The impact of Social Media on Marketing Strategy

The Impact of Social Media on Marketing Strategy

Richard FullertonMay 2012Slideshare.net version

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There are no secrets. The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone.The Cluetrain Manifesto, Thesis 12.

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About this document

• This document is a précis of a dissertation of the same name produced by Richard Fullerton for his Masters in eMarketing degree in 2010/11.

• Its aim is to make the dissertation more readable and accessible, and is aimed at practitioners as much as academic students.

• There are 133 slides and most slides have a lot more information than is ‘typical’ in a slideshow. This is NOT a presentation. It is still an academic rather than practitioner document.

• This research is as much about marketing strategy as it is about social media’s impact. It is not about social media strategy.

• Academic and some practitioner authors are cited in support of the material on each page but full references and bibliography are available in the original dissertation only.

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About this document

• One additional benefit is that it does contain some material which was cut from the original dissertation due to word count and page limit restrictions.

• The document consists of:– Introduction section + Background to the Social Web (section 1).– Literature Review (sections 2, 3, 4, 5).– Methodology (section 6).– Findings & Discussion (section 7).– Conclusion (section 8).

• A full copy of the dissertation can be downloaded from www.newrivermarketing.co.uk/downloads

• You can follow the Author on Twitter via @newriverm and connect via www.linkedin.com/in/richardfullerton

http://www.newrivermarketing.co.uk/downloads

http://www.twitter.com/newriverm



http://www.linkedin.com/in/richardfullerton

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ContentsAbout this document 3. The Decline of

Marketing4. The Promise of the Social Web

5. Conclusion to the Literature Review

Contents What is Strategy? Marketing in Decline The Promise of the Social Web

6. Research Methodology

Background to the Study Alternative views of Strategy Loss of Ascendancy of Marketing

Restoring the Lost Art of Engagement

7. Findings & Discussion

Research Objectives Effectiveness, Efficiency & Strategy

The Challenge of Value Creation

Influencing Buyer Behaviour via Social Media

8. Conclusion to the Study

The Impact of the Internet on Strategy

The Struggle for Innovation Social Media bringing Organisational Change

What are Social Media? Challenge to the Hierarchy of Strategies

The Rise of the New Consumer

Creating Value with Social Media

Rise of the Social Web What is Marketing Strategy? The Limitations of Relationship Marketing

Social Media as a source of Innovation

The Power of Social Media Value as the new Marketing Paradigm

Questioning of the Marketing Mix

Gaining a Competitive Advantage via Social Media

The Strategic Nature of Social Media

The Challenge for Branding Brand-building via Social Media

Marketing’s Mid-life Crisis

Conclusion to the Decline of Marketing

2. Exploring Marketing & Strategy

1.Background to the Social Web

3. The Decline of Marketing

4. The Promise of the Social Web





About this document

Contents

Background to the Study

Research Objectives

What are Social Media?

The Power of Social Media

Rise of the Social Web


What is Strategy?

Alternative views of Strategy

Effectiveness, Efficiency & Strategy


Challenge to the Hierarchy of Strategies

What is Marketing Strategy?

Value as the Marketing Paradigm

Marketing in Decline

The Loss of Ascendancy of Marketing


The Struggle for Innovation


The Limitations of Relationship Marketing


The Challenge for Branding



The Promise of the Social Web



Social Media bringing Organisational Change




Brand-building via Social Media

Click on any heading above to navigate to the relevant part of the document. You can return to this Contents page at any time by clicking on the ‘Return to Contents page’ link below the page number on every page.

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• The a priori assumption is that social media have eroded marketers’ control1 and the power is now with the consumer2.

• Consumers are having conversations about brands in which the brands are not involved, forcing these brands to listen3.

• Some researchers even suggest now that the consumer defines the brand4.

• In the context of the study Problem, marketing strategy includes areas such as branding, consumer behaviour, the mix, relationship marketing, value creation, and organisational orientation.

1 Strategic Direction (2010).2 Constantinides and Fountain (2008).3 Weinberg (2009).4 Li and Bernoff (2008).

Return to Contents page >

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Research Objectives

1. To explore the contemporary issues raised by the literature within strategic marketing.

2. To establish the gap between practitioner perspective and activity, and the published literature.

3. To analyse the impact of social media on marketing strategy.4. To create a conceptual framework of social media’s influence

on marketing strategy.The following companies were interviewed as part of the research: first direct (two interviews); Marks & Spencer; Birds’ Eye Iglo Group, Dell, Nokia, British Gas, and Moneysupermarket.com.


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Background to the Social Web


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What are Social Media?Social media

Description Examples

Blogs Individuals’ or companies’ online journals. Readers can often leave comments.

John Battele’s FM Signal blog

Microblogs A form of blogging that allows a user to publish short text updates,

Twitter

Social network

Applications allowing users to build personal web sites accessible to other users for exchange of personal content and communication.

Facebook;

LinkedIn;

MySpaceContent communities

User-generated content web sites. YouTube;

FlickrVirtual brand communities

Brand-specific websites where people with a common interest can interact.

Lego’s LUGNET P&G’s Beinggirl

Forums/Bulletin boards

Sites for exchanging ideas and information usually around special interests.

Numerous, all unique.

Content aggregators

Applications allowing users to customise the web content they wish to access.

Technorati;

StumbleuponCollaborative websites (Wikis)

A wiki is a web site that allows online collaboration by allowing multiple users to add, remove or edit and change content.

Wikipedia

Social bookmarking sites

Users can recommend and share interesting and relevant content with one another.

Digg; del.icio.us, Newsvine; Reddit

• ‘Social media’ and ‘Web 2.0’ are used interchangeably.

• But other synonyms include the ‘social web’, the ‘groundswell’, ‘consumer-generated media’ and just simply, ‘social’.

• To reconcile the various types of social media and their categories, see left.

Sources: Constantinides and Fountain (2008); van Zyl (2009); Mangold and Faulds (2009); Stokes (2009).


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Why Consumers use Social Media• They see social as a more trustworthy source of information than

organisations themselves.• Social media “simply unlocked an existing human need”1.• “Darwinian models” of “socio-biology” involving altruism are a factor2. • Social is popular because of its advantages – transparency, referrals,

contact with others3.• A study into Facebook user experiences found most motives were

curiosity, enjoyment, fun, excitement and pleasure4.• Addictive – a 1/3 of all women aged 18-34yrs check Facebook on

waking before even visiting the bathroom5.1 Meadows-Klue, 2008, p.249.2 Palmer and Koenig-Lewis, 2009, p.169.3 Constantinides and Fountain (2008).4 Hart et al. (2008), cited in Palmer and Koenig-Lewis (2009).5 Parr (2010).


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Why Organisations are adopting the Social Web• It’s where customers are (interacting)1.• The competition are doing it2.

– No evidence that online ‘buzz’ leads to sales but proof is emerging that online WOM is an indicator for sales3.

• Knowledge-sharing, a ‘collaborative learning environment’4.• Productivity and workflow efficiency5.• Cost-savings as expensive call centres made redundant by

support forums6.

• Open platforms facilitate collaboration and increase job satisfaction and productivity7.1, 2 Fisher (2009).

3 Li and Bernoff (2008).4 Van Zyl (2009).5 Van Zyl (2009).

6 Hoffmann and Fodor (2010); Li and Bernoff (2008).7 Tapscott and Williams (2006), cited in Vany Zyl (2009)


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• Powerful because they amplify “consumer-to-consumer conversations in the marketplace”1.

• Achieve “results no media campaign can achieve”2.• WOM is a marketing tool, relationship builder, and has financial

advantages3.• Negative – examples of consumer power in social:

– Digg.com and its revealing of the HD DVD encryption key4; ‘Dell Hell’5; ‘United Breaks Guitars’6; Thomson Holidays’ ‘Tunisia trip hell’7.

• Positive power:– 25% of Dell’s new customers come via referrals8.– The power of ratings and reviews e.g. eBags.com – 30% growth9

– Snakes on a Plane – bloggers influenced script changes101 Mangold and Faulds, 2009, p.361. 2, Li and Bernoff, 2008, p.130.3 Harridge-March and Quinton (2009).4 Li and Bernoff (2008).5 Jarvis (2005).

6 Ayres (2009); HennigThurau et al. (2010).7 Creston (2010)8 Reichheld (2006).9 Li and Bernoff (2008).10 Li and Bernoff (2008). Return to Contents page >

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• Not just another traditional marketing communications tool1.• Evidence of its strategic nature:

– Ford’s spending of 25% of its marketing budget on digital and social media, twice the industry average. Blogging, uploads to YouTube, Facebook activity and ‘tweeting’ raised awareness of the Fiesta − unknown in the US − amongst Generation Y to 37%, equivalent to hundreds of millions of dollars of traditional advertising spend2.

– Dell: social media is “probably the most important thing we do today from the marketing standpoint” (Andy Lark, VP of Global Marketing)3.

– Li and Bernoff (2008) compared existing business functions within organisations with social media objectives (see next slide).

• But only ¼ of marketers have made social a strategic activity4.1 Hoffman and Fodor (2010). 2 Kiley (2009). 3 Lark (2008).4 MarketingSherpa (2010), cited in eMarketer (2009a).


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Evidence that social media are strategic is the fact that the 5 groundswell objectives mirror those of organisational functions.


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Exploring Marketing and Strategy

Since this study seeks to identify the impact of social media on marketing strategy, it is necessary to explore strategy and marketing strategy first.


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What is Strategy?

• An organisation has two levels of strategy:1

1. Organisational strategy – defining what businesses the firm should compete in and how.

2. Business unit (Competitive) strategy – role is to create a competitive advantage.

• Competitive strategy theory2 broadly states that firms can follow one of three generic strategies:1. Cost leadership strategy (low prices, standard product)2. Differentiated strategy (added value, higher price)3. Focus strategy (serve a particular segment very well leading to

differentiation or cost leadership for this segment)• “The essence of strategy is in the activities – choosing to perform

activities differently or to perform different activities than rivals”3.1 Porter (1987).2 Porter (1980).3 Porter, 1996, p.64.


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What is Strategy?• Numerous definitions of Strategy:

– “Strategy is the route to achievement of specific objectives and describes how objectives will be reached”1.

– “Strategy is the creation of a unique and valuable position”2 obtained by activities that differ from the competition. It is also about making trade-offs* and “creating fit among a company’s activities”3.

– “Strategy is about competitive advantage through differentiating against the customer’s alternatives, continuous innovation to sustain that advantage, and organizing to achieve ‘fit’§ in maintaining the advantage”4.

– Strategy is “the business’s overall plan for deploying resources to create competitive advantage in its markets”5.

1 McDonald, 2007, p.298.2 Porter, 1996, p.68.3 Porter, 1996, p.75.4 Piercy, 2002, p.75.5 Doyle, 2008, p.11.

* In Porter’s context, a ‘trade-off’ is a sacrifice of part of a service in order to enhance another one. An example he gives is Ikea which has a clear strategic positioning compared with a traditional furniture store. The trade-off is customer service – but customers don’t mind and Ikea can offer things other stores cannot such as extended opening hours.

$ ‘Fit’ here refers to strategic fit – whether an activity contributes to overall performance.


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• “Strategy is revolution; everything else is tactics”1. In contradiction to the ‘fit’ model, growth comes from a ‘stretch’ – a gap between strategic resources and ambitions, and trauma to the organisation is ‘good’.

• Firms should pursue a ‘blue ocean strategy’ and seek un-contested market space instead of trying to compete head-on2.

• Strategy is “the policies and key decisions adopted by management that have major impacts on financial performance”3.

• ‘Strategy’ is an overused word, implying that its overuse has muddled its true meaning4.

1 Hamel , 1996, p.70, cited in Prassad (2010).2 Kim and Mauborgne (2005).3 Buzzell and Gale, 1987, p.18.4 Brennan et al. (2008).


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Effectiveness & Efficiency & Strategy

• UK organisations that are inward-looking are adopting the wrong approach to strategy. By making themselves more efficient e.g. cutting costs, instead of more effective e.g. achieving strategic goals such as a competitive position, they threaten their own survival1.

