Marketing: Social Media Impacts

Introduction

Businesses are embracing social media because they realize that conventional forms of online marketing are becoming inefficient. Consumers have increased their preferences for online media and are reducing their interest in traditional media. Customers trust other internet users. It is also easier to engage a large audience in social media on a small budget compared to the use of television (Economist Intelligence Unit 4). Through social media, companies can increase knowledge of market developments and engage customers more directly through customized communication. They can also find out customer expectations, needs, and opinions.

Fortune 500 companies are at least on one social media platform. Many utilize Twitter, with YouTube and Facebook being the other popular social media networks preferred by the companies. There are many benefits reported by businesses on their use of social media, but the following are the most notable. First, businesses report their ability to target customer segments accurately. The social media tools at their disposal help them achieve the objective, and they can access user demographics and incorporate marketing messages into competitions so that they create the desired outcome in an indirect and non-invasive way (Economist Intelligence Unit 7).

In reviewing the impact of social media on the generation of customers and revenue, it will be important to establish a background understanding of social media impacts and the motivations of organizations in using it as a marketing tool. In addition, the paper will take the reader through the development of a conceptual framework that brings together various aspects of sellers’ and buyers’ relationships and how social media serves to impact that relationship to create an appropriate outcome for organizations. The conceptual framework provides a direct and indirect approach to looking at the study topic for this paper. Besides, the paper offers recommendations for research and practice concerning the estimation of the impact of social media.

Literature Review

Customer engagements and buyer-seller relationships

Relationship with customers is paramount, especially when look it from the marketing concept perspective. Marketing insists on meeting customer needs, and market orientation works to emphasize strategies that help to meet customer needs. Therefore, relationship marketing is a broadened domain of the exchange relationship. It helps build an understanding of the relationships established by sellers and clients. Relationship marketing highlights constructs that affect the factors influencing market exchanges of vendors and clients. The critical elements that determine the nature of a particular relationship as either transactional or relational include trust and commitment (Sashi 259).

Sashi (253) developed a model for improving the understanding of the customer engagement cycle. It focused on connection, interaction, satisfaction, retention, loyalty, advocacy, and commitment stages within the model. The model also revealed that there are four types of relationships established by customers, which are listed as follows. There are transactional clients, fans, loyal customers, and delighted customers. Sashi (259) reveals that customer engagement goes beyond market orientation scope by generating intelligence on the changing needs of clients and shaping an organization to respond to the needs. In customer engagement, an organization actively involves customers in creating intelligence, which has a consequence of shifting value creation from firm-centric views to personalized customer experiences. The important thing for organizations is to have a networked, empowered, and active customer base, which is adept at co-creating value together with the organization.

Trust is developed when a party has confidence in an exchange partner’s reliability and integrity. On the other hand, trust ceases to exist when the reliable nature of the integrity aspects of engagement fizzle out. Without trust, customers are not expected to become advocates for the seller. In addition to trust, there should be a commitment to the business relationship. Mostly, commitment is built by taking relationships seriously and putting extra effort into maintaining relationships. Committed people want to work towards keeping a relationship going. Commitment leads to a long-term relationship, but it may not necessarily lead to intimacy (Sashi, 259).

There can be calculative commitment and affective commitment. If there are switching costs or a lack of options, then a customer makes a calculative commitment. On the other hand, if there is an emotional bond that captures trust and reciprocity, then an affective commitment emerges. Both types of commitment lead to customer engagement. It is now possible to proceed to the next part of the paper that builds on this background information to move the reader towards a conceptual framework after bringing out the understanding of customer relationships and sellers’ intentions.

There are elements that play a role in determining outcomes in the customer engagement cycle. They also offer opportunities for improving participation. The elements are connection, interaction, satisfaction, retention, commitment, advocacy, and engagement, and they appear in a cyclic relationship way. It is possible to come up with a client engagement matrix, based on the customer engagement cycle and a review of the different elements in play.

The two independent parameters are emotional bonds and relational exchange, while the primary outcomes placed within the matrix are the relational variables, which include delighted customers, fans, loyal customers, and transactional customers. Relational exchange can be high, leading towards fans and loyal customers, while emotional bonds can be strong and lead to fans and delighted customers.

An understanding of the relationships discussed in the previous paragraphs leads an organization to embrace the right tools for causing appropriate engagement with customers. In the past, all efforts to control marketing mix decisions rested with the seller. However, the use of social media is empowering customers to participate in strategic decision-making (Sashi, 267).

