BRAND BUILDING BY CROWDFUNDING

January 1, 2015

Written by Master Student at Lund University

Introduction

When creating a new venture, a successful establishment of the brand is a crucial activity in customer acquisition process and order to create a favourable reputation (Bresciani & Eppler, 2010). Small enterprises generate economic growth and create working opportunities to the society. However, banks are often reluctant to take risks and venture capital firms looking for bigger companies and require quick results. This denotes difficulties for new ventures to obtain financing through traditional approaches and to even get started with the business idea (CrowdCube, 2013). Moreover, with today’s noise in the market sphere, it is extremely important for the new venture to stand out and build a brand in order to survive. There are several channels where entrepreneurs can promote and communicate their brand. As the new media landscape opens up for opportunities it also raises challenges, such as building establish a brand in a short time and send a consistent message regarding the brand value (Winer, 2009).

A relatively new path to get funding and market validation in an early stage is through crowdfunding. In this short paper, I will examine the topic of crowdfunding as a tool to build brand awareness through social media channels. In order to observe this further, I aim to define the area of crowdfunding, start-up branding and the essence of word-of-mouth in an online setting. Additionally, I will base the discussion trough thoughts from an entrepreneur that started a venture through a crowdfunding campaign.

The basics of crowdfunding

Crowdfunding platforms occur over several sectors from non-profit purposes to consumer products to music and film production. Commonly, these platforms consist of three actors; the receiver seeking financing, the public financing platform and the individuals that provides with financial support. The crowd platform acts as a link between the project and the financers (Ordanini et al., 2011).  Crowdfunding can take various forms such a donation, reward or pre-emption or capital model through equity or loans (Hemer, 2011). Belleflamme, Lambert and Schwienbacher (2007, s.7) defines the topic as ”Crowdfunding involves an open call, essentially through the Internet, for the provision of financial resources either in form of donations (without rewards) or in ex-change for some form of reward and/or voting rights in order to support initiatives for specific purposes". Belleflamme, Lambert and Schwienbacher (2011) indicates that there are three main reasons why people engage and support crowdfunding; following the process of a new product that never been launched, a pre-order of a certain product before it reaches the mass-market and identify themselves as privileged financers that partake in a community.

Brand your start-up

According to Rode and Vallaster (2005) studies of branding is a very unique phenomenon in the context of start-ups and claim that further researches in this area is necessary. This is further discussed by Bresciani and Eppler (2010), claim the field of branding on new ventures to be an under-explored area and its marketing strategies cannot be directly copied of established firms for success. For example, start-up branding distinguishes from established firms in terms of no rooted identity, spread reputation and lack of organizational structures (Bresciani & Eppler, 2010). Additionally, the limited resources such as capital, knowhow and time are also typical issues for new ventures.

Since the entrepreneur is responsible for many areas of the business, Barbu et al. (2009) findings were showing that the marketing strategies mainly surrounded sales. This research declared that the branding strategies were hard to overcome due to lack of managerial competence. Moreover, almost all start-ups are focusing on one product or service. In the context of small ventures, Resnick and Cheng (2011) claim the firm’s branding cannot be separated from the owner’s personal brand. As product and entrepreneur cannot be distinguished from the each other, the branding could be seen as one. 

Social Media Branding

The web is a unique social environment with the ability to link a piece of content to another, which creates content webs that contain value (Akar & Topsu, 2013). Social media is applicable in various fields from customer management, market intelligence and research to public relations and promotions. Social media is today a vital tool for marketers from both small and large firms to spread their message to customers. An advantage of social media branding is the possibility to gain effective and relatively cheap customer insights such as feedback, attitudes and analyse customer movements (Barwise & Meehn, 2010). 

From the consumers’ perspective, social media provides the ability to generate and share information about firms and products, influence buying behaviour and a vast effect on brand reputation. When a firm is present on social media communities, it’s possible for the customer to interact around the clock. From the firm’s perspective it is, according to Barwise & Meehan (2010), essential but hard to sacrifice control of the brand’s channel. Word-of-mouth regarding customer opinions are perceived to be more trustful in comparison to the firms marketing efforts (Akar & Topsu, 2013). Thus, social media has a great (positive or negative) impact on the firms sales and as claimed by Kietzmann et. al (2011), ultimately the impact on the firms continued existence. Moreover, Singh and Sonnenburg (2012) examine the essence of co-creation storytelling, which implies that the customer can actively affect the content and distribution of the message. This active participation forms a feeling of belonging to a community. The firms should consequently focus on generate connection among its followers, rather than promote its brand and commercials.

