The effect of Social Media – Should companies abandon Traditional Advertisement? Part 1

October 27, 2014

Written by Elisabeth Matsson

Part 1 – The effect of Social Media

Introduction

Having a strong brand that generates positive associations and that differentiate the brand from competitors is a crucial factor for successful marketing (Dahlén & Lange, 2009). According to Dahlén and Lange (2009), the quality of the product is not the evident factor when it comes to purchasing a product, the deciding factor depends on how the brand is perceived. This demonstrates the important role of the brand and that a good reputation can increase sales (Persson, 2010). But, how can a company of today increase a good reputation and what are the risks of doing so?

Until recently, companies used to launch an advertising campaign in traditional media when they wanted to reach the public audience. Today, according to Armelini and Villanueva (2011) you do not exist in the consumers‘ mind unless you communicate with them through social media. Social media has become a powerful arena for consumers to share their thoughts and opinions about a company’s brand and products. Companies all over the world have started to take part in this increasing trend hoping to become even more successful. However, is social media really effective when it comes to increasing sales and if so, should companies put all their efforts into the arena of social media? – The answer to this question will be discussed further in these two posts.

The rise of social media

Social media is not as new as people may think but it was not until ten years ago that it was widely adopted (Bolton et al., 2013). Social media can be defined in many different ways but it will here be defined as ”any online service through which users can create and share a variety of content” (Bolton et al, 2013, p. 248).  It includes blogs, discussion forums, social platforms, news-, photo-, and video-sharing sites that provide networks, interactions and relations, and it is up to every company to decide on what social media forum to use (Singh & Sonnenburg, 2012). Social media has made it very easy for word of mouth to travel and for example, just liking or sharing a post on Facebook increases the audience size tremendously (Swani et al., 2013). This indicates that social media can increase the awareness for companies as well as the brand.

There is no doubt that social media is powerful and that it influence consumers in their everyday life, and, as a matter of fact, many researchers have praised social media for benefiting companies and strengthening their brand qualities (Brawise & Meehan, 2010; Powers et al., 2012). The explosion has been massive and has captured the attention among all kinds of companies and consumers which has led to a change in consumption habits (Armelini & Villanueva, 2011). However, there are differences in opinions on what social media really brings to the table and whether a company should focus more on either social media or traditional advertisement. So the question arises, can social media really benefit a company by increasing sales?

There are many advantages of social media, it can for instance increase the brand awareness, reputation et cetera. Nevertheless, social media does not only generate knowledge about the company to the consumers, the companies can also get valuable insights about the consumers (Brawise & Meehan, 2010). Deighton and Kornfeld (2009) argues that social media has increased the power of the consumers instead of the marketers, which can also be very dangerous. Consumers like to share their joy when making a good purchase, but they are also eager to share their negative experience of a product or brand (Powers et al., 2012).

 

The danger in use of social media

Social media encourage people to spread their thoughts and experiences, but just as quickly as positive word of mouth can spread, negative has the same speed (Tuten & Angermeier, 2013).  Consumers enjoy ventilating their opinions about the company and those opinions are not always too optimistic. Social media has made it possible for word of mouth to travel faster and reach a larger audience than ever before. This emphasize how important it has become for a company and its brand to be authentic and transparent (Scott, 2008). A company or brand should never pretend to be something they are not. If it fails to accomplish this criterion the consequences can be very harmful once it has been exposed and an unhappy consumer spreads his/hers dissatisfaction virtually (Scott, 2008).

The social arena is becoming problematic to handle and consumers of today demand a lot. It is not only important for a company to take responsibility for the content they are providing on their digital networks. They also must take responsibility for what others do that can be associated with the company. The Swedish fashion company H&M learned this the hard way when they didn’t take actions against the online expression of hatred that one writer had to suffer when sending a comment to H&Ms Facebook page. The critics against H&M were massive and everyone agreed that it was H&Ms responsibility to maintain a respectful tone in the comment section on their Facebook page (Thomsen, 2013).

Critic against H&M for not maintaining a respectful tone on their Facebook page”

Critic against H&M for not maintaining a respectful tone on their Facebook page”

Picture: http://nyheter24.se/nyheter/inrikes/738173-kunder-rasar-mot-hm-pa-facebook

Social media as a sales increaser?

Social media has been acknowledged for being both a success as well as a danger for a company today. Nevertheless, according to Vázquez-Casielles et al. (2013) word of mouth has been recognized to be one of the most effective communication channels today. Vázquez-Casielles et al. (2013) conducted a study to investigate whether word of mouth has an impact on the probability to make a purchase or not. The study showed that word of mouth in fact does influence brand-purchase probability. It also proved that a positive word of mouth has a larger impact on a positive brand-purchase probability, than a negative word of mouth has on a negative brand-purchase probability (Vázquez-Casielles et al., 2013). This indicates that the benefits outweigh the risks of using social media since the result imply that the positive effects are much stronger than the negative effects.

To conclude, social media facilitate word of mouth since it is an arena for sharing thoughts, expression and opinions. It has been shown that positive word of mouth has a strong connection to brand-purchase probability which means that social media is effective to increase sales. With this said, there is no doubt that social media is attractive for companies since the benefits by being a part of the social arena is evident. However one question still arises, since it has been established that social media is a successful arena for companies to take part in, should companies simply concentrate on social media activities or should they balance this with traditional advertisement? – The answer to this question will be discussed further in part two “Social Media versus Traditional Advertisement”.