting models might need to be adapted for SM engagement. For example, timing and relevancy are two very important factors that could also act as barriers to the target audience if marketing messages are perceived to be irrelevant noise that interrupts their communication.

By learning from those models, a corporate can adapt the communication style and timing to create value and trust among consumers who possibly have different needs and priorities than the business objectives of the corporate.

The battle for physical market territory has now evolved into competing for an online share of mind. Latest reports predict that by 2014, more than three billion of the world’s adult population will be able to transact electronically via mobile and Internet technology (Gartner, 2010) extending brand perception management into cyberspace. The challenge is making an emotional connection that leads to people falling in love with and trusting the brand in order to develop strong loyalty to that brand. According to Landor “products are created in the factory. Brands are created in the mind” (Bennett, 2010). While being remembered is essential, it’s becoming harder every day especially with information overload and that if done wrongly, “communication is irreversible” particularly online (Wood, 2009).

In its modern definition: ‘communication is a transactional process’ that exists on a continuum ranging from impersonal to interpersonal. Taking this into consideration, the discussed model can provide a corporate a framework for building dialogue, sustaining strong relationships and trust with modern consumers over time; while impacting brand perceptions and mind share (Wood, 2009).

The discussed complex relationships and communication factors are important for a corporate to fully understand when dealing with its “fans or followers” on SM channels. Moreover, three dimensions of relationship-levels have been identified and need to be understood better: a) Responsiveness referring to how aware of others [or corporates] and involved we are. b) Liking deals with the degree of positive or negative feeling during communication. c) Consumers being selective in their communication with non-close friends like advertisers in this case (Richmond et al., 2000, Wood, 2009).

However, it is worth noting that although liking may seem synonymous with responsiveness, the two are actually distinct. It is also important not to assume that brand awareness will automatically result in the desired response from consumers, or lead to a change in their purchasing behaviour; as we can be preoccupied and unresponsive to people [or brands] about whom we care about sometimes (Wood, 2009).

A study by Gartner has revealed that the majority of today's consumers rely on social networks as an effective cost-efficient communication tool to help to guide them throughout their purchase decision lifecycle. Despite this fact, and eWOM reach possibilities, social networks [like Facebook, Twitter, etc.] are currently an underutilised aspect to the marketing process (Ingelbrecht et al., 2010, Perez, 2010). The majority of marketers have no formal social-media strategy (O'Malley, 2010), which is quite dangerous; since a strategy built on intuitive consumer-centric business approach wouldn’t necessarily justify to stakeholders the value of a brand fanbase, assess associated risks, or prove return on investment (ROI) of engaging on the new ecosystem.

2.4 Consumer driven ecosystem

Literature dedicated to ‘post 2006 Social Media’ when Facebook became public, is relatively very new compared to those studying the effectiveness of e-commerce or internet trends for example. However, the literature examining business interaction between marketers and consumers through SM has increased as scholars actively try to understand how online communities facilitate and influence consumer behaviour, including WOM recommendations (Boyd et al., 2007, Kim et al., 2008) [Figure 10, Figure 16, Figure 44][Table 1]

Despite corporates’ aims to make profitable use of SM platforms [such as Wikipedia, Facebook, FourSquare, and Twitter], due to “affordance and reach” there seems to be limited agreement on what the term “Social Media” means exactly (Boyd et al., 2007). The term became a buzzword when O’Reilly labelled a conference as Web 2.0 back in 2005 (Wikipedia.org, 2010b). Yet, although related to user-generated content, Web 2.0 is not synonymous with SM, as advanced web programming technologies do not necessarily include a media or any social activity.

Taking this holistic scope into account, the researcher suggests taking SM as an umbrella term, under which one can find various and very different behaviours related to creating, consuming and sharing content among a community of connected participants using a PC or a web-enabled device [iPhone/iPad, Android, etc.]

2.4.1 Definition of ‘Social Media’

A common agreement among scholars and industry journals is that SM marketing is the practice of utilising various SM websites and mobile interactive tools – or what are known as ‘SM platforms’ – to facilitate dialogue and the sharing of content between corporate: ‘content publishers’, consumers: ‘recipients’, and their contacts: ‘peers’. The SM platforms include blogs, professional and social networks, video and photo sharing sites, Wikis, forums and related Web 2.0 and mobile technologies (MarketingSherpa, 2009). Other emerging concepts such as iPhone/iPod and augmented reality applications act as catalysts for adopting an on-the-go lifestyle (Szymczyk, 2009).