• Organisations must pursue both effectiveness – “doing the right things” and efficiency – “doing things right” since an absence of either threatens survival2.

• Another view is that operational effectiveness includes efficiency and means “performing similar activities better that rivals”3. But competition by this means alone is “mutually destructive”4 – so a company must adopt a different strategic position from its rivals.

• Thus the logic is that “operational effectiveness and strategy are both essential to superior performance”4.1 Wilson and Gilligan (2005).

2 Brennan et al., 2008, p.13 & 14.3 Porter, 1996, p.62.4 Porter, 1996, p.62.5 Porter, 1996, p.61.

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• Consider the impact of the web on strategy – could it be a model for its impact on marketing strategy?

• The internet did not make strategy redundant or provide first-mover advantage – the switching costs were lower, not higher – and the promised benefit of network effects*, did not materialise at first1. But the latter has now been realised e.g. eBay2.

• In fact the web has eroded competitive advantage traditionally enjoyed by firms3.

• The internet has changed our understanding of strategy:– “Strategy is redundant”4 because of the speed of change brought about

by the internet. – We should “redefine strategy as the art of surviving rapid transition”5.

* Network effects: the process by which a company’s products and services become more valuable as more people use them. Examples are email, instant messaging and of course, social networks.1 Porter (2001).2 Kumar (2004).3 Wilson and Gilligan (2005).

4 Piercy, 2002, p.206.5 Evans and Wurster, 2000, cited in Piercy, 2002, p.206.


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• Organisational strategy structure has traditionally been hierarchical – below Corporate and Strategic Business Unit (SBU) level strategy is Functional level strategy1.

• But recently this concept has been challenged – a new heterarchichal relationship between the strategies has been suggested2.

1 Hofer and Schendel (1978); Webster (1992); Varadarajan and Jayachandran (1999). 2 Chakravarthy and Henderson (2007).

‘Old’ hierarchy structure

‘New’ heterarchy structure

Source: Chakravarthy and Henderson, 2007, p.650.


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Challenge to the Hierarchy of Strategies• The reason for this revision is that studies have shown that the traditional

portfolio planning role of corporate strategy does not lead to better performance and that “strategy formulation is not always top down”1.

• Corporate, business and marketing strategies interact to define the competitive advantage of SBUs in a company. The merging of these strategies defines the degree to which a business can gain and sustain that advantage2.

• The challenge of this heterarchy is continuous renewal, not just of positioning the firm in a more attractive market space but of developing competencies to defend these positions3.

• Could social media be one of these ‘competencies’ and offer the organisation a competitive advantage in some way?

• Can social media play a role in this ‘bottom-up’ strategy formulation?

1 Chakravarthy and Henderson, 2007, p.647.2 Varadarajan and Jayachandran (1999).3 Chakravarthy and Henderson (2007).


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• The Author’s study has shown that some academics define marketing strategy in almost tactical terms e.g. – “the selection of which marketing opportunities to pursue, analysis of target

market(s), and the creation and maintenance of an appropriate marketing mix that will satisfy those people in the target market(s)”1.

• However, he argues that it should be defined strategically:– “Marketing strategy should be set in the context of overall corporate strategy”,

because the marketing must be aligned to ensure the overall direction of the organisation is followed2.

• And some do define it in terms of gaining and sustaining a competitive advantage3.

• But the essential idea of marketing is to create value4.– “Businesses not offering value to customers are seeing their market shares

eroding at accelerating rates”5.1 Dibb et al., 2006, p.20.2 Hooley et al. 2008, p.31. 3 Day et al. (1990); Sudharshan (1995). 4 Sheth and Uslay (2007); Doyle (2008).5 Doyle, 2008, p.12. Return to Contents page >

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• Thus the link between corporate and marketing strategy comes from the latter’s ability to create a competitive advantage by “leveraging a firm’s unique skills and resources to implement a value-creating strategy that its competitors cannot implement as effectively”1.

• So the Author’s preferred definition is: “Marketing strategy seeks to deliver superior customer value by combining the customer-influencing strategies of the business into a coordinated set of market-driven actions”2.

• Note that it is now argued that value is jointly created between the customer and the producer3, a recurring theme in this research document.

1 Barney (1991), cited in Varadarajan and Jayachandran, 1999, p.121.2 Cravens and Piercy, 2009, p.13.3 Prahalad and Ramaswamy (2004a); Payne et al. (2008).


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• Numerous scholars assert that Relationship Marketing has been displaced as the current paradigm1. But there is no consensus amongst academics on the replacement marketing paradigm2.

• A full examination of marketing paradigms is outside the scope of this study but Various replacement candidates have been suggested, such as Electronic Marketing3 and Experiential Marketing4, but there is strong support in academia for Value Marketing5, the choice of the Author as the current paradigm.

• Value is a universal requirement. Coca Cola now talks about ‘value marketing’ and not ‘brand marketing’6.

• For the new paradigm candidate list, see Appendix B in the full dissertation at www.newrivermarketing.co.uk/downloads

1 Wilson and Gilligan (2005); Piercy (2002); Kotler (2008).2 Egan (2008).3 Wilson and Gilligan (2005).4 Pine and Gilmore (1998), Schmitt (1999).

5 Piercy (2002), Poiesz and van Raaij (2007), Porter (1996), Cravens & Piercy (2009), Doyle (2008), McDonald (2007).

6 Piercy (2002).



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Progress check...


About this document 3. The Decline of Marketing


































About this document

Contents


Research Objectives





What is Strategy?

























YOU ARE HERE

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The Decline of Marketing

The Author’s reading has revealed that many academics believe Marketing to be in decline.


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• According to many academics, Marketing is in decline1.• For others, marketing is ‘in crisis’2, ‘dead in the water’3, ‘in mid-

life crisis’4, ‘at saturation point’5, or even ‘broken’6. • This section examines these controversial assertions, including:

– Marketing’s decreasing role within the organisation.– Problems with value creation and innovation.– Difficulties with influencing consumer behaviour.– The limitations of relationship marketing.– Criticism of the Marketing Mix.– Exploration of the current issues facing branding.– Marketing’s mid-life crisis.

1 Kumar (2004); Parsons and Maclaren (2009); Grönroos (2009); Webster et al. (2005).

2 Grönroos (2009). 3 Piercy (2002).4 Wilson and Gilligan (2005).

5 Poiesz and van Raaij (2007).6 Lovatt (2010).


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• Marketing has a reduced role and influence– Doubts exist about its value1 and future role2.– Executives are united in stating that marketing is an ambiguous concept

with unclear responsibilities3.– Less than 10% of the board’s time is spent discussing marketing and

customer-related issues4.– The ‘tyranny of P&L’ - an obsession with short-term financial metrics5.– Marketing is seen as a variable cost that can be cut6.– Resources are being shifted to Sales, with the latter taking over more

responsibility for customer management7.– Marketers are creative thinkers but lack the analytical skills of IT, finance

and data analysis required in business8. – Marketing has lost credibility9 and needs to “regain its seat at the table”10.1 Kumar (2004).

2 Wilson and Gilligan (2005).3 Webster et al. (2005). 4 McGovern et al. (2004); Kumar (2004).5 Webster et al. (2005).

6 Sheth and Sisodia (2005).7 Webster et al. (2005).8 McGovern et al. (2004).9 Sheth and Sisodia (2005); Grönroos (2009). 10 Webster, 2005a, p.124.


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• Diminishing Corporate Marketing function– Marketing has all but disappeared at corporate level1 – Responsibility for marketing has been given to the SBUs2 but this often

fails because SBU managers lack marketing skills and are driven by short-termism3.

– Few CEOs have marketing experience4 so Chief Marketing Officers (CMOs) are appointed to fill the gap left by the corporate marketing function but often lack the necessary strategic and analytic skills5.

– Marketing is now a cross-functional process6 with a disappearance of boundaries between marketing and other functions7. This gives rise to a Marketing paradox:

“The deeper marketing is embedded within an organization and becomes the defining theme for shaping competitive strategies, the more likely is the role of marketing as a distinct function to be diminished”8.

1 Webster (1992) & (2005a); Wilson and Gilligan (2005); Wind (1996).2 Kumar (2005); Webster (2005a).3 Webster (2005b). 4 McGovern et al. (2004).5 Webster (2005b).

6 Cravens and Piercy (2009).7 Poiesz and van Raaij (2007).8 Day, 1992, p.323.


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• Disconnect between marketing and corporate strategies1. – In fact, “many CEOs believe that marketing is failing at the strategic level

because marketing efforts are not aligned with the strategic goals and overall strategy of the firm”2.

– “When marketing activities are tightly aligned with corporate strategy, they drive growth. But in too many companies, marketing is poorly linked with strategy. Marketing may seem to be performing well according to standard metrics, like the number of repeat purchases customers make, but if the company's strategy is to, say, build market share, simply boosting repeat purchases isn't enough. In many organizations, marketing exists far from the executive suite and boardroom. Marketing managers are rarely held accountable for ROI and rarely expected to explain, exactly, how what they do supports corporate strategy... it's a case of myopia. No one in the organization sees the relationship between marketing and strategy well enough to diagnose the problem and begin to fix it. The failure of marketing strategy is a crisis that requires attention at the highest levels of the organization-from the corporate board itself”3.

1 McGovern et al. (2004).2 Kumar, 2004, p.19. 3 McGovern et al., 2004, p.72.


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• The challenge for marketing is to ensure it fulfils its promise to deliver consumers superior value. – “Today’s marketing challenge is to bridge the widening gap between brand

and customer value which is increasingly generated through supply chain leadership, networks of relationships, and individualised customer service”1.

• Difficulties with the concept of value– The problem with value is that it means different things to different people,

and ultimately it is defined by the customer2. – The concept is riven with paradoxes e.g. Ryanair – the low-frills, cheap

airline – and Starbucks, which charges £3 for a cup of coffee (which customers are willing to pay for)2.

– What matters is perceived value – it is this that attracts a customer or lures him from a competitor3.

1 Maklan and Knox, 1998, p.47. 2 Piercy (2002). 3 Rust and Oliver (1994).


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• Difficulties in creating value– Since marketing is ‘dis-integrated’ or ‘centrifuged out’ to various parts

of the organisation, it is without a ‘centre of excellence’ so companies find it hard to create value and deliver it to customers1.

– Difficult to create value in increasingly crowded markets, with the impact of the internet, and with increasingly sophisticated customer databases each ‘competing’ against the other2.

– Brands can only now compete either on price or by consistently adding value. This is increasingly hard as brands exhaust ways of doing this e.g. 24hr delivery is no longer a competitive advantage3.

– “Added value, as the core concept of marketing, is gradually but definitely becoming an illusion”4.

1 Webster et al. (2005).2 Poiesz and van Raaij (2007).3 Poiesz and van Raaij (2007).4 Poiesz and van Raaij, 2007, p.8.


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• Difficulties over how Value is created– Traditionally, value creation occurred during the exchange of goods or

services with the customer1.– The term ‘delivering value to customers’ is no longer accurate2 and

firms cannot continue to rely on extracting costs from value chain activities – efficiency savings − as their main source of value creation3.

– Scholars now suggest that this ‘value-in-exchange’ concept has been superseded by one of ‘value-in-use’4.

– There is no ready-made value embedded in products − value is created in the use of the product by the customer and not during exchange5.

– The proposal therefore is that the consumer is now the co-producer (co-creator) of value6.

1 Kotler (1972); Hunt (1976). 2 Grönroos (2009).3 Prahalad and Ramaswamy (2004b).4 Gummesson (2002); Vandermerwe (1996); Woodruff and Gardial (1996).

5 Grönroos (2008); Payne et al. (2008).6 Vargo and Lusch (2004).


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• The need for Innovation– Product innovation is key to long-term profitability1 , however, long-

term growth requires continual breakthroughs in all areas, not just product development2.

– Successful innovation is a major business challenge and can be categorised by how novel it is, and the extent to which customer value is created3.