New media influences on customer relationships

Unlike traditional media, new media is digital, and it introduces no marginal costs for duplicating products or creating a global audience. It is also democratized because anyone can create a digital product and distribute it. New media is also pro-active, thereby allowing the consumer to contribute to all parts of a value chain. The consumer can be reached to articulate or have an extensive co-creation form of participation. The consumers are visible, and they can access produced content at any time in their use of new media tools. Therefore, consumers can be creators while they continue to consume new media content (Hennig-Thurau et al. 312). With social media, consumers are reachable at any time. They also use various tools to participate in sharing and creating content or communicating with others.

Marketers continue to show a great interest in the management of online communities, and they seek to affect brand perception. One of the questions that marketers ask is: What are the possibilities of using communities on popular social networks like Facebook to enhance brand perception? They also ask about the benefits that a brand gives community members for them to become virtual friends. Once they have access to communities, markets ask what the risks of such communities are; they look at the potential of other marketers taking over these communities (Hennig-Thurau et al. 314).

According to Kumar and Mirchandani (55), an ice cream retailer substantially improved the effectiveness of a social media marketing strategy by following a seven-step model. The model was as follows. The first step was to monitor conversations, which required a look at what was happening in various social media platforms used by the business. The second step was to identify influential individuals that were capable of spreading the message. The ice cream retailer then worked on ways of engaging the influencers. The third step was to actualize the intention of influencing influencers by identifying factors shared by them.

Once that was done, the ice cream retailer located the potential influencers according to their interest in the present campaign. The fifth step was recruiting them with interests that matched the drive. The sixth step was to include the incentives for the influencers so that they spread positive word-of-mouth about the product sold by the business. The seventh step was to reap the rewards from the increased effectiveness of social media, where the rewards were in the form of enhanced financial performance and increased brand awareness.

So far, the literature review has been useful in bringing out the relevant themes that will be necessary for generating an appropriate conceptual framework for looking into the relationship between the use of social media and the attraction of customers or an increase in revenue. The study by Kumar and Mirchandani (55) provides a practical example of the application of various strategies to improve return on investment of the marketing effort. Interestingly, the 7-step model used by these researchers adheres to the core concepts introduced by Sashi (259) on the customer engagement cycle. There is an emphasis on building trust with the main influencers and another concern for ensuring that the key influencers in a particular social media network remain committed to spreading positive word-of-mouth.

Also, there have been elaborations by Kumar and Mirchandani (55) on the special aspects of key influencers that should be of interest to marketers who are keen on gaining a favorable return on investment in terms of revenue increase. The critical influencers can have four generalizable characteristics. They can be active, have clout, be talkative, and likeminded. Finding critical influencers with all the features is the ideal goal of a marketer.

Online social media networks can offer small businesses direct and indirect value. Direct value is often measured as a revenue increase that comes from the use of social media for marketing purposes. It is important to have another practical example as part of the intention to link the use of social media and the favorable returns that business gets, which can be increased in the number of customer or revenue. Hopkins (131) evaluated the same research topic by using a case study approach on how a business managed to use Facebook to obtain favorable returns for its engagement in social media networks.

Nevertheless, the study only looked at the application of Facebook in a particular way that caused an increase in turnover, an increase in new customer connections, and overall organizational growth. There was also an increase in the indirect value of word-of-mouth, and the business had positive recommendations due to the relative influence that Facebook community members exerted.

Linking social media strategy to outcomes

Small businesses have limited budgets for marketing, and in many cases, target a niche market segment that is not served by big corporations. That was the case with The Sleep Store, a company used in the case study by Hopkins (135). The business operated online-only, and its first engagement with Facebook was the provision of the necessary information on a Facebook page. Otherwise, the company relied on an email database to market itself online.

The Facebook page became successful when visitors began leaving suggestions and experiences about general baby care and life. The page became a resource that other visitors depended on. It also became a discussion center, and the business took advantage of the growing community by writing an article about its database and placing a hyperlink for visitors to its Facebook page to use for signing up for its customer database (Hopkins 137).

It is important to realize that unless a company is doing a particular thing to utilize the engagement gains made on social media, it cannot end up increasing its number of customers and revenues. In the case study presented by Hopkins (137), The Sleep Store was effectively using social media because it managed to convert an increase in popularity of its Facebook page into a rise in the number of sign up customers for its database. It could directly promote offers to the target group, which led to a subsequent increase in revenues.