As a result, there is evidence of a rapid shift away from one-to-many mass broadcasting [push model] into a many-to-many [pull model]. Moreover, more people transform from being content recipients into content creators. This also facilitates the “democratisation of information” (Wikipedia.org, 2010a) and allows the internet to be an integral part of the daily lives of over 600m internet users globally regardless of age, gender, social class, and how they interact with each other as well as their favourite brands (Goessl, 2010, Smith, 2008).

Traditional Media generally refers to mass communication of ideas or information. Social implies a multi-directional interaction process among multiple participants within a community. Taken together, SM therefore refers to many-to-many communication platforms that are sustained by the interaction of participants utilising advanced communication capabilities to provide consumers with a diverse array of tools that allow them to interact and engage with each other (and their favourite brands).

A new internet connective tissue has evolved and is driven by user-generated content. For example, SM could be centred on a specific need (Twitter = updates, Linkedin = business networking) or feature (Flickr = photos, YouTube = video), in other cases, belonging to the community itself is the main attraction (Facebook =Social networking, MySpace = music).

2.4.2 The connective tissue of the web

Without the interactions between enough people, SM platforms would fail, even if the media platform had splendid features like in the case of earlier SM site ‘SixDegrees’. This closed down in 2001 a year after being acquired for US$125 million as it couldn’t gain enough public momentum to generate the required user base growth. Therefore, SM websites adopt different techniques to grow their registered user base quickly to facilitate engagement and eWOM recommendation opportunities to gain new consumers and to attract venture capital investments. For example, in 2007 Facebook was able to raise $240 million equity stake from Microsoft at a $15 billion valuation (Facebook, 2007). Its current evaluation stands at around $40 billion due to its current 500 million member base.

Corporates need to keep an eye on latest trends in this dynamic landscape to focus efforts and budgets. For example, some SM websites could suffer noticeable slowdown in growth if user behaviour patterns change over time or churn due to successful marketing efforts of competing websites. After Facebook became mainstream in 2006, users’ attention shifted away from top SM websites ‘SecondLife’ and ‘MySpace’, to use two examples.

Another trend that corporates need to monitor is the impact of low-cost availability of information. In his 1951 work, The Bias of Communication, Innis (1999) predicted results that, maybe surprisingly, accurately reflect current SM trends due to the dramatic reduction in communication costs, including:

1. Power shifts, due to redistribution of knowledge
2. Amateurs competing with professionals, due to easy access to knowledge substitutes for mastery of complexity
3. Individuals and minorities voicing ideas freely
4. Reduction in advantages related to speed-to-knowledge before others; as information spreads in real-time
5. Reduction in advantages of organisational size and ability to afford high budgets; as SM allows any entity or individual to influence others with their message.

2.4.3 eWOM and brand value opportunities

In this highly networked age, marketers are facing challenges and opportunities due to the emergence of new communication platforms such as SM where corporates are able to address their target audience both directly and indirectly (Palmer et al., 2009).

In facing these brand management challenges, marketers need to fundamentally rethink the way they engage with consumers, as well as how they assess payback from SM. For example, factoring in consumer WOM referral value – resulting from effective electronic interactions – instead of focusing on traditional sales value of a consumer. Individual consumers can be high influencers when it comes to eWOM, despite being a low-potential or low-value purchaser themselves (B&T, 2010).

Some marketers have adopted an active engagement role to build innovative online communication platforms and techniques (Chan et al., 2007) to identify ‘influential users’ who can influence purchasing and eWOM decisions of others in their networks.

Scholars are also identifying factors that trigger eWOM behaviour among SM members (Yeh et al., 2008) and this research will examine this in detail, including user generated content, motives behind sharing, and the dynamics of trust on SM.

2.5 Impact on traditional media landscape

According to ComScore, Facebook already has a 16% share out of the $9 billion ad impressions market vs. 2.4% for Google (Robles, 2010). Marketers are seeking opportunities for their corporates on SM and these same SM opportunities also impact on other types of communicative technologies usage – such as the phone and email (Richardson et al., 2009).