• The stifling of Innovation– Instead of innovating, firms compete head-to-head for a greater

market share but this is the road to long-term decline4. – Organisational transformation agendas include “downsizing, overhead

reduction… portfolio rationalisation” – anything but innovation5.1 Webster et al. (2005). 2 Piercy (2002).3 Cravens and Piercy (2009).4 Mauborgne and Kim (1999).5 Hamel and Prahalad, 1994, p.124. Return to Contents page >

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• The stifling of Innovation (cont.)– The ‘innovation spiral’, whereby a downward spiral exists because of

the pressure to innovate, high innovation frequency and shorter innovation duration e.g. laptop market1.

– Innovation is intrinsic to marketing but real innovation that abandons the ‘rule-book’ is rare2.

– Increasing lack of creativity in advertising3.– 6 obstacles to innovation include: lack of resources, a short-term

focus, a lack of a systematic innovation process, it’s judged too ‘risky’, that financial targets deter it, and that “we punish innovation failure but don’t reward innovation success’’4.

– An organisation must harness the creativity of all its people – innovation should not just be the preserve of the R&D department5.

1 Poiesz and van Raaij (2007).2 Piercy (2002).3 Sasser (2008).4 Loewe and Dominiquini, 2006, p.24.5 Loewe and Dominiquini (2006) .


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Rise of the New Consumer

• Characteristics of the New Consumer– The ultimate aim of marketing is to change behaviour1 but marketers are

finding it increasingly hard to do this2.– The new consumer has changed: He/she is more demanding, more

discriminating, less loyal, and more willing to complain3. Additionally they are ‘time-starved’ and low on attention and trust4.

– Modern consumers are involved, independent, better informed and more critical5.

– They are existential6 and strive for self-actualisation as they seek to close the gap between their real and ideal selves7.

– They are “smart” and demand “openness and transparency”8.– This media-, advertising-, brand- and technology-literate consumer

presents one of the biggest challenges facing marketers9. 1 Brennan et al. (2008). 2 Poiesz and van Raaij (2007); Wilson and Gilligan (2005).3 Wilson and Gilligan (2005).4 Lewis and Bridger (2000).5 Capon and Hulbert (2000); Lewis and Bridger (2000).

6 Christopher (1989).7 Burnett and Hutton (2007). 8 Piercy, 2002, p.58.9 Wilson and Gilligan (2005).


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Source: Author’s own based on Dibb et al. (2006); Wilson and Gilligan (2005); Constantinides (2004), Cravens and Piercy (2009).

1. Problem definition

2. Information search

3. Evaluation of alternatives

4. Purchase

5. Post-purchase evaluation

A stimulus from the internal or external environment causes a need to develop in the consumer.

Information is collected in order to satisfy the need.

Process of problem-solving – criteria for comparing products is established.

A product or service is selected.

Consumption of product followed by evaluation to check if need has been met.


Problems with the Consumer Buying Decision-Making ProcessThe dominant theory amongst academics for how and why consumers buy is a five-step process:

Problem exists here


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The Communications Spiral• However a problem exists in stages 1-3 above – a downward communications

spiral1 exists caused by competitive pressures between brands which force them to increase message frequency, thereby increasing clutter2.

• There is a “feeling of overwhelming mass media spam”3.

1 Poiesz and van Raaij (2007). 2 Rotfeld (2006); Keller (2009). 3 Rotfeld, 2006, p.181.

Stronger urge to communicate

Increased number of communication

attempts

Information overload for consumers

Decreased impact of average message

The Communications Spiral


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• The marketing funnel metaphor demonstrates the problem:

Source: Li and Bernoff, 2007, p.101.

– Brands end up ‘shouting’ at consumers to gain their attention and engage in ‘interruption marketing’1.

– There is too much advertising from competing brands, as well as conversations occurring between consumers via social media within the funnel2. A battle of wills occurs, with consumers trying to avoid commercials whilst marketers are continually thinking up ways of slipping past consumer defences3.

– But marketers persist with the funnel because they can still measure the effectiveness of their campaigns via trusted methods4.

1 Godin (1999).2 Li and Bernoff (2008).3 Weber (2009). 4 Haven et al. (2007). Return to Contents page >

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• The transparency of the market − that the internet promised to bring by enabling brands and products to be compared easily1 – is lost2. Due to the overload, consumers cannot make rational choices.

– Organisations are guilty of ‘overmarketing’3.– “Marketing has become its own competitor”4. – In reality, “the marketing funnel is a broken metaphor that

overlooks the complexity social media introduces into the buying process”5.

1 Kapferer (2001); Sinha (2000).2 Poiesz and van Raaij (2007).3 Author.4 Poiesz and van Raaij, 2007, p.8. 5 Haven et al., 2007, p.1.


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• As revealed earlier, relationship marketing is no longer considered the current paradigm. However, this does NOT mean brands do not want relationships with their customers since its role remains to help build a competitive advantage1.

• The benefits of (e)CRM*2 include no acquisition costs, limited need to incentivise, less price-sensitivity of customers, more referrals and increased spend per relationship3.

• But there have been high failure rates of CRM systems4 and the dot.com crash in the early 2000s was caused largely by the failure of the firms to build relationships and thus gain repeat business5.

• Additionally, high customer churn rates of 10-30% remain, in spite of CRM6.

1 Harker and Egan (2006).2 Parvatiyar and Sheth (2001). 3 Chaffey et al. (2009).

* In the academic community, the terms ‘relationship marketing’ and ‘CRM’ are used interchangeably.

4 Foss et al. (2008).5 Chaffey et al. (2009).6 Brennan et al. (2008).


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• And whilst CRM involves sophisticated data storing and mining techniques, from the consumers’ perspective it is still a crude tool involving “aggressive email, phone and internet promotions. With or without their permission”1.

• It is also suggested that the relationship between loyalty and profit is much weaker than is realised, and existing claims about loyalty, such as that it costs less to serve a loyal customer, are being challenged2.

• Some question not just the return that companies get for investing in CRM, but whether it actually works! It should not be CRM but CMR, the customer management of relationships where the customer dictates the relationship3.

1 Urban, 2004, p.79.2 Kumar and Reinartz (2002).3 Newall (2003).


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Three problematic areas of the Mix1

1. Lack of customer orientation – The Mix’s origins lie in the era of mass marketing which did not

accommodate the needs of the consumer.

2. The Mix lacks the ability for personalisation– Mass customisation/ mass individualisation is desired by the consumer.

3. Lack of strategic content – This renders it deficient as a framework for marketing planning in an

environment where strategic opportunities and threats are defined by uncontrollable and external factors.

• As a result, the Mix’s ability to give a brand the differentiation it requires to offer value to the consumer and competitive advantage is in doubt2.

1 Constantinides (2006).2 Wilson and Gilligan (2005); Poiesz and van Raaij (2007).


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• It is suggested that the 4Ps are each operating as four, downward spirals creating a marketing spiral1.

• Since each spiral is downward, the output of the mix is an increasingly undifferentiated, commoditised product or service2, effectively ‘Walmartisation’3.

1 Poiesz and van Raaij (2007).2 Roberts and Alpert (2010).3 Prahalad and Ramaswamy (2004a).

Communication spiral

Distribution spiral

Innovation spiral

Price spiral

The Marketing Spiral

The menace of the Marketing Spiral


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• Tactical marketing is subject to the spirals – what is required to escape the marketing spiral is strategic innovation1.

• “There is an urgent need for a reconsideration of the marketing paradigm. Marketing needs a new strategy”2.

• The mix should “not be considered as the foundation of Consumer Marketing management any longer”3.

• The model’s rigid decision making attributes have become a “straitjacket (sic) for the development of marketing theory and practice”4.

1 Poiesz and van Raaij (2007).2 Poiesz and van Raaij, 2007, p.40.3 Constantinides, 2006, p.413.4 Grönroos, 2009, p.352.


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Introduction to Branding• Because the Mix has reduced ability to contribute to a competitive

advantage, marketers have switched attention to the Brand to seek differentiation1. Branding is now a priority2.

• Growing brand equity creates value for the organisation3, however this is made difficult because often the marketing function is distanced from top management4.

• Branding must be a key part of any marketing strategy because “branding is strategy”5.

• Brands have a strategic role and can influence the corporate direction, indeed survival, of organisations6.

• But the paradox is that brands are in decline so marketers face a major challenge.

1 Wilson and Gilligan (2005). 2 Aaker and Joachimsthaler (2000); Kapferer (2005). 3 Aaker (1992).4 McGovern et al. (2004).

5 Piercy, 2002, p.471.6 Cravens and Piercy (2009).


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The Challenge of Branding

The Rising Importance of Brand Equity• Definitions of Brand Equity:

– “The differential effect that consumer knowledge about a brand has on their response to marketing for that brand”1.

– “The value of a brand as a signal to consumers”2.• Brand equity, if measured, is a better way of providing an understanding of

short and long-term performance than traditional financial methods3.• Consumer-based brand equity (CBBE) is an intangible asset that can offer a

sustainable advantage4, and differentiation is the “anchor of a brand’s equity”5.

• So scholars are building brand equity models that link brand development, marketing activities and the resulting customer response to long-term shareholder value6.

• Thus the building of brand equity is now a key objective for marketers7.1 Keller, 2003, p.60.2 Erdem and Swait, 1998, p.140.3 Christodoulides and de Chernatony (2010).4 Christodoulides and de Chernatony (2010).

5 Thomas and Kohl, 2009, p.9.6 Webster et al. (2005). 7 Webster et al. (2005).


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The Challenge of Branding

Brands and Value• Brand equity creates value for the organisation in 6 ways1.

1. Enhances the efficiency and effectiveness of marketing.2. Strengthens brand loyalty.3. Enables higher margins via premium pricing.4. Provides a platform for brand extensions.5. Offers leverage in the distribution channel.6. Creates a barrier to stop customers switching.

• Brands offer value to consumers by2:– Assisting in identifying and interpreting products.– Giving confidence and saving time in the purchase decision.– Offering a psychological comfort via brand association.

• But the traditional (offline) branding model, whereby customers are passive recipients of value, is not represented online. Here customers are “active co-producers of value” via social media and thus they also add value to the brand3.

1 Aaker (1992).2 Dibb et al. (2006); Cravens and Piercy (2009); Aaker (1992).3 De Chernatony, 2001, p.191.


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Branding and Strategy• “Brands can transform markets, and change competitive structures”

because of their effect on consumer perceptions, e.g. Virgin Direct and The Sainsbury Bank which were able to grab market share in the banking sector quickly by leveraging the strength of their brands1.

• Companies are increasingly looking to revitalize dying or dead brands as a strategy because of the high costs of launching new brands e.g. Puma and Ovaltine’s revival2.

• “Traditional brand engineering no longer works” and value for customers is increasingly being created by business processes outside the auspices of brand managers3.

• However, at the same time, forces are working against the brand...

1 Piercy, 2002, p.471.2 Thomas and Kohl (2009).3 Maklan and Knox, 1997, p.120. Return to Contents page >

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* A ‘category killer’ is a ‘destination store’ which consumers visit with the sole intention of purchasing items in one product category which are offered at low prices. Examples are large discount toy chains, sporting goods chains, and office supply chains.


Reasons for Brand decline• Weakening of brands

– Brand loyalty has seen a decline, notably in retailing, as a result of discounting and promotion wars1.

– Impact from competition2.– Brand switching by ‘new’ consumers who are less loyal3.– ‘Category killers’* such as Ikea and Toys ‘R’ Us have forced prices down, de-valuing brands

and undermining company brand-based strategies4.

• Internal forces– Incorrect managerial strategic and tactical actions e.g. raising prices with no increase in

benefits5.– Day-to-day pressures distracting managers from brand management6.– Funds being taken away from brand equity-building initiatives in favour of those which

offer immediate results, such as retail promotions7.

1 Dibb et al. (2006). 2 Thomas and Kohl (2009); Piercy (2002); Sinha (2000).3 Lodes and Buff (2009).4 Piercy (2002).

5 Thomas and Kohl (2009).6 Aaker (1996).7 Webster et al. (2005).


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Reasons for Brand decline (cont.)• Erosion of trust

– Via brand extensions1.– Via marketers’ actions, such as audience manipulation and offensive products

2.– Via charging premiums for undifferentiated products3.