The Crowdfunder Discussion

Due to the time frame for this project I concluded that a convenience sampling would be most suitable. This sampling process is a non-probability sampling process that entails my accessibility to the respondent, thus I highlight the lack of generalizability (Bryman & Bell, 2011, p. 190).

An interview was held with an entrepreneur of a new consumer product that crowdfunded during ten weeks in 2013. The entrepreneur recalls the starting phase to take a long time, since the idea needed to be clearly conceptualized before the crowdfunding campaign. The campaign was the first representation of the product, “Since we’re aiming at the ‘ordinary people’ we wanted to see if the backers (people that found in an idea) liked it first” the entrepreneur said. When I ask about their branding strategies, my respondent is hesitating a bit before saying, “We got our concept, however crowdfunding will help supporters to create the brand and we will to some extent adapt accordingly”.

My interpretation after this discussion is supported by (Bresciani & Eppler, 2010) in the sense of lacking organizational structure and a rooted identity. The entrepreneur continues, “The invisible presence in social media before the crowdfunding launch was an active choice”. Social media accounts for the start-up was created just before the launch, “We wanted to come from nowhere and ride on the wave”.

The advantage of a crowdfunding campaign is the ability to get natural spread. “Our campaign becomes very intimate, since the viewers can grasp our passion about our project. If we did a more traditional commercial, it could be harder to portray or vision”. The entrepreneur is thinking in the same terms as Singh and Sonnenburg (2012) regarding the focus on the content story and not the brand itself. The entrepreneur continues with the importance of gaining trust and let the customers’ out from a passive role, “Our campaign is not an advertisement, or we can pass the “filter” being perceived as one because we simply ask for cooperation and engagement”.

Learning and conclusion

Crowdfunding has indeed redesigned the innovation sphere. Small venture should interact as a personal friendship during the brand building process, which is a strategy that is impossible apply by big firms. That would enable the entrepreneurs to not fear the loose of control, since the customers feel that the venture is theirs. Crowdfunding is a great tool for start-ups to get market validation at an early stage and engage personally through social media channels. Furthermore, I believe that crowdfunding opens up for the entrepreneur to faster form their brand identity. Additionally, crowdfunding has the possibility to build brands before the start-up is created, potential customers help with feedback, money and engagement to build the final product. Thus, the main drawback is the possibility of unique product to be copied. Social media has the ability to facilitate the creation of meaning and highlight the uniqueness of each brand only if start-up finds the formula to consumers’ heart. The challenge remains to target the individual consumer and at the same time please the collective mass. A crowdfunding campaign is made locally and convey a personal feeling, that can be spread and engage globally. To conclude, social media enable start-ups to build personal networks based on small communities around the brand and through crowdfunding the chance of spreading faster increases- This text demonstrate that social media presents the start-up firm the opportunity to tap into the enormous collective intelligence available on the web to build the brand further.

References

Akar, B, Topsu, (2013), “An examination of factors influencing consumers’ choice of social media marketing”, Journal of Internet Commerce, 10(1), 35-67. 

Barbu, M.C., Ogarcă R. F. & Barbu M.C.R. (2009). Branding in small business. Management & Marketing. Vol. VIII. Special issue 1/2010, pp. S31-S38.

Barwise, P. and Meehan, S. (2010), “The one thing you must get right when building a brand”, Harvard Business Review, December.

Belleflamme, P., Lambert, T. & Schwienbacher, A. (2011). Crowdfunding: tapping the right crowd. Center for Operations Research and Econometrics, Discussion paper  2011/32.

Bresciani, S. & Eppler, M. J. (2010). Brand New Ventures? Insights On Start-Ups’ Branding Practices. Journal of Product & Brand Management. Vol.19, Issue. 5. pp. 356 – 366. 