However, many European marketing managers have found that communication through traditional mass media, especially during the recession, has been ineffective, inefficient, and costly (Joachimsthaler et al., 1997). This is expected as the consideration phase is more important than awareness in a recession – and that's where advertising flops and social recommendations succeed (Bernoff, 2008).

According to a Mintel study (2010), in response to the recession, nine out of ten adult internet users are surfing the net more at home as it becomes a low-cost method of accessing a wide variety of media. For example reading free newspapers and magazines instead of paid-for publications [43% and 34% respectively] and downloading free rather than paid-for music, movies and podcasts [20% and 13% respectively].

It appears that in recession, consumers are increasingly blocking traditional marketing messages and choosing how they receive their information, but more importantly, what and whom to trust other than their close circle of friends. While advertising is mostly about generating awareness and reinforcing brand identity, SM on the other hand, is about people connecting with others and possibly influencing their purchase decisions. It is also cheap and measurable. Social applications can be nearly free through blogs, Linkedin and Facebook pages, for example (Bernoff, 2008).

Five years ago consumers simply Googled their queries ‘awareness phase’, weighed results ‘consideration phase’, and made the ‘purchase’. Today they might post the question on SM to get second opinions from their trusted friends, or seek professional help from ‘experts’ on professional social networks like Linkedin Answers; to ensure they lower the risk of taking a rushed purchasing decision.

Both researchers and corporates are aiming to understand how online communities facilitate consumer behaviour through conversations and eWOM recommendations to help brands engage effectively with their audience. Kim et al (2008) believes that the online community not only serves as an important reference group for participants but also possibly plays an influential role in member’s purchasing decisions or eWOM behaviour.

Haque (2010) believes that SM is fundamentally rewiring communities and business through new dynamics that can offer a cost-effective opportunity for marketers to engage with influencers, building their brand reputation and trust over time, leading to brand preference and sales conversion.

Since those conversations are happening on SM channels, understanding the differences and rules of engagement on those public communities would allow a corporate to adapt its marketing message and to approach the audience differently depending on segments and platform; and ultimately achieve collaboration and engagement with its followers. For more control, a corporate might decide to build its own dedicated SM community, which is typically still a lot cheaper than a significant sized ad campaign (Bernoff, 2008).

2.6 Explaining the evolution

A number of models take different approaches to describing the fast-evolving SM ecosystem, which helps a corporate evaluate its available options and prioritise its SM engagement efforts.

Kaplan classifies SM platforms by characteristics including collaborative projects, blogs, content communities, social networking sites, virtual game worlds, and virtual social worlds. (Kaplan et al., 2010). “The Conversation Prism” model [Figure 6] (JESS3, 2010), groups SM platforms according to reasons of user engagement.

Figure 6. The Conversation Prism Model

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Source: The Conversation Prism (JESS3, 2010)

Catalyst (2010) categorises SM platforms according to functionality [Figure 8] to describe the SM ecosystem, while “The Content Grid” model [Figure 7] symbolically represents and visualizes the average business sales cycle and how the existing SM platforms currently fit two continuums: awareness vs. consideration and centralized vs. decentralized. The model can help organisations reach out to SM customers throughout stages of the purchasing cycle, and how much control they want to have while managing customer relationships (ShashiBellamkonda1, 2010).

Figure 7. The Content Grid Model

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Source: The digital letter (Yeung, 2010)

Figure 8. Social Media Platform Groups According to Functionality

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Source: Marketing Strategies That Captivate Today's Social Media Audiences (conference)` (Platt, 2010)

Regardless of how the evolving ecosystem is described, most scholars agree that a new era or web revolution has been triggered by the combination of the web interactive capabilities and Smartphone applications that jointly form the connective tissue of what we now call SM.

2.7 Shifts in budget focus

Realising these digital age trends, many corporates are already shifting attention to SM as both an effective approach to reach a larger group of target consumers, throughout different phases of their purchasing cycle (Goessl, 2010), and also as a cost efficient alternative to traditional mass media [print, radio and TV].

For example, despite the economic downturn, 81% of marketers intend to increase their online advertising budgets (Hartley, 2009) from $1.21 billion [3.9%] in 2009, to $1.39 billion [7.7%] in 2011 (Washington et al., 2010) [Table 1] at the expense of print [decrease of 41%], radio [decrease of 26%], and television [decrease of 22%].