• Loss of control– Marketers are ceding much control of brands to consumers4, and brand

communities and social networks now lay claim to ownership of brands and they influence the brand choices of consumers as well as company decisions5.

– Branding strategies have been turned upside down – branding now occurs via consumer actions within social media and “post-internet branding is about facilitating conversations around the brand”6.

1 Loken and John (1993); Gürhan-Canli and Maheswaran (1998); John et al. (1998). 2 Rotfeld (1998). 3 Sinha (2000).

4 Sawhney et al. (2005); Muniz and O’Guinn (2001).5 Christodoulides (2008). 6 Christodoulides, 2009, p.142.


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Progress check...About this document 3. The Decline of


































About this document

Contents


Research Objectives





What is Strategy?

























YOU ARE HERE

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The Marketing Concept under pressure• Academia began questioning the whole concept of marketing in

the 1990s.– Suggestions arose that it lacks strategic intent1 and thus cannot add value2.

For this to happen, marketing must become a “strategic activity rather than a supporting activity”3.

– The concept is unclear as to how the organisation should compete, how to align its capabilities, and in understanding the customer4.

– “Something is amiss, that the (marketing) concept is deeply, perhaps irredeemably, flawed… and… is… on the brink of serious intellectual crisis”5.

– However, it is also suggested that the problem in the past has lain with marketing managers who have not understood marketing as a concept6.

1 Varadarajan and Jayachandran (1999); Wilson and Gilligan (2005). 2 Poiesz and van Raaij (2007).3 Poiesz and van Raaij, 2007, p.47.4 Varadarajan and Jayachandran (1999) .

5 Brown, S., 1995, p.42.6 Hooley and Saunders (1993)


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Lack of Market-orientation in Organisations• Many firms just pay lip-service to customer-orientation1 and in fact are product-

oriented2. This is the “customer conundrum”3 – they can only find customers by slashing prices4.

• To become more customer-focused, corporate marketing can help build capabilities5, but this function is disappearing! And anyway, instead of trying to influence customer behaviour, brand managers need to “go back to basics and seek to better align their marketing with people’s needs”6.

• Two types of organisation7:– Left-handed ones are financially-driven and look to grow profits by cutting areas such as

costs, or trimming the marketing mix.– Right-handed ones are market-driven whose main focus is satisfying the customer.

• “There are now two types of corporation: those with a marketing department and those with a marketing soul”8. The latter are the top performing companies.

5 Kumar (2004).6 Christodoulides, 2008, p.292.7 Doyle (1994).8 Brown, A. (1995), cited in Piercy, 2002, p.6.

1 Webster (2005b) .2 Poiesz and van Raaij (2007).3 Piercy, 2002, p.18.4 Doyle (2008).


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Marketing’s Mid-life CrisisWhat the Academics and Practitioners say• Marketing has reached a “mid-life crisis”1, is “broken”2, is “dead in the water”3, is

“suffocating under its own weight”4, “appears to be in decline”5, is “no longer delivering”6, “no longer seems to make sense”7, and should be given “the dignified burial it deserves”8.

• Twin paradoxes: “Consumers have more choices that yield less satisfaction. Top management has more strategic options that yield less value”9.

• Marketing is becoming less successful at its purpose – to synchronise supply and demand. Consumers buy products they do not need, or cannot use because they do not understand them10.

• Paradox: “Marketing is becoming more important, but less visible”11.• “Customers evolved, but did marketing?”12.• “There doesn’t seem to be any time for marketers these days to actually do any

marketing”13. 1 Wilson and Gilligan, 2005, p.22. 2 Lovatt (2010).3 Piercy, 2002, p.6.4 Poiesz and van Raaij, 2007, p.10.5 Wind, 1996, p.6.6 Wilson and Gilligan, 2005, p.33.7 Poiesz and van Raaij, 2007, p.39.

8 Holbrook and Hulbert (2002) , cited in Egan, 2008, p.14. 9 Prahalad and Ramaswamy, 2004a, p.4.10 Poiesz and van Raaij (2007).11 Poiesz and van Raaij, 2007, p.48.12 Meadows-Klue, 2008, p.245.13 Lee (1997) cited in Piercy, 2002, p.288.


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What the Academics say (cont.)• Marketing’s core problem: “Products and services are facing commoditisation

as never before… if consumers do not see any differentiation they buy smart and cheap”1.

• Many CEOs of major companies are frustrated at marketing’s inability to produce measurable results2.

• Some warn against those who believe that social media offers a panacea for marketing, by suggesting it is a cause of some of its problems3.

• A.G. Lafley, CEO of Proctor & Gamble, told his executives: “We need to reinvent the way we market to consumers. We need a new model”4.

• “Somewhere along the journey of marketing, the skill to listen has weakened and the art of engagement lost in favour of ever grander and louder messaging techniques... doing little to create true dialogue with the customers”5.

1 Prahalad and Ramaswamy, 2004b, p.7.2 Kumar (2004).3 Sasser (2008).

4 Weber 2009, p.11. 5 Meadows-Klue, 2008, p.245-246.


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As a result of this analysis of the state of marketing, the Author believes marketing and the organisation face the following nine challenges:• Challenge 1: There is no agreement on the current marketing paradigm. Until

this is agreed, marketing thinking will remain diverged, pulling thinkers and practitioners alike in different directions.

• Challenge 2: There has been a loss of ascendancy of marketing in organisations and marketing as a corporate function has all but disappeared. Since this is so, marketing competence must somehow be dispersed across the organisation in order for marketing to ‘regain its seat at the table’.

• Challenge 3: Organisations should pursue value-driven marketing strategies but marketers are finding it extremely hard to create value for customers, when there is difficulty over the concept of value itself, and when there is no marketing ‘centre of excellence’ in many organisations.


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• Challenge 4: Innovation is key to creating and adding value but there is an innovation spiral, and if organisations are not geared to innovate, how can organisations create value, differentiate and compete?

• Challenge 5: Traditional marketing techniques do not work well on the new consumer, compounded by conditions of the marketing funnel due to fragmented media, intense competition, and consumers having conversations with each other. Firms must regain the ability to influence the consumer.

• Challenge 6: Questions exist about relationship marketing and its ability to deliver its promise. With consumers increasingly in charge of the relationship, how can firms re-connect with their customers?


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• Challenge 7: The marketing mix is captive to a marketing spiral which produces a commoditised offering, thereby frustrating the brand from creating value and differentiating. A new paradigm needs to be developed which enables the creation of competitive advantage.

• Challenge 8: Branding, whilst experiencing some difficulties, offers marketers a way of creating a differentiated product and thus gain a competitive advantage. How can brand equity be built in this new era of marketing?

• Challenge 9: Marketing is in a mid-life crisis. Academia is questioning the whole marketing concept. Many firms that claim to be customer-led are in fact product-led. Organisations must therefore re-align with the customer.

The next section, ‘The Promise of Social Media’ is intended to show how social media might assist in meeting these challenges.


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This section seeks to show to what extent Social Media can address the challenges to Marketing set in the previous section.


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As a result of the challenges identified for marketing earlier, the following questions arise relating to social media:A. Can social media enable brands to re-connect with their customers? B. Can social media enable organisations to influence buyer behaviour once

again? C. Can social media bring about change in organisations and make them

market-oriented?D. Do social media enable organisations to create and deliver value for

customers and organisations? E. Can social media help organisations to innovate? F. Can social media offer a competitive advantage to organisations?G. Can social media restore trust in brands and build brand equity?H. Can social media provide a fix to the marketing mix which, it is claimed,

does not work anymore?


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Restoring the lost art of EngagementA: Can social media enable brands to re-connect with their customers?

Background to Customer Engagement• Increasingly, CEOs and CMOs recognise “that long-term, sustainable

competitive advantage is tied to a firm’s ability to retain, sustain, and nurture its customer base”1.

• Companies need to encourage interactions with consumers to build two-way relationships because customers contribute value to firms in many ways in addition to transactions e.g. WOM, new ideas for products, mutual support2.

• These non-transactional Customer Engagement Behaviours (CEBs)3 involve consumers forming emotional bonds with brands, and inherent in this are feelings of “confidence, integrity, pride, and passion”4.

• Not full consensus – for some, engagement is “marketing’s new key metric”5 but for others it is a ‘management fad’6.

1 Anderson et al. (2004); Gruca and Rego (2005); Rego et al. (2009), all cited in Van Doorn et al., 2010, p.253.2 Kumar et al. (2010).3 Van Doorn et al. (2010).

4 McEwen (2004), cited in Bowden, 2009, p.64-65.5 Haven et al., 2007, p.1.6 Saks (2006).


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Restoring the lost art of Engagement

Understanding Customer Engagement• As a concept, customer engagement is hard to lock down. There is no

accepted definition of it1:– The “long-term ability of a brand to gain a customer’s attention on an ongoing

basis”2.– “The creation of a deeper, more meaningful connection between the company and

the customer, and one that endures over time”3.– “The level of involvement, interaction, intimacy and influence an individual has with a

brand over time”4. – It is also described as being a stage beyond the measurement terms of ‘reach’ and

‘frequency’ and is likened to how far down the marketing funnel the consumer has travelled5.

• Companies should see engagement as a holistic and reliable process that enables mapping of the constructs such as satisfaction, commitment, trust and loyalty – which are all difficult to measure6.1 Tuten Ryan (2007).

2 Chaffey et al. , 2009, p.340.3 EIU, 2007, p.2, cited in Kumar et al. (2010).4 Haven et al., 2007, p.4.5 Li and Bernoff (2008).6 Bowden (2009).


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Restoring the lost art of EngagementDrivers for Customer Engagement• Firms are increasingly pursuing strategies that promote non-transactional behaviour

because they recognise the value of customer engagement1.• Engaged customers contribute to brand reputation and recognition via online

communities, and can be a crucial source of knowledge and thus co-creation2.• Consumers have a greater propensity to communicate via both WOM and social

media when they are engaged with a brand or idea3.• The power of WOM marketing is compelling: “Engaged customers drive word-of-

mouth marketing that is ten times more effective at resonating with a target audience than television or print advertising”4.

• The world’s most valuable brands are finding that there is a correlation between the depth of engagement and their financial performance5.

• However, building a customer-engaged organisation is one of the biggest challenges facing marketers6 with one report stating that 27% do not have a customer engagement strategy7.

1 Verhoef et al. (2010).2 Van Doorn et al. (2010). 3 Mangold and Faulds (2009).4 Kirby (2006), cited in Roberts and Alpert, 2010, p.198.

5 Engagementdb (2009). 6 Cravens and Piercy (2009).7 Forbes Insights (2010).


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The Key to creating Engaged Customers• It is argued that the ‘typical’ marketing approach using “creative mass advertising” and

“ensuring customers are ‘satisfied’” is not enough to create engaged customers because of various external and internal challenges.

• Four elements that must be aligned to create engaged customers:2

o Customer value propositiono Customer experienceo Brando Internal culture

• Research reveals that the simple act of completing a customer satisfaction survey engages the consumer more deeply with a firm3.

• It follows that social media such as blogs, user-generated content, forums, aggregators, communities, and social networks are tools by which consumers engage with organisations and vice-versa4.

• “Engagement is all about content”5 which is “no longer something you push out. Content is an invitation to engage with your brand”6.1 Roberts and Alpert, 2010, p.199.2 Roberts and Alpert (2010).3 Borle et al. (2007).

4 Verhoef et al. (2010).5 Weber, 2009, p.76.6 Elliott (2006).


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Examples of Engagement via Social Media• Southwest Airlines in the USA revised its Nuts About Southwest blog with

podcasts, videos and other social media. As a result, visits to the blog rose by 25%, page views increased by 40% and visitors to the company’s website stayed 26% longer1.

• In 2009 Burger King developed a ‘Whopper Sacrifice’ Facebook application whereby members were asked to ‘unfriend’ 10 Facebook friends in return for a free burger. This initiative resulted in the unfriending of 234,000 friends who received alerts informing them they had been sacrificed for a Whopper. This campaign was enormously successful in engaging consumers and gaining notable WOM2.