Bryman, Alan. & Bell, Emma. 2011. Business Research Methods Third Edition. Oxford, GB: Oxford University Press

CrowdCube, 2013. Vad är Crodwfunding. Available online:

http://blog.crowdcube.se/vad-ar-crowdfunding/ [Accessed 10 feb 2013]

Hemer, 2011. A snapshot of Crowdfunding. Available online: http://www.isi.fraunhofer.de/isi-media/docs/p/de/arbpap_unternehmen_region/ap_r2_2011.pdf [Accessed 10 feb 2013] 

Kietzmann, J.H., K. Hermkens, I.P., McCarthy & B.S. Silvestreet (2011), “Social media? Get serious! Understanding the functional building blocks of social media”, Business Horizons, 54, 241—251.

Ordanini, A., Miceli, L., Pizzetti, M., & Parasuraman, A. (2011). Crowd-funding: transforming customers into investors through innovative service platforms. Journal of Service Management, 22(4), 443-470.

Singh, S. & S. Sonnenburg (2012), Brand Performances in Social Media”, Journal of Interactive Marketing 26, 189–197.

Rode, V., & Vallaster, C. (2005), “Corporate Branding for Start-ups: The Crucial Role of Entrepreneurs”, Corporate Reputation Review, 8 (2), pp. 121-135 Schmeisser w.,  

Resnick, S., and Cheng, R., 2011. Marketing in SMEs : A proposed ‘4 Ps’ model. Academy of Marketing: Annual Conference, July 2011.

Winer, R.S. (2009), “New communications approaches in marketing: issues and research directions”, Journal of Interactive Marketing 23, 108-117.

NATIVE ADVERTISING, THE NEXT BIG THING? Part 2

December 15, 2014

Written By Thomas Roos

Part 2: Native Advertising Discussed 

Part one of this paper discussed the rise of native advertising and how it is a result of paradigm shifts in consumer culture as a whole, as well as of developments within the online marketing field. This part will further elaborate on how native advertising is practiced and eventually discuss native advertising in terms of its success, and its limitations. To conclude with I raise the question that I could not answer in this paper, but should be of interest of anyone that has genuine interest in the field of internet marketing and branding. 

Empirical data analysis: Native advertising.

The consumer annoyance and scepticism towards advertisements, advertisers and capitalist practices in general as described in part 1 have forced online marketers in a new direction: native marketing. Native advertising, as explained in this infographic about native advertising by Wasserman (2012), is the creation of high-quality content by brands which is placed “…into the organic experience of a given platform.’’ Perhaps a simpler definition of the concept was given by Keers (2013), on the Content Marketing Association blog: “…instead of a simple, same-everywhere ad, it is targeted content, sitting alongside the publisher's content, but produced by brands themselves.”

The essence of native advertising is that it answers the consumers’ demand for valuable content from brands, whether they are the targeted audience or not. Holt (2002) argues that in the post-postmodern paradigm, consumers will judge brands and their ads on how they add value to people when they are not customers. Samuel Johnson once said: “The true measure of a man is how he treats someone who can do him absolutely no good.’’, and this research provided reason to believe that the same mantra will define brand perception in the post-postmodern internet era. Native advertisements make a clear step into that direction, which is perhaps the reason why they work so well.

A second important strategic advantage of native advertising is that it offers value to both brands and publishers, as well as to different platforms. As Miller, the CEO of The Guardian Media Group (in this case: the platform) puts it: "There's an opportunity to work with advertisers on creating content that meets the editorial aspirations of ourselves and meets their need to get to consumers." {C}(Jackson, 2014){C}. What is being created is thus ‘branded content’ instead of simple advertisements.

{C}{C}{C}To illustrate this, an example is provided that came up during the empirical research online. The picture below shows a BuzzFeed article, and on the surface it seems like another entertaining BuzzFeed article (click on the image to view the full page). Who posted it? It was posted by Captain Morgan, and looking at the marked text in the description, its purpose is not just to entertain you{C} (Muniz & Schau, 2011){C}; it is there to educate consumers about the man behind the rum. On the side, we can find more ‘sponsored content’ from Captain Morgan. Evidently, the success of one such native ad is to create content that 1) enhances brand equity, 2) adds to the publisher’s / platform’s value, and most importantly; 3) is valuable for the audience that needs to be engaged.  

Figure 1 : Native Advertising in practice; Captain Morgan offering valuable content on Buzzfeed.

Native Marketing explained

Buzzfeed, Forbes, The Atlantic, Facebook, The New Yorker, etc; they all have developed a version of native advertising, called ‘sponsored content’, of which the above is an example. Buzzfeed runs completely on the gains from native advertising; not only do they encourage advertisers to settle in between the website contributors, (the regular visitors), but they also offer help to potential and existing advertisers to create content that is likely to be shared often by BuzzFeed users.