Table 1. Comparative Estimates: UK Online Advertising Spending. 2009-2014 (billions)

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Data Source: eMarketer.com, June 2010; various, as noted, 2009 & 2010 (Andrews, 2010)

Furthermore, in the first half of 2009, the UK became the first major economy in which online advertising budgets surpassed TV campaign budgets [Figure 9]. eMarketer predicts that internet advertising spend will overtake the whole of the print sector spend combined in 2010 with a forecast of £3.79 billion ad spend (Andrews, 2010).

Figure 9. Advertising expenditure by medium

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Data Source: Global Ad Recovery Strengthens as Us Returns to Slow Growth (ZenithOptimedia, 2010)

Marketers and agencies alike believe that strong consumer relationships can be established over time through the strategic use of SM tactics (Foster et al., 2010, Marketwire, 2009) to influence purchasing decisions. However, such ‘earned media’ usually requires significant amounts of effort and in some cases, budgets (Goessl, 2010). For example, In 2008 T-Mobile leveraged the power of eWOM through a viral video campaign [The Dance] that gained instant free publicity for the brand among 21 million people who shared and commented on the video on SM video sites (Antcliff, 2009).

Is it possible then that earned media can alone provide the needed marketing exposure without the use of traditional paid media? Rosen (2010) argues that in fact “memory is what often drives conversations” between persons, hence the need for traditional advertising channels to remind consumers of their experience with a product or service to earn eWOM, especially with current behaviour of multi-tasking and simultaneously consuming different media.

For example 36% of Europeans who are online [52%] indicated that they watch less TV since going online, while 28% reduced newspaper and magazine reading, and 17% radio listening (Leckart, 2009, Ostrow, 2009, Owyang et al., 2009) [Figure 10].

Figure 10. Average person’s daily media consumption habits

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Source: Wired Magazine (Leckart, 2009)

Honda adopted those emerging concepts of mixing traditional and SM in its advertising campaign in CarTown, a Facebook game where a paid-for branded billboard is seen by the gaming community promoting the latest sport hybrid coupé, the Honda CR-Z (Indvik, 2010) and at the same time creates opportunities for earned-media eWOM.

In the UK, internet take-up has now reached 73% of households, while surfing the web is the most popular mobile internet activity among 18% of mobile phone users, a five percentage point increase since Q2 2007 (Ofcom, 2010).

2.8 Could Social Media be another bubble?

Latest reports show that social networks dominate the internet but are still evaluating means to monetise their content and growing user base, accounting for more than 67% of all online activity (Department for Culture et al., 2009, Keane, 2010).

Before committing to investments and looking into strategies to harness SM marketing potential, a corporate needs to assess the associated commercial potential and risks, ensuring that it is not investing in a fad that would disappear with time or that would negatively affect its brand equity.

Furthermore, with stakeholders across the organisation seeking evidence to justify ROI, understanding success factors and dynamics of SM engagement becomes crucial, including examining the SM community impact on members’ decisions, as well as diversity of members’ demographics and motives when engaging with each other and brands on SM.

Current growth and usage trends provide evidence that the SM phenomenon is here to stay, with huge potential for eWOM activity especially on popular platforms like Facebook and Twitter. For example, Facebook alone was able to engage its US members for almost 14 billion minutes per year [Table 2] (Conneally, 2009, Lee, 2009, Smith, 2009). Another report by Nielsen [Figure 11], shows that SM is now the most popular activity online in the USA, where consumers spend a quarter of their online time [up 43% compared to 2009] (Keane, 2010).

Figure 11. Share of Time Spent on online activity in US

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Data Source: Nielsen (Keane, 2010)

The latest UK numbers reflect a similar story; according to the latest Ofcom report (2010) social networking now accounts for 23% [Figure 12] of all time spent online in the UK. This is driven by the growth of Facebook, whose reach rose by 31% compared to 2009, reaching a unique UK audience of 26 million.

Figure 12. UK internet sectors share of total internet

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Source: Communications Market Report (Ofcom, 2010)

Globally, Facebook has attracted over 500 million registered members in less than six years [Figure 13]. Similarly, in 2009 we saw exponential growth of SM; according to Nielsen Online, Twitter grew 1,382% year-on-year [Feb 08 – Feb 09], registering a total of just more than 7 million unique visitors in the US. with very little advertising (Armano, 2010b, Conneally, 2009, Goessl, 2010, Lee, 2009, Ostrow, 2009, Owyang et al., 2009, Smith, 2008, Smith, 2009, The Ups and Downs of Social Networks, 2010).