• The $30,000 GillettePhenom online contest, in which consumers had to create a short video demonstrating their skill in a ball sport. They then submitted videos to their own YouTube accounts and the top 25 videos were then voted on by website viewers to determine the winner3.1 Hoffman and Fodor (2010).2 Hoffman and Fodor (2010).3 Mangold and Faulds (2009).


http://www.blogsouthwest.com/

http://news.cnet.com/8301-13577_3-10211898-36.html

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Restoring the lost art of EngagementMeasuring Engagement• The two biggest challenges for social are ROI and measurement1.• Four components for measuring Customer Engagement Value (CEV):2

o Customer lifetime value (CLV)o Customer referral value (CRV)o Customer influencer value (CIV)o Customer knowledge value (CKV)

• The Net Promoter Score (NPS) measures how ‘energised’ a consumer is e.g. how likely he will promote a product3. However, the NPS can be inaccurate and misleading4.

• ‘Buzz’ & sentiment can be measured via 36 different listening tools5*, examples being Nielsen’s Buzzmetrics or TNS’ Cymfony6§.

• In a cScape survey, 44% of firms revealed that social networks helped increase their online customer engagement7.

1 IAB (2010).2 Kumar et al. (2010).3 Reichheld (2006). 4 Kumar et al. (2007), and Keiningham et al. (2007), cited in Chaffey et al. (2009).

5 Chaffey et al. (2009).6 Li and Bernoff (2008); Weber (2009). 7 cScape (2010).

* Or ‘snorkelling tools’ (Weber, 2009). § Nielsen BuzzMetrics monitors 30m blogs each producing 500,000 to 1m posts a day (Gillin, 2009).


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Influencing Buyer Behaviour via Social MediaB: Can social media enable organisations to influence buyer behaviour once again?

• It was shown earlier that the more marketing tries to reach consumers, the more extreme their evasive behaviour becomes1.

• But the need to be able to target consumers on the basis of their behaviour is an ever-present objective for marketers since people who have similar views will respond in similar ways to any given marketing mix.

• It is therefore argued that a more psychological approach to marketing is required2.

1 Poiesz and van Raaij (2007).

2 Brennan et al. (2008); Poiesz and van Raaij (2007).


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How Social Media influence the Buying Process

• As a result of the conversations that consumers hold with each other, the existing buying process, already complicated by the existence of the web, is made more complex.

• Social media play a “massive part in influencing consumer behaviour”1.

Source: Constantinides and Fountain, 2008, p.240.

1 Strategic Direction , 2010, p.6.Return to Contents page >

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• The key is therefore finding those who can champion and influence the brand for the organisation.

• Some academics see parallels between the traditional model of relationship marketing and the social web – loyalty of consumers can be earned by organisations that engage with them correctly1.

• Thus participants in social networks can be advanced up this ‘virtual ladder’2 in the same way customers climb the traditional ‘ladder of loyalty’3.

Segmenting the Social Web to find Brand Champions

1 Harridge-March and Quinton (2009).2 Harridge-March and Quinton (2009).3 Christopher et al. (1991).

Source: Harridge-March and Quinton, 2009, p.176.


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• Another segmentation model is the Social Technographics® Profile (STP). Seven segments of behaviour are identified1.

• The Adult Fans of Lego group (AFOL) are given by the model’s creators as to how brands can segment their customers by the degree of engagement.

• AFOLs are important, being responsible for 5-10% of Lego sales (£50m). The most influential segment are ‘Creators’ who act as ambassadors for Lego and carry out much marketing for Lego via the social web, saving the company an enormous sum2.

Segmenting the Social Web to find Brand ChampionsThe Social Technographics® Profile (STP)1

1 Li and Bernoff (2008); Bernoff (2010).2 Li and Bernoff (2008).


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The Social Web and Relationship Marketing• With relationship marketing on the wane, marketers see online

brand communities as a way of helping them to understand consumer needs and to encourage brand loyalty and involvement1.

• Social media are exposing existing CRM systems’ inability to help firms build relationships within these new channels. To offset this, the organisation must adopt social CRM as a series of systems and processes across departmental boundaries2.

• In effect, social CRM involves existing traditional organisational processes, such as market research and sales, being synchronised with their social media equivalents3, in this case the ‘listening’ and ‘energising’4.

1 Casaló et al. (2008); McAlexander, Schouten, and Koenig (2002). 2 Wang and Owyang (2010).3 Band and Petouhoff (2010).4 Li and Bernoff (2008).


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Social Media bringing Organisational changeC: Can social media bring about change in organisations and make them market-oriented?

The Case for Market-orientation• Market orientation is “a business perspective that makes the

customer the focal point of a company’s total operations”1.• A market-led culture leads to increased marketing

effectiveness2, superior business performance3 and an ability to provide superior customer value4.

• All this “effectively and efficiently produces a sustainable differential advantage”5.

1 Cravens and Piercy, 2009, p.4.2 Žostautienė and Vaičiulėnaitė (2010); Appiah-Adu and Singh (1999).3 Deshpande et al. (1993); Cravens and Piercy (2009).4 Cravens and Piercy (2009); Piercy (2002); Slater and Narver (1994). 5 Dibb et al., 2006, p.749.


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Social Media bringing Organisational change

Towards a Listening, Learning Organisation• A market-oriented organisation is one which “continuously gathers

information about customers, competitors, and markets” and which “involves the use of superior organisational skills in understanding and satisfying customers”1.

• By listening, companies not only measure engagement but become learning organisations, a desirable state advocated by leaders in management because “learning is the basis for developing superior strategies”2.

• Social media listening tools give the organisation which can “inform the strategic marketing decision making”3.

• However, “listening is perhaps the most essential neglected skill in business”4.

1 Cravens and Piercy, 2009, p.4.2 Piercy, 2002, p.405.3 Harridge-March and Quinton, 2009, p.177. 4 Li and Bernoff, 2008, p.93.


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Changing the Organisation from within• Whilst listening provides intelligence, the organisation must re-align

itself to face the customer as part of “the process of going to market”1.

• This re-alignment is a long-term process necessitating a number of steps to be taken which are expensive and time-consuming2. It also “requires the involvement and support of the entire workforce”3.

• Organisations need to create their own ‘mini-groundswell’ internally in order to embrace the groundswell outside it4.

• But it is argued that social media are changing organisations internally anyway because employees are consumers and use social media at work5.

1 Piercy, 2002, p.316. 2 Wilson and Gilligan (2005).3 Cravens and Piercy, 2009, p.4. 4 Li and Bernoff (2008).5 Aziza (2010).


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Employee Empowerment• Empowerment is increasing in importance and “gives front-line

employees the authority and responsibility to make marketing decisions without seeking the approval of their supervisors”1.

• It is suggested that the main reason why organisations experience strategy failures (up to 9/10 companies2) is not because of a poor business strategy, but because the strategy execution is flawed3. Indeed, “engaged employees can either make or break the execution of an organisation’s strategy”4.

• Therefore employees should be empowered to create engaged customers as this then produces better customer experiences5.

• Reputation can be built from the inside out by encouraging employees to be brand advocates6.

• However only 17% of organisations have processes that enable and encourage staff to use social media7.

1 Dibb et al., 2006, p.751.2 Aziza (2010). 3 Charan and Colvin, 1999, cited in Roberts and Alpert, 2010. 4 Roberts and Alpert, 2010, p.203.

5 Roberts and Alpert (2010).6 Burnett and Hutton (2007).7 cScape (2010).


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Employee Innovation• A welcome by-product of empowerment is innovation. Employees

should be freed up “to experiment with new technologies, to make high-profile decisions on the fly”1. Examples:– Orange’s ‘intrapreneurial’ engagement program, idClic, enables any Orange

employee can generate an idea – such as a process improvement – and blog about it, and gain points as other employees comment and vote on it2.

Over 93,000 ideas have resulted in 7,500 projects being implemented3. Thus “by promoting internal entrepreneurship, Orange has unleashed a flood of innovation that never surfaced in its traditional hierarchical and structural organisation”4.

– Twelpforce, a system created by Best Buy in the US, as another example. Employees can use it to see Best Buy-related issues that consumers have voiced on Twitter – and respond5.

1 Bernoff and Schadler, 2010, p.95.2 Ramaswamy (2010).

3 Orange (2010). 4 Ramaswamy, 2010, p.24.5 Bernoff and Schadler (2010).


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• The HERO Compact1, whereby organisations can use social media, to provide innovative solutions to customers.

• HERO = ‘highly-empowered and resourceful operative’.

• In essence, every employee has the potential to be a marketer for the company.

• This concept capitalises on the breaking down of boundaries between the marketing and other departments revealed earlier. Source: Bernoff and Schadler, 2010, p.96.

1 Bernoff and Schadler (2010).


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About this document

Contents


Research Objectives





What is Strategy?

























YOU ARE

HERE

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5 Hoffman and Novak, 1997, p.51.6 Hoffman and Novak (1997).7 Lusch and Vargo, 2006, p.284.

Creating Value with Social MediaD: Do social media enable organisations to create and deliver value for customers and organisations?

• Conventional sources of value that offer an advantage are being eroded by forces such as commoditisation and globalisation, and so firms are now recognising that customers offer a source of value creation1. In fact, the “customer is always a co-producer” of value2.

• Value is no longer thought of as simply benefits minus cost - it is now the “result of an implicit negotiation between the individual consumer and the firm”3 and is created only when goods or services are consumed4.

• It was suggested as early as 1997 (before social media!) that “consumers may collaborate not only in idea generation and product design, but also in the marketing communication effort itself”5 and that customer interaction can also assist in developing product and marketing strategy, and the innovation of content6.

• This co-creation “involves the (customer) participation in the creation of the core offering itself. It can occur through shared inventiveness, co-design, or shared production of related goods’’7.

1 Ramaswamy (2008).2 Vargo and Lusch, 2004, p.10.3 Prahalad and Ramaswamy, 2004b, p.7. 4 Gummesson (1998).


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Co-creation of Value• Co-creation is a result of four interactions -

Dialogue, Access, Risk-benefits, and Transparency (DART)1.

• Dialogue – because markets are now defined as conversations between the consumer and firm2 although there are also conversations amongst consumers.

• Dialogue is difficult without the granting of Access to, and Transparency of, information.

• Risk, refers to risk-benefit balance. By being too transparent, the firm risks revealing too much, but too little and it could lose customers. But the rewards for sharing information can be high.

1 Prahalad and Ramaswamy (2004b). 2 Levine et al. (2001).

Source: Prahalad and Ramaswamy (2004b)

DART building blocks of interactions for co-creation of value


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Co-creation and Value• Value is created not just via interactions but via the experiences

generated that are of value to the consumer1. “Value is shifting from products to solutions to experience”2. These experiences become “strategic capital of value to firms”3.

• “Social media seems to be acting like a social solvent; freeing value from places we hardly knew we had places”4.

• 3 ways that companies can capture value by co-creation: – via selling the co-created product itself: the South Korean cosmetics brand Missha

which was co-created and has 40% market share. – via the provision of a complementary product or service, such as Red Hat selling

add-on services to users of Linux, the open-source platform. – by benefiting indirectly from the co-creation itself, such as by obtaining a better

brand or strategic position5.1 Ramaswamy (2008).2 Prahalad and Krishnan, 2008, p.24.3 Ramaswamy, 2008, p.14.

4 cScape, 2010, p.25, quoting Adam Hibbert of Aviva.5 Bughin et al. (2008).


Creating Value with Social MediaCo-creation in action• There are increasing examples of co-creation in the marketplace.

– LEGO Group has long used relationships with certain members of online brand communities. Co-creation has not only delivered product innovations but also brand development and a change in LEGO’s organisational structure1.

– Threadless.com, a T-shirt manufacturer that enables consumers to submit designs online, does not just limit co-creation to ideation and product development but also marketing and post-launch activity2.

– Orange interacts with Facebook users and bloggers and discusses its latest product launches with them, and its Lab’Orange forums enable beta-testing of products in advance of launches, a fine-tuning via co-creation3.

– Ducati collaborates with customers at the end of its NPD process whereby virtual communities help in design and testing4.

– Intuit uses its employees as ‘listening posts’ for its Quicken software to gain insights which then help customers co-design their own products5.

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1 Hatch and Schultz (2010). 2 Hoyer et al. (2010).3 Ramaswamy (2010).

4 Sawhney et al. (2005). 5 Payne et al. (2008).


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Co-creation benefits and drivers for End Users• Segments that partake in co-creation include “innovators,

lead users, emergent consumers, and market mavens”1. • Social benefits to end users include increased status, self-

esteem and connectivity with others2.• Technical benefits include the gaining of knowledge via

exchange of ideas3. • Psychological motivators include altruism, desire for creativity

and self-expression, and a dissatisfaction or high involvement with a product4.

1 Hoyer et al., 2010, p.288.

2 Nambisan and Baron (2009). 3 Nambisan and Baron (2009).4 Hoyer et al. (2010).


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4 Payne et al. (2008); Prahalad and Ramaswamy (2000).5 Prahalad and Ramaswamy, 2004b, p.9.

1 Van Doorn et al. (2010).2 Van Doorn et al., 2010, p.253.3 Hoyer et al. (2010).


Co-creation drivers for Organisations• The failure of existing value generation methods1.

– “CEOs are becoming wary of value creating antics of financial managers who rely on techniques such as leveraging and financial restructuring”2.

• The high failure rates of new products3. – these are associated with inadequately fulfilling customer needs, and so ideas

generated via co-creation will more closely match those needs and thus reduce launch failures or might improve existing products.

• Co-creation offers two major sources of competitive advantage4: 1. Productivity gains via enhanced efficiency, such as cutting of running costs.2. Enhanced effectiveness, such as increased product value or ability to innovate.

• A perfect antidote to the commoditisation of the marketing mix. The attraction of co-creation is its potential to produce differentiation − “products can be commoditised but co-creation experiences cannot be”5.


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4 Hoyer et al. (2010).5 Sheth and Sisodia (2005).6 Hatch and Schultz (2010).


The Challenges presented by Co-creation• The downsides to value creation involving consumers include:

– The firm has reduced control over its strategic management and planning e.g. transferring innovation processes to consumers risks incremental innovation instead of radical innovation1.

– Control of brand management is also loosened or even lost, increasing uncertainty for the firm2.

– The involvement and empowerment of consumers adds yet more stakeholders, whose views have to be considered. Disputes over intellectual property may arise, information overload can occur, and some good ideas can just be unfeasible3.

– The objectives of customers often differ from those of the organisation, for instance the former demanding customisation whilst the latter, efficiency4.

– Co-creation poses a threat because customers can ‘disintermediate’ themselves from marketers and move towards a ‘do-it-yourself’ marketing situation5.

– The transparency of co-creation risks revealing company secrets to competitors, and also causes dissatisfaction in some consumers who see organisations reaping revenue from their (free) efforts6.

1 Hoyer et al. (2010).2 Pitt et al. (2006), cited in Hoyer et al. (2010).3 Hoyer et al. (2010).


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Social Media as a source of InnovationE: Can social media help organisations to innovate?

The Importance of Innovation to the Organisation• “An innovation is an idea, practice, or object that is perceived as new by an

individual or other unit of adoption”1. • Innovation is a crucial management function and impacts on the performance of the

organisation2.• The majority of large companies view innovation as critical, and growing in

importance3.• What ensures successful innovation are the company’s market sensing skills,

effective R&D and manufacturing processes, and the correct mix of the firm’s competences4.

• But this importance of innovation is not limited to NPD:– “Whereas an increasing number of companies stress the importance of product innovation (3M,

for example, has an objective of at least 30% of revenue from new products introduced in the last four years), it is increasingly important to focus on innovation in marketing practices”5.

• Technology offers an “increasing number of opportunities for innovation in distribution and marketing practices”6.

1 Rogers, 1995, p.11. 2 Hoyer et al. (2010).3 Loewe and Dominiquini (2006).

4 Sawhney et al. (2005).5 Wind, 1996, p.7.6 Wind, 1996, p.7.


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5 Mazur, 1999, cited in Piercy, 2002, p.76. 6 Kim and Mauborgne , 2005, p.12.7 Kim and Mauborgne (2005).


Value Innovation• The problem faced by many companies is not how to gain a competitive advantage

– but how to sustain it1.• The answer lies in continuous innovation2. Successful innovation is a major

business challenge and can be categorised by how novel it is, and the extent to which customer value is created3.

• Value and innovation go hand-in-hand − this is ‘value innovation’4 and is defined as “creating new value propositions… that lead to increased customer satisfaction, loyalty and – ultimately – sustainable, profitable growth”5.

• Another definition describe it as “focusing on beating the competition” but “making the competition irrelevant by creating a leap in value for your buyers and your company”6.

• Value without innovation does not make the brand stand out, whilst innovation without value tends to be too technology-driven or advanced, exceeding the needs of the customer7.

1 Wilson and Gilligan (2005). 2 Piercy (2002).3 Cravens and Piercy (2009).4 Poiesz and van Raaij (2007).


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Examples of Value Innovation• Examples of value innovation include:

– Kodak, which went against the grain and launched high cost printers for consumers but with low cost ink cartridges1.

– Yellow Tail wine from Australia which made the competition in the US irrelevant by making itself fun and easy to drink for all, and is enjoying high growth2.

• But marketers of a brand should not allow competitors to mimic its value curve (the graphic depiction of its relative performance across its industry's key success factors)– The Body Shop enjoyed success for ten years but did not attempt another value

innovation when the competition’s value curves merged with its own and it now suffers declining performance as a result3.

• However in a contradictory note, the same academics say that, “managers should not get too excited about innovation” – what decides success or failure is not innovation, but strategy alignment4.

1 Cravens and Piercy (2009).2 Kim and Mauborgne (2005).3 Kim and Mauborgne (2005).4 Kim and Mauborgne, 2009, p.80.


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4 Chakravorti, 2010, p.97.5 Lazzarotti and Manzini, 2009, p.618. 6 Chanal and Caron-Fasan (2010).


Innovation via Co-creation• Co-creation is not just about value but innovation as well, a definition being “a

collaborative new product development (NPD) activity in which consumers actively contribute and select various elements of a new product offering’’1.

• Innovation is communicated through a social system via the process of diffusion. As new ideas are invented or adopted, social change occurs2. Social media are thus the perfect media for innovation.

• Companies which lack good ideas do so because they lack external and internal networks that can be good idea generators3.

• The solution is for “companies to ‘open’ their innovation and idea generation model”4.• Open innovation is defined as “the phenomenon where firms rely increasingly on

external sources of innovation, which means that ideas, resources and individuals flow in and out of organizations”5.

• The concept implies that firms can reduce their R&D costs and capture value via knowledge produced outside the company6.

1 O’Hern and Rindfleisch, 2009, p.4.2 Rogers (1995).3 Hansen and Birkinshaw (2010).


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Open Innovation via Crowd-sourcing• Crowd-sourcing is an example of open innovation and describes the process by

which the power of the many can be brought together on the internet to build and to innovate1.

• Described as “harnessing distributed intelligence”2, example crowd-sourcing platforms include Dell’s IdeaStorm and Starbucks’ MyStarbucksidea.com which were both introduced to turn around these flagging companies. Soon after, Dell’s site was getting 2m views a month, and within two months Starbucks had more than 40,000 ideas3. Another well-know example of crowd-sourcing is Wikipedia4.

• Increasingly, brands are testing crowd-sourcing, notably in advertising, largely as a riposte to agencies’ high fees5.

• Confusion over the distinction between co-creation and crowd-sourcing. – The founder of Threadless.com describes his collaborative design process as crowd-sourcing6

and yet others call it co-creation7. The suggestion is that crowd-sourcing is the outsourcing of tasks to a specific group – ‘community collaboration’ – whilst co-creation is the development of products in close collaboration with those who will use them8.1 Howe (2008).

2 Chakravorti, 2010, p.98.3 Chakravorti (2010).4 Chanal and Caron-Fasan (2010).

5 Sweeney (2010). 6 Lake (2010).7 Hoyer et al. (2010).8 Kuipers (2010); Parker (2010)


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4 Knowledge@Wharton (2007); Weinberg (2009). 5 McEleny (2010).


Examples of Innovation via Communities and Blogs• Marketers should concentrate on “making customers an integral part of the way you

innovate”1 and it is not just about making better products and processes but about “innovating faster”1.

• Examples include:– Salesforce’s Idea Exchange which functions in similar ways to Digg.com and allows their

customers to suggest ideas for improving the Salesforce product and to rate others’ ideas1. – Dell’s IdeaStorm platform which demonstrates the power of co-creation – Dell’s Linux PC went

from idea to completed product in only two months, instead of the usual development process of 9-15 months2.

– Brand communities also generate innovative customer ideas such as Proctor & Gamble’s Connect + Develop, one result being Bounce, the world's first dryer-added softener, whose product technology was acquired from an independent inventor, and Starbucks’ MyStarbucksIdea community site which displays ideas that have been adopted3.

– Blogs such as Southwest Airline’s Nuts About Southwest and Dell’s Direct2Dell corporate blog enable consumers to question and submit ideas to employees and managers4.

– Unilever has plans to create bespoke social networks across its brand portfolio to involve consumers in its product innovation process5.

1 Li and Bernoff, 2008, p.183. 2 Weber (2009); Li and Bernoff (2008).3 Weber (2009); Hellriegel (2009).


http://sites.force.com/ideaexchange/ideaHome?c=09a30000000D9xt

http://www.ideastorm.com/

http://www.pgconnectdevelop.com/

http://mystarbucksidea.force.com/

http://www.blogsouthwest.com/

http://en.community.dell.com/dell-blogs/Direct2Dell/b/direct2dell/default.aspx

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Gaining a Competitive Advantage via Social MediaF: Can social media offer a competitive advantage to organisations?

• Organisations must seek a competitive advantage to outperform competitors and can do this by either cost leadership or differentiation, each offering value to the customer in different ways.

• Sustainable competitive advantage will increasingly depend on the core competencies of the organisation1. But success used to depend on marketing power. Now, it is argued that “success depends much more on finesse − ability to deploy effort into areas that generate higher customer value than the added cost of providing that value”2.

• In support: “High-quality interactions that enable an individual customer to co-create unique experiences with the company are the key to unlocking new sources of competitive advantage”3.

• Value is created via these non-transactional experiences – value for the customer and Customer Engagement Value (CEV) for the organisation.

1 Wilson and Gilligan (2005). 2 Wind and Rangaswamy 2001, p.25. 3 Prahalad and Ramaswamy, 2004b, p.7.


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• For the firm this value can result from efficiency savings:– via consumers viewing FAQs on a user forum (instead of using a toll-free

phone number that costs the firm)– via mining customer comments on products in online forums (instead of

costly market research)1.• But by far the greatest value will be created by WOM because

of the superior effectiveness of consumer-to-consumer communications and its superior ability to influence over traditional media2, and trust in WOM plays a major role in this3.

• The fact that an Inc. magazine study found that 82% of the fastest-growing private companies use WOM techniques4 is commercial evidence that social media are a great source of value and advantage.

1 Hoffman and Fodor (2010). 2 Brown et al. (2007).3 Roberts and Alpert (2010). 4 Ferguson (2008). Return to Contents page >

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• Practitioners are not necessarily as enthusiastic as academics about the social web’s powers with respect to competitive advantage.

• McKinsey carried out an online discussion with CEOs and senior managers of UK and US corporations. Although not an empirical study, the report suggested that views differ as to whether social media offer a strategic competitive advantage1. – Some think Web 2.0 can offer long-term advantage, others think it is

fleeting until the ‘pack’ catches up with them. – But, others think that Web 2.0 enables them to do business differently,

internally and externally, and thus offer some sustainable advantage.