An overview of the main players in the native advertising field is provided in this map of native advertising platforms, and was taken from a 2013 article (Berry, 2013), and therefore not completely up to date. However, it accurately shows the division between different native advertising channels. Please note that more players joined this landscape since the map was made, however, the main players have remained more or less the same (Berry, 2013):

• Sponsored Posts and Articles: Facebook and BuzzFeed (and newspapers)
• Sponsored Video: YouTube and ShareThrough
• Sponsored Images: Imgur and TripleLift
• Sponsored Playlists: Pandora (mainly U.S) and Spotify (mainly Europe)
• Sponsored Links: Disqus and Zemanta (many more have emerged)
• Sponsored Listings: Uncrate and Yelp

Discussion.

In a study that was published on February 12th 2014, The Media Briefing (Taylor, 2014) investigated the traffic around these native ads and provided this study with interesting data collected from 689 BuzzFeed native ads posted by 51 companies.

The results (average ad shares per social platform) are astonishing:

• 263 Facebook shares
• 36 Tweets
• 7 Google ‘plus one’s’
• 44 Pins
  
• 2 Linkedin shares

Additional outcomes of the study:

• Native advertising on BuzzFeed is likely to result in 4241 total social media interactions.
• Spotify’s native ad wins: 8530 Facebook shares, resulting in almost 50.000 Facebook interactions, including likes and comments.

According to The Media Briefing (2014), it can therefore be argued that BuzzFeed’s native advertising strategy is a tremendous success simply because advertisers love the idea that consumers will share an ad on their social network platforms. Why? It turns out that the earlier-mentioned Word of Mouth is of vital importance for gaining trustworthiness, and therefore is much more likely to lead to an increase in sales (see table 1 below). “That these services enable only the sharing of content on the Web is not important here. What is important is that they allow simultaneous sharing in reality.” (Akar & Topcu, 2011, p.39).

A 2012 study conducted by The Nielsen Company (2013) indicated advertising in the form of word-of-mouth recommendations from friends and family continued to be the strongest factor triggering action among 84% of 29.000 global respondents from 58 countries (table on the next page).

Table 1: Nielsen Global Survey of Trust in Advertising, Questionnaire 1-2013 (Nielsen, 2013)

Native Marketing explained

A brief Critique and suggestions for research.

Some critique is being raised about native advertising as a new form of online advertising.  Listed below are the most commonly raised issues:

• Many platforms may not have the capacity to handle the growing amount of native advertising, even though they say they can (Kantrowitz, 2013).
• It is generally hard to tell whether native advertising is more successful than conventional banner methods, as they are used at different scales.
• Joe McCambley, who helped creating the first banner ad, says that native advertising might destroy journalism, as “You are gambling with the contract you have with your readers,” and “How do I know who made the content I am looking at and what the value of the information is?” (Carr, 2013).
• There are ethical questions being raised about the extent to which for instance The New Yorker is fooling their audience and breaching the contract of offering valuable and trustworthy content.

The scope of this paper leaves no room for discussion of the above, therefore it is suggested that further research should be done towards the limitations of native advertising, in terms of scalability as well as in terms of ethical issues.

 

Conclusion.

Web 2.0 has made a significant impact on the power relations between brands and their audience, and native advertising is one answer to this paradigm shift. Online advertisers now find themselves on thin ice, as the “…web-based power struggles between marketer and consumer brand authors challenge accepted branding truths and paradigms: where short-term brands can trump long-term icons, where marketing looks more like public relations, where brand building gives way to brand protection, and brand value is driven by risk, not returns.” (Fournier & Avery, 2011, p.193). This paper confirms that advertisers will always be looking for better ways to reach their audiences, and that those who are most adaptive to change will always be upfront.

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NATIVE ADVERTISING, THE NEXT BIG THING? Part 1

December 11, 2014

Written By Thomas Roos

Part 1: How Web 2.0 gave consumers endless power

An introduction to native advertising.

Native advertising is a new phenomenon within the online advertising field and by some people is referred to as the new disruptive online advertising strategy (Salmon, 2013). Native advertising has received wide-spread attention within the online marketing field, especially among content marketers, but seem to be poorly understood by too many stakeholders. (The