Being able to measure social media efforts is a significant part of estimating the marketing benefits of individual social media platforms. A study by Wood (247) recognized that effect could be measured by experience and outcome, with the latter being the visible and tangible characteristics of an impact that an organization would get from engaging in marketing activities. Hoffman and Fodor (41) explore the idea of having appropriate returns on investments when using social media marketing. They explain that the process of determining returns on investment with social media is effective when organizations start with the marketing objectives that they need social engagement to cover. This can include brand engagement.

They also ask organizations to think about behaviors that consumers will engage in when they get to a particular platform. The behaviors include commenting or rating a product or service. Measurement of the behaviors or the objectives can then justify investment in social media. It is in light of such findings that an appropriate method of determining the impact of social media emerges, where organizations can focus on what they want and then use it to determine the outcomes worth measuring.

Conceptual framework

The following important aspects are considered in coming up with a conceptual framework. The revenue gained by a business must be attributed to a particular channel of marketing for it to serve as proof of the effectiveness of that channel. On the other hand, the framework is aware of the difficulties in measuring revenue attributed directly to social media. The problems that cause the difficulty include too many data to analyze and multiple sources of data that can obstruct revenue flow monitoring. The social media conversions may not be easy to measure when they do not use a direct approach to selling to customers on a particular platform. On the other hand, not all followers in a social media network convert when there is a promotion for a product or service that targets them.

The second consideration for the conceptual framework is the information sources that would be trusted most by a business. When engaging in social media marketing, sources of information vary in their relevance to an enterprise. There are direct reports by a channel used by an enterprise. There are also industry reports by third-party organizations. There can also be calculated reports obtained from the analysis of various information sources.

In addition to the trusted information sources for a company’s ongoing strategy of social media, there can also be the effect of the strategy on the ability to gather appropriate information for reviewing performance in terms of customer number increase or growth in revenue. In this regard, the paper opines that a strategy of engagement without aspects of conversion is unlikely to yield much data on the relevance of a particular social media tool on revenue growth.

On the other hand, the conceptual framework brings together the goals of social media that many organizations will have. The main characteristics of these goals are that they aim to build trust, credibility, and relationships, they seek to engage followers and the followers’ networks, as well as enabling customers to re-enforce the message communicated by an organization. Besides, the goals are to broaden the business’ relationship horizon and increase its brand visibility. Nevertheless, the overall goal is to be relevant so that customers choose the organization over its rivals and increase their purchases from the organization, leading to growth in revenues.

The theory of reasoned action will serve as the basis for formulating the conceptual framework. The theory predicts that people’s volitional behavior will rely on summed relative weights of two things. They are people’s attitudes and subjective norms. The theory explains how people voluntarily participate and engage in social media activities. Moreover, the theory has been a basis of social media research (Ngai, Tao, and Moon 34). At the same time, the literature review section has introduced the marketing orientation concept as an organizational attribute. It is an input variable that can help to discern the effect of social media usage in revenue, brand building, and customer relationships (Ngai, Tao, and Moon 36). Therefore, its placement in the conceptual framework will serve to clarify the nature of research and pinpoint the relationship of revenue or customer growth and the use of social media tools.

The dependent variables in this study are customers and revenues, whereas the various social media networks are the independent variables. The social media platforms include Facebook, Twitter, Instagram, Pinterest, and YouTube. The study also looks at moderators of the behavior of the main variables, where these moderators can be social factors and user attributes. Therefore, the study examines the outcomes achieved for the respective uses of the different social media platforms. It breaks down the motivations of using a particular platform in terms of the user attributes that an organization would be targeting, as well as the social factors that are going to affect users’ engagement with the particular brand through the social media platform.

The marketing orientation aspect highlights the strategies that an organization would put in place to ensure that its products and services are relevant to potential customer engagement through social media. On the other hand, looking at consumer interactions on social media, aspects of switching costs, continuity costs, and contractual costs will matter and can help explain a noted outcome of the particular social media tool to an organization’s objectives.

The following illustration presents the conceptual framework, which looks at the input as the independent variables, while the outcomes are the dependent variables. The downward arrow indicates the direct impact of social media on customers and revenue, while the circle shows elements of customer engagement that would affect the direct impact. The moderating factors, as well as market orientation factors, also influence the relationship between an organization and its customers; therefore, they affect the outcomes, as shown in the illustration below.

Conceptual framework for impact on social media on generating customers and revenues.
Figure 1: Conceptual framework for impact on social media on generating customers and revenues.