1 McKinsey (2007).


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4 Pine and Gilmore (1998) and Schmitt (1999, 2000), cited in Christodoulides and de Chernatony (2004).

5 Christodoulides, 2009, p.142.

Brand-building via Social MediaG: Can Social Media restore trust in brands and build brand equity?

Brands and brand-building in the Web 2.0 era• Academics have sought to define a role for brands in the age of Web 2.0. It is

suggested that in this age of transparency, brands must be trusted by consumers if they are to succeed, so-called ‘trust brands’1.

• Also, the concept of ‘enterprise branding’, whereby the brand is an accumulation of corporate and co-creation stakeholder activity and is driven by the identity created by this joint enterprise2.

• A brand should also consistently communicate the firm’s value proposition3 and it is suggested that brands no longer merely act as signals or identifiers for consumers, but are equated with experiences, just as value was shown to be created by experiences earlier4.

• This shift in emphasis of the brand means a change in how marketers manage brands. Marketers can no longer act like ‘control freaks’ and an approach that has “consumers as passive recipients of brand value has no place in Web 2.0”5.

1 Wilson and Gilligan (2005). 2 Hatch and Schultz (2009, 2010).3 Roberts and Alpert (2010).


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4 Weber, 2009, p.36.5 Weber, 2009, p.36.6 Li and Bernoff, 2008, p.78.


What is a Brand in the Web 2.0 era?• There are many, many definitions of the brand. For David Ogilvy, a post-war

advertising legend, the brand was “the intangible sum of a product's attributes: its name, packaging, and price, its history, its reputation, and the way it's advertised”1.

• Others see a brand as having more than a distinguishing role – “a mechanism for achieving competitive advantage for firms, through differentiation”2.

• But with the advent of Web 2.0, it is now recognised that brands are “social objects and socially constructed” and that “consumers are actively involved in that creation”3.

• But to win the ‘branding war’, managers must recognise that brand equity is moving away from brand essence and recall – the era of “stationery brands like Gillette, Kodak, Disney and Kellogg’s”4. Instead, today’s brand is a “living, changing thing” – like Google – that is “based on the dialogue you have with your customers and prospects – the stronger the dialogue, the stronger the brand”5.

• Essentially, “your brand is what your customers say it is”6. 1 van Riel and Fombrun, 2007, p.39.2 Wood, 2000, p.666.3 Muniz and O'Guinn, 2001, p.427.


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How to build Brands via Social Media• Brand equity consists of five assets that contribute to the value of a

brand: – 1) Brand loyalty.– 2) Brand awareness.– 3) Perceived brand quality.– 4) Brand associations.– 5) Other brand assets such as trademarks or patents1.

• It follows that increasing the value of an asset, such as awareness, increases the equity. Awareness can be created by “releasing information to the firms’ consumer community and via other social media tools resulting in ‘buzz’ about the product or service”2.

1 Aaker (1992). 2 Hoyer et al., 2010, p.291.


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How to build Brands via Social Media (cont.)• Co-creation can build brand equity quickly by facilitating the

origination and sharing of user-generated content (UGC) on sites such as YouTube and Wikipedia1.

• “Word-of-mouth is a powerful amplifier of brand marketing, achieving results no media campaign can achieve”2.

• Four ways of brand building (and the problem they each address) are3: – Posting a viral video (awareness).– Engaging with consumers in social networks (lack of WOM).– Writing blogs (complexity).– Creating specific online communities (accessibility).

1 Christodoulides (2009).2 Li and Bernoff, 2008, p.130.3 Li and Bernoff (2008).


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5 Hennig-Thurau et al. (2010).6 Meadows-Klue, 2007, p.249.7 Kiley (2009).


Examples of Brand building with Social Media• Blendtec’s ‘Will it blend?’ campaign showcases videos of its CEO, Tom Dickson, on YouTube

using his company’s premium kitchen blenders to blend unusual objects such as an iPhone, coke cans, and a garden rake. As well as raising awareness and communicating its brand quality (62m views so far2) the on-going campaign has increased sales by 700% since November 20063.

• The Dove ‘Campaign for Real Beauty’4 – Unilever grew awareness by developing a conversation with consumers about self esteem5. The ‘Evolution’ video told in just over a minute the story of how artificial a magazine cover girl’s image is, and in doing so “sparked millions of online conversations as the content flowed frictionlessly across YouTube and the blogosphere”6.

• Ford’s Fiesta Movement, a pre-launch activity in 2009 for the car’s entry to the US market. Ford gave 100 Americans a Fiesta to drive, and the results of their blogging, uploads to YouTube, Facebook activity and ‘tweeting’ have raised awareness of the Fiesta − unknown in the US − amongst Generation Y to 37%, equivalent to hundreds of millions of dollars of traditional advertising spend7.

1 Li and Bernoff (2007); Weber (2009); Hoffman and Fodor (2010).2 Godin (2008)3 Taylor (2010).4 Deighton (2007); Mangold and Faulds (2009).


http://www.willitblend.com/

http://www.youtube.com/watch?feature=player_embedded&v=5XF66Ku4a9U

http://chapter1.fiestamovement.com/

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5 Muñiz and Schau (2007).6 Meadows-Klue (2008); Constantinides

and Fountain (2008); Gillin (2007).


The Power of Brand Communities• Brand communities are now ‘virtual’ communities, and these can exert

tremendous influence on a brand by nature of the members within it1. • Not only can brand communities assist in innovation via co-creation but they

enable brand engagement by encouraging dialogue, giving access to information and offer transparency2.

• They have also “become a powerful tool for marketers since these communities may help to understand consumer needs and to promote brand loyalty and involvement”3.

• Online communities can also shape the brand perceptions of consumers via e-WOM4 and many studies have shown that brand communities create detailed and increasingly professional brand content5.

• Evidence suggests that messages received via social media are more believable and trusted than those received via conventional media6.

1 Casaló et al. (2008).2 Prahalad and Ramaswamy (2004b); Hatch and Schultz (2010).3 Casaló et al., 2008, p.19.4 Jansen et al. (2009).


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Examples of Online Communities• Online communities can be set up by vertical or horizontal market

as part of a targeted brand building process1. Examples include:– www.getsatisfaction.com which is a community which brands use in order

to engage with their customers2. – P&G’s beinggirl.com – a community site about everything that young girls

deal with – is a successful example of a brand community’s effectiveness. According to P&G, the site is four times as effective as advertising in reaching its target consumers3.

– The Lego Users Group Network (LUGNET), a global community of thousands of Lego enthusiasts created by Adult Fans of Lego (AFOL), which acts as a support forum4, as well as co-creation platform − to date over 205 user-driven Lego innovations created5.

1 Weber (2009). 2 Li and Bernoff (2008).3 Li and Bernoff (2008).4 Hatch and Schultz (2010); Li and Bernoff (2008).5 Antorini (2007), cited in Hatch and Schultz (2010). Return to Contents page >

http://www.getsatisfaction.com/

http://www.beinggirl.com/

http://www.lugnet.com/

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Conclusion to the Literature Review

This section aims to make sense of the academic and practitioner material that has been uncovered in the course of the Literature Review.


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• This study is as much about marketing strategy as it is about social media. It avoids exploring the different types of social media and social media strategies.

• Decline: There is almost universal belief amongst academics that marketing is in decline, and this is an over-riding theme.

• Marketing Paradigm: There being no agreement on the current marketing paradigm, the Author questions how marketing thinking can progress. The choice of Value Marketing is the only possible option if the many claims for social are to be given any credence.

• Loss of Ascendancy: Regarding Marketing’s loss of ascendancy in the organisation, the proposal to disperse marketing competence across the organisation seems a perfect antidote - assisted by social media.

• Commoditisation of the Mix: Value innovation is proposed as the solution, aided by co-creation via the social web.


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• Problems in the marketing funnel: “Marketers are used to shouting and looking for the echo”1. Organisations are ‘over-marketing’ and unable to influence the consumer in the way they used to. Again, the solution from the literature comes from the groundswell, which suggests using webmavens to influence fellow consumers.

• Branding: This was shown to be rising in importance due to its ability to offer differentiation but is also under pressure from various forces. The literature showed that social media can help build brands.

• Competitive advantage: The overriding strategic need to gain a competitive advantage is emphasised again and again, but there is no evidence that social media give an advantage per se, although the way they are used can.

1 Li and Bernoff, 2008, p.125.


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• Failures in strategy: These are revealed to result from a lack of strategy alignment or failure of employees to execute it. Organisations must change structure and culture to better align themselves with the consumer, and employees must be empowered – social media has a role in both.

• Experiences: These are revealed to be influential in co-creation activity, during customer engagement, and inherently part of the brand. The customer seeks out experiences, so “the next competitive battlefield lies in staging experiences”1.

• Customer engagement: The literature suggests that engaging with customers will provide the interactions necessary to develop loyalty, build relationships and grow business. Social media offer the perfect way to assist this via their many tools that enable interaction between consumers and organisations.

1 Pine and Gilmore, 1998, p.98.


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Summary • “Perhaps the main problem with all the bits and pieces of ideas

that would promote customer engagement – branding to consumers, internal marketing within the company, and service delivery – is how to fit all these together”1.

• It is this piecing together that the Author feels has not yet been done by any academic. From the evidence of the literature, he suggests that it may be social media that will act as the glue that sticks the pieces into one complete item again, restoring marketing to its rightful position at the table, able to create value for the organisation and assist it in gaining the competitive advantage it needs to survive and grow.

1 Roberts and Alpert, 2010, p.198.


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About this document

Contents


Research Objectives





What is Strategy?

























YOU ARE HERE

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Research Methodology

This is a short synopsis of the methodology employed in the course of this study. The full methodology can be obtained by downloading the original dissertation at www.newrivermarketing.co.uk/downloads



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Methodology

• This is an epistemological, interpretevist (phenomological), inductive study.

• This was inductive rather than deductive as there was no theory to test, so a conceptual framework needed to be constructed.

• The research ‘onion’ model1 was adopted for the path to follow as the structure is a useful metaphor for the research process.

1 Saunders et al. (2009).

Source: Saunders et al., 2009, p.108.

The Research Onion


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Methodology

• “A dissertation should also be a thesis”. A thesis is a proposition that is maintained by argument1.

• A conceptual framework was developed from the study of the literature to aid construction of the investigative questions in the primary research.

1 Fisher, 2007, p.319.

Problem Possible solutionTIER 1 CONCEPTUAL FRAMEWORK

Marketing in decline. Social media can reverse the decline.TIER 2 CONCEPTUAL FRAMEWORK

1 No agreement on current marketing paradigm.

Value-based marketing.

2 Loss of ascendancy of marketing. Disperse marketing competence across organisation - everyone can become a marketer for the firm via social media.

3 Value creation increasingly difficult. Co-creation aided by social media.4 Increasing difficulty to innovate. Value innovation and co-creation of

products, services, practices and ideas, aided by social media.

5 Traditional marketing techniques increasingly ineffective at influencing buyer behaviour.

Social media offer new way to influence consumer in the marketing funnel.

6 Relationship marketing no longer delivering – there’s a need to reconnect with customers.

Customer engagement strategies in which social media play important role.

7 Marketing mix increasingly producing commoditised offering, hard to gain competitive advantage.

Social media can offer a new route to competitive advantage.

8 Need to build trust in brands, and brand equity in order to differentiate and gain competitive advantage.

Social media can help restore trust in brands and build brand equity.

9 Marketing in ‘mid-life crisis’. Increase market orientation by becoming listening organisation, and employee empowerment – using social media.

The Conceptual Framework


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1 Saunders et al. (2009) ; Sekaran (2003).2 Blumberg et al., (2008); Cooper and Schindler (2008); Ghauri and Grønhaug (2005)3 Sekaran (2003).4 Glaser and Strauss (1967). 5 Myers (2008).6 Miles and Huberman (1994).

Methodology

Primary Research• Purpose of the study: this was both an exploratory and

explanatory study1. The latter is also known as ‘causal’2 or ‘hypothesis testing’3.