Figure 13. Facebook daily visitors in UK vs other top websites

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Data Source: Google Trends (Google, 2009)

Over 60% of the UK’s 15-34 year olds access SM at home [Figure 14] compared to 48% of adults between 35-54 and 20% of over 55s. Despite the growth and high penetration rates, SM adoption still lags behind total internet adoption in the UK (Ofcom, 2010).

Figure 14. Proportion of adults who access social networking sites at home

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Source: Communications Market Report (Ofcom, 2010)

Table 2. Top social networking websites by total minutes

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Data Source: The Nielsen Company (Nielsen, 2009b)

Stibel (2008) believes that that such fast SM growth might lead to an implosion; as social networks can’t grow forever, eventually hitting a point where a counter-trend occurs due to “social overload”. Reminding us of the internet bubble that was fuelled by the ‘Metcalfe's Law’ notion that bigger networks become more powerful, which is true during the growth phase up to a certain point (Armano, 2010a).

Based on that, the real power of a network then does not lie in its growth rate or size, but in its stability, when better communication, interaction and even consciousness can develop (Stibel, 2008). A corporate should focus on developing two-way interactions to allow richer connections with influential users that lead to trust and eWOM sharing opportunities in the long term.

2.8.1 Case study: Obama’s presidential campaign

Despite its marketing potential, SM audience is generally perceived to be dominated by early adopters and teens. However, in 2008 something happened to change this perception forever and provide a classic case study that marked the beginning of a new era for SM, turning “Social Networking into the global consumer phenomenon of 2008” (Nielsen, 2009a).

Scholars believe that Obama’s presidential machine forced sceptical marketers to take SM more seriously; by providing evidence that SM can indeed influence mass consumer behaviour. A Facebook fanpage built a movement by reaching out for voters through creating direct dialogue between Obama and the nation, positioning him as an approachable young leader and possibly contributing to his winning of the US elections through effective utilisation of SM tactics (Kokich, 2009).

The marketing team not only expressed his opinions to the nation through the new channel, but also influenced new segments of voters to take proactive action and participate in the election process, via clear communication of how to apply for their first voting card and consequently influence their voting decision.

More evidence came from sentiment analysis of tweets posted in the run-up to the 2008 US presidential election, by Carnegie Mellon University. They found that tweets followed formal opinion polls closely, thereby showing that Twitter could provide a cheaper and quicker alternative to monitoring public voting intentions as the election neared (Giles, 2010).

Timed with the deep recession, corporates took note of these emerging concepts and started exploiting different commercial opportunities to monetise the medium deploying techniques to influence consumer brand perception, and possibly alter their behaviour to generate revenue and cut costs. For example, Lenovo was able to achieve a 20% reduction in call centre activity as consumers went to a community website, while Dell sold $3,000,000 worth of computers via engagements on Twitter. Today over 300,000 businesses have a presence on Facebook, a third are small businesses (Quetteville, 2009).

On the other hand, some studies argue that the recession has also triggered a new trend of “staying-in”; consumers limit their entertainment spend while their normal need to communicate and exchange stories is still high which might have contributed to the recent boom of SM coinciding with the same period. Having the possibility to exchange special discounts and tips via SM might also be another indirect factor for that boom (Quetteville, 2009).

A clear strategy is needed to ensure correct execution and to raise brand awareness and intent among consumers, and ultimately build retention and WOM, exactly like the Obama campaign success.

2.9 External strategic challenges

Today, many corporates communicate directly with their consumers and focus on building trust and long-term relationships via SM, which is probably one of the biggest changes of all (Goessl, 2010). Nearly every organisation is facing big transformations in people, process and technology fuelled by the dynamic user-centric nature of SM; and a new accelerated consumer purchasing lifecycle [from awareness to consideration] that is not only unfamiliar to them, but also lacks the control and protection that traditional marketing channels granted corporates for decades (Armano, 2009b).