Literature review and conceptual framework conclusion

The literature review highlighted the importance of market orientation as a primary determinant of the eventual strategy that an organization will use for social media. The theory of reasoned action makes it necessary to evaluate other factors that affect the transfer of social marketing strategy into the desired outcome. It also helps to connect the consumer engagement cycles with other factors affecting social media effectiveness, and these have been essential in the discussion when formulating the conceptual framework. Importantly, the framework shows that variables can interact directly, and the inclusion of other aspects affecting the dependent and independent variable relationship is subject to the scope of particular research.

A look at the underlying factors in the impact will necessitate a qualitative approach to the study, while a focus on the appropriate impact in terms of outcomes represented by customer numbers and revenues can use quantitative methods. In both instances, the client engagement cycle components and moderators or market orientation factors will assist in analyzing findings.

Conclusion

Social media is becoming an integral part of integrated marketing communications. This paper has reviewed the literature to show that customer engagement, market orientation, and organizational objectives are critical when evaluating the outcomes of social media. The study demonstrated the impact of social media on generating customers and revenue; therefore, it relied on a linkage of organizations and the outcomes received. Part of the linkage was elaborated using examples of organizations using social media to generate appropriate outcomes that would be considered as successes of marketing efforts. With motivation, the paper was able to incorporate the theory of reasoned action to justify the expected consumer behavior when using social media. Eventually, the paper supported a framework that would be useful to explore the study topic.

Recommendations

Organizations must establish holistic approaches to measuring the outcomes of social media engagement. The difficulty in measuring conversions and the need to develop reliable evidence for supporting future investments in social media increase the pressure for finding the right formula for completing the task. In this regard, having a return on investment objective as the main agenda for measuring the effectiveness of social media will be an appropriate way of establishing holistic approaches. It is possible for an organization to look at its objectives using a return on investment perspective.

However, the recommendation here is that social media review requires a non-traditional outlook of the return on investment concept. A business should move away from emphasizing its marketing investment, instead of concentrating on funds placed and funds received. An appropriate way would be to look at what consumers are doing and their motivation to using social media and then evaluating whether the business is doing the right thing to enhance the activities of customers and, at the same time, achieve its objective. This outlook ensures that an organization does not depart from its objectives of facilitating consumer engagement and being market-oriented. At the same time, it ensures that traditional objectives of marketing, such as an increase in the number of customers or revenues, persist (Hoffman and Fodor 41).

Companies should track customer investments in their social media platforms to be able to tell the potential of the investments that translate to new clients or those that lead to an increase in revenue. A company can estimate customer behaviors by working backward with the relevant theories of predicting behavior, such as the theory of reasoned action. It can also look at the underlying factors affecting the behavior and the opportunities availed by a particular media platform for behaving in a particular way. Through that, the company is able to estimate the probability of customers responding to their social media engagement strategies. It can turn out to be a favorable workaround for cases where the determination of conversion is difficult, and an increase in customer numbers or revenues cannot be directly attributed to a particular social media network.

Works Cited

Economist Intelligence Unit. “Getting Closer to the Customer: A Challenge for the C-suite.” The Economist (2012): 2-16. Print.

Hennig-Thurau, Thorsten, Edward C. Malthouse, Christian Friege, Sonja Gensler, Lara Lobschat, Arvind Rangaswamy, and Bernd Skiera. “The Impact of New Media on Customer Relationships.” Journal of Service Research 13.3 (2010): 311-330. Print.

Hoffman, Donna L., and Marek Fodor. “Can You Measure the ROI of Your Social Media Marketing?” MIT Sloan Management Review 52.1 (2010): 41-41. Print.

Hopkins, John L. “Can Facebook be an Effective Mechanism for Generating Growth and Value in Small Businesses?” Journal of Systems and Information Technology 14.2 (2012): 131-141. Print.

Kumar, Vikram, and Rohan Mirchandani. “Increasing the ROI of Social Media Marketing.” MIT Sloan Management Review 54.1 (2012): 55-55. Print.

Ngai, Eric W.T., Spencer S. C. Tao, and Karen K. L. Moon. “Social Media Research: Theories, Constructs, and Conceptual Frameworks.” International Journal of Information Management 35.1 (2015): 33-44. Print.

Sashi, Chris M. “Customer Engagement, Buyer Seller Relationships and Social Media.” Management Decision 50.2 (2012): 253-272. Print.

Wood, Emma H. “Evaluating Event Marketing: Experience or Outcome.” Journal of Promotion Management 15.1-2 (2009): 247-268. Print.