• Research strategy: A grounded theory strategy4 was adopted.• Data collection: Qualitative research using a single data

collection method – Semi-structured interviews. These offer a developed line of questioning but with scope for improvisation5. These were done via the telephone.

• Data analysis: Data display and analysis strategy6.


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Methodology

IntervieweesRespondent Company & job title Area of responsibility

1 Sam Grimley First Direct, Marketing Communications Manager

Social media

2 Paul Say First Direct, Marketing Director Marketing strategy

3 Sienne Veit Marks & Spencer, Social and Mobile Commerce Development Manager

Social media

4 Cheryl Calverley* Birds’ Eye Iglo Group, General Marketing Manager.

Marketing strategy & Social media

5 Kerry Bridge Dell, Social Media ManagerDell Public Sector Communications

Social media

6 Mark Squires Communications Director, Nokia Social Media

7 Benjamin Braun Head of Online Services, British Gas Online Services

8 Dan Cohen Head of SEO and Social Media, MoneySupermarket.com

Social Media

* Until August 2010, Cheryl Calverley was a Senior Global Manager at Unilever. As a result she was able to speak authoritatively on both marketing strategy and social media.


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Findings & Discussion

This section discusses the Findings and relates them to the theories from the literature. It has ten areas of commentary, corresponding to the nine of the conceptual framework and an additional one concerning social media’s general use.


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Findings & Discussion1. On Strategy, Marketing Strategy, the Marketing paradigm.

– Noone was familiar with the ‘heterarchy’ structure of strategies (see slide 21). There was a range of strategy structures volunteered: ‘Top-down’, ‘bottom-up’, ‘flat’, were some examples. These findings were unsurprising, given the range of different organisations.

– The interviewees variably suggested that marketing strategy is customer-led, brand-led, benefit-, value-led, or experience-led.

– So the same lack of consensus on the current paradigm exists amongst marketing practitioners as it does amongst academics. An explanation as to why the interviewees disagreed could possibly be that each brand has different strategic priorities.

– For instance, a value-based strategy might suit British Gas but not first direct (experience strategy). Similarly, an FMCG brand such as Persil or Birds’ Eye requires a brand-led strategy to build brand equity.

– Only one interviewee explicitly stated that customer input via social is fed back into strategy. This suggests that the majority of the 7 companies interviewed are not true listening organisations.


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2. On Marketing’s loss of Ascendancy– The respondents did not accept that marketing has reduced influence,

thus contradicting the literature.– This may be due to a lack of awareness by the respondents of the ‘big

picture’ that is available to academics, due to being ‘siloed’ in their roles. Pride may have been a factor – noone likes to admit to have reduced influence. Some interviewees did admit to a ‘blurring of boundaries’ of marketing within their organisations but they viewed this as positive.

– Regarding social media’s ability to aid strategy execution by empowering employees, it appeared that many respondents realised the benefits.

– However, it was not clear that they were aware of the claim in the literature that a major cause of organisational strategy failure is poor strategy execution caused by unengaged employees.


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3. On Value creation– The interviewees were not as gloomy about Marketing’s ability to create

value via the marketing mix, as the academic literature was. Some create value via price deals, whilst Birds’ Eye does via NPD, as does British Gas e.g. enabling customers to control energy usage at home.

– Some interviewees recognised that experiences are value creators, and actually also do co-create with customers e.g. first direct and Nokia (which unboxes new products in front of key influencers (webmavens) who tweet out first impressions to followers who then feedback, sometimes causing product changes). Many were also very conversant on the crowd-sourcing process.

– The respondents had various views on how social media creates value for them but the impression given was that much value is still being created via improved efficiency, such as value chain improvements, rather than improved effectiveness (new, better ways of doing things).


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4. On Innovation– Not one interviewee mentioned ‘value innovation’, that ‘leap in value’

that makes the competition irrelevant. However some of the companies interviewed are value innovating – first direct (via its Talking Point forum) and British Gas (via its EnergySmart option).

– But other examples of innovation given at interview seemed to the Author to be more incremental innovation rather than radical innovation.

– The respondents did feel that social media offer a route to innovation, but other than IdeaStorm (Dell) and the ‘ideation’ of a new pet insurance product (Moneysupermarket.com) no examples were offered.

– Take out was that most interviewees only saw innovation via social as a route to NPD rather than innovation in practices and processes as well.


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5. On Buyer Behaviour– The interviewees recognised the increasing ineffectiveness of

traditional advertising and the problems in the marketing funnel.– It was largely recognised that delivering emotionally-led advertising as

social media content is very effective at influencing buyer behaviour. However with the exception of Dell’s Outlet on Twitter, and Marmite (Unilever) on Facebook, the interviewees were not able to volunteer examples, suggesting this activity – or the measurement of it – is still in infancy.

– There was a tacit recognition that the social web offers a new way of segmentation and targeting, especially of evangelists. Unilever already does this (Marmite bloggers) and several respondents revealed plans to do so, e.g. Birds’ Eye could target Mumsnet (opinion formers), M&S the top 10% of socially-active consumers.


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6. On re-connecting with the Consumer via Engagement– The interviews revealed a deep awareness of, and the need for,

engagement, as well as evidence of engagement activity in the social space. Most argued that content is key to engagement although Birds’ Eye saw discounting as an engagement tool.

– Only Nokia claimed openly that engagement with customers has improved customer loyalty, but whilst others did not there was clear intimation of this, suggesting to the Author that engagement is seen as a loyalty tool or at least a measurement of it.

– There was some recognition of the term ‘social CRM’ but only one interviewee (Moneysupermarket.com) championed it. Another interviewee dismissed it as just a ‘corporate buzzword’.

– Use of Net Promoter Score (NPS) to measure engagement is near universal and most interviewees use various buzz and sentiment measurement tools.


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7. On gaining a Competitive Advantage– The need to gain a competitive advantage was universally recognised,

however some respondents claimed not to actively seek it, instead concentrating on the “needs of the business” which in turn may offer an advantage. This reflects a typically pragmatic, practitioner approach!

– Unsurprisingly, a brand such as Birds’ Eye seeks a competitive advantage via the marketing mix.

– As for social media offering a competitive advantage, the Author sensed that the brands use them to gain a tactical rather than strategic advantage, examples being insight (Dell), link-building (Moneysupermarket.com), communication (Nokia), and brand-building (Birds’ Eye).

– Overall take out was that there was little recognition of social media as a strategic tool for gaining a competitive advantage.


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8. On Branding– There was recognition for the need to build brand equity as it offers

differentiation leading to advantage but methods for this varied according to each ‘brandscape’.

– However, the sentiment was that attempts to do this would be self-defeating if the brand personality was not retained on the social web.

– There was considerable agreement on the concept that now brands are social constructs and are the sum of customers’ views, with the brand marketers having a close alignment with views expressed in the literature.

– The opportunities to build brands via social media was almost universally recognised but some brands e.g. first direct were not even on Facebook! This reinforces the suggestion in the literature that brands are being cautious in their approach to adoption of social media.

– The power of social media to work for brands was understood and success stories such as Blendtec were universally known. On this subject there was therefore considerable synergy with the literature.


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9. On Marketing’s mid-life crisis– Of all the issues raised in the literature, this was the most disputed by

the interviewees. All respondents claimed their organisations were customer-centric and they strongly rejected the notion of any crisis in marketing. One described this as “marketing psycho babble”. This shows a yawning gap between scholars and practitioners.

– Despite this, an issue was recognised by several e.g. “marketers have forgotten what marketing is for”, “Organisations are not adapting to change fast enough”, and “marketing is in a state of flux”.

– This suggests a difference of emphasis. Several interviewees voiced concerns over media fragmentation and lack of ‘cut-through’ so there is clearly a recognition of a problem with marketing but perhaps not a ‘crisis’.


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10. On use of Social Media– To gain further insight the interviewees were asked why their brands used social

media, and about its place in the promotional mix. – The general answer could be paraphrased by ‘that is where the customer is’. – The majority saw social as ‘just another communications tool’. – But the literature suggested they were also a tool for listening, culture-changing,

empowerment, influencing, and co-creation. These aggregate to a strategic role.– There was agreement with the literature that social is encouraging a customer-

focused culture and increased organisational transparency.– Adoption of social media internally (Dell, Nokia, British Gas) has brought people

closer and eased information flow, supporting the theory that social assists in internal re-alignment of the organisation.

– The problem of showing the ROI of social media was raised by some interviewees, reflected in the literature. However, the Author points out that this is an age-old problem for marketing generally.


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Conclusion to the Study


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Review of the Research Objectives• The Author argues that all four of the original research

objectives have been achieved. 1. Contemporary issues raised by the literature within strategic

marketing have been explored.2. The gap between practitioner and academic understanding has been

examined.3. The impact of social media on marketing strategy has been analysed.4. A powerful conceptual framework for the study Problem was

created.


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A return to the Research Question• The original Problem set was What is the impact of social media on

marketing strategy? • The ‘short’ answer to the Problem depends on perspective.• From the academic perspective, it is clear that social media’s impact is

considerable, whereas from the practitioner viewpoint it is perhaps moderate.

• The conceptual framework proposes that social media are a panacea for marketing’s problems and thus are revolutionary in nature.

• The primary research has shown that brands are cautious and see social as ‘just another’ – but exciting – channel. This suggests that brand owners see social having a more evolutionary impact on marketing.


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Conclusion to the StudyDiscussion of the results of the Research• The research consisted of the desk research, and the interviews.• The Author argues that the real value of this study is in the powerful

conceptual framework that was created – in short that marketing is in decline but that social media could help revitalise marketing.

• The literature review concluded that:– Marketing is in decline, has lost its ascendancy and needs a new paradigm.– The Marketing Mix suffers from commoditisation, however social media might

enable brands to value innovate via co-creation.– Problems exist in the marketing funnel and brands are ‘over-marketing’. But

brand champions on the social web could help influence fellow consumers and thus assist in the marketing effort.

– Branding is under threat but at the same time offers a way to differentiation and thus competitive advantage. Social media were shown to help in branding.


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Discussion (cont.)– Competitive advantage is key to survival but that merely having a social media

presence does not guarantee survival.– Failures in strategy often arise from poor strategy alignment or failure of employees

to execute it. Social media can assist in fixing both.– Experiences generated when the customer interacts with the brand are strategically

important – social can create unique experiences via co-creation.– Customer engagement is vital and social media offer many ways for brands to

engage with the customer.• In the conclusion to the literature review, the Author surmised whether

social media could be the glue that helps stick back together all the ‘pieces’ of ‘broken’ marketing.

• The primary research could not hope to verify this, or the conceptual framework, via 8 interviews – but some important findings were made.


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Discussion (cont.)• The primary research amongst practitioners showed some synergy

with academic thinking over the areas of branding and engagement. • The major discrepancy occurred on the issues of the state of

marketing – the practitioners did not agree that marketing was ‘in crisis’ or that it has lost ascendancy.

• Reasons for this could include a pride in their discipline, a lack of awareness of academic thinking, and an understandable inability to see the ‘big picture’.

• The ‘middle ground’ appears to be over social media and their use and impact. Academics see social media as strategic in nature whereas marketers in this study see them as more tactical in nature.


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Discussion (cont.)• The Author, a practitioner, has the benefit of seeing from both

perspectives, having studied academic thinking on both marketing and social media.

• He reasons that the initially curious decision to examine organisational strategy in the literature review is not only justified but highly relevant to the outcome of this study, according to the following logic:– Organisations seek a sustainable competitive advantage and an advantage will only

be gained via the core competences of the organisation. – These may or may not include social media. What matters is doing activities more

efficiently and effectively than the competition – this is what provides a competitive advantage, rather than any one tool.

– It follows that employing social media can provide a competitive advantage – if they are used better than the competition.


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End

• Please share this document with colleagues via this link www.newrivermarketing.co.uk/downloads.

• The Author would also appreciate feedback on this research and you can do this by leaving public comments on the New River Marketing website, or privately by getting in touch via www.linkedin.com/in/richardfullerton.

• You can follow the Author on Twitter via @newriverm



http://www.linkedin.com/in/richardfullerton




The impact of Social Media on Marketing Strategy

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