With such challenges, marketers need to have a coherent SM strategy. Strangely, there is evidence that 52% of social marketers are operating “without a game plan” (Fielding, 2010, R2Integrated, 2010). Another study from Digital Brand Expressions shows that of the 70% of corporates with a SM presence, only 41% have a strategic communication plan to guide such activity (EXBD, 2009, O'Malley, 2010), while only 45% had policies governing how to respond to comments or guidelines to manage crises on social websites (eMarketer, 2010)

From the above, it is evident that in order for a corporate to develop an effective strategy, they need to study external factors [including recession impact, diversity of consumers, future trends] as well as internal factors [including stakeholders, corporate culture, budgets, measuring ROI] that can lead to challenges. External challenges include:

2.9.1 Recession pressures

With the recession adding more pressure to deliver measurable results, managers are faced with complex decisions when building their marketing strategies, in particular those involving SM activities. More so, one of the difficulties faced in order to gain necessary internal buy-in is defining clear measurable key performance indicators (KPIs) to gauge value and prove ROI of SM activities such as WOM and video virals (Kokich, 2009, Palmer et al., 2009).

Like any new trend, SM initiated a lot of controversy about its credibility and adding value to corporates. There are very few studies on the ROI of corporate utilising SM to interact with prospect consumers. People may believe in the power of SM more than ever, but it is still hard to make a business case for investment based on belief alone.

White (2005) believes that more businesses are recognising how to best leverage SM tools to build a community dialogue based on engagement and interaction – the foundations of SM. This dialogue creates a chance to learn from consumer behaviour (Balwani, 2009).

2.9.2 Diversity of consumer behaviour

Almost two-thirds of marketers believe that strong consumer relationships can be established through the strategic use of internet technology. Therefore, it is important to understand the overall motivational construct; to explain why certain users participate or share on SM (Foster et al., 2010, Li et al., 2008a, Marketwire, 2009).

For effective engagement, a corporate needs to understand the diversity of users, with different types of personalities and motives for joining and sharing content on SM (Samuel, 2010). As Li argues, “Assuming everyone wants the same thing as you [corporates] do would be a big mistake” (HBR, 2008, Li et al., 2008a).

In their book, Groundswell, Li and Bernoffand discuss what they believe are the real motivational reasons behind engaging on a SM site, showing a clear mismatch between those and the marketers’ assumptions (2010, Li et al., 2008b).

Those engagement reasons included: (1) Keeping up with what is going on with people they already know, (2) Making new friends, (3) Social pressure from existing friends to join, (4) Curiosity about the concept, (5) ‘Culture of generosity’ and wanting to help, (6) Show their work and creativity to generate business leads, (7) To be perceived as knowledgeable experts in their fields, and (8) Affinity with others who share their specific and sometimes niche interests.

While identifying influential consumers to target online, marketers are realising that not everyone is alike nor worth targeting equally. To add to the complexity, a person’s SM network can be, but is not necessarily, the same as their offline network. There are also possibilities for individuals to impersonate others on SM, as well as create ‘virtual personas’ or ‘avatars’ and pretend behaviours that are different to their real behaviour away from SM, which can be misleading to corporates engaging in SM or eWOM activity thus affecting results.

2.9.3 Demographics and characteristics

A number of studies take different approaches to identify possible factors affecting how members interact within the SM ecosystem, including demographics, age, behaviour, intentions, and roles SM individuals play on different platforms. It is now clear that there are specific personality types and demographics that can be identified and should be targeted to promote a brand, company, product or service on SM (Ingelbrecht et al., 2010).

For example, despite the common belief that SM is associated with Generation Y, and not attracting enough older Generation X members, a couple of recent studies challenge this stereotype through analysing other segments – including mums in their 30s and their motivations for using emerging digital and SM channels (Facebook Vs Twitter and the Demographics of Social Networkers, 2009, Fortner et al., 2009, Walter et al., 2009).

Furthermore, according to Facebook’s own statistics, only 16% of its 27.8 million UK members are under 18 years old [Figure 15] (Facebook, 2010a).

[...]

Details

Pages
131
Year
2010
ISBN (eBook)
9783668805675
Language
English
Catalog Number
v162446
Institution / College
The University of Surrey – Business School
Grade
72.96
Tags
social media social media strategy digital strategy online strategy online marketing online PR digital PR web 2.0 facebook Twitter new economy ecommerce b2c online behaviour UK web online internet strategy UK consumer monetisation MBA masters strategy

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Title: Harnessing Social Media Commercial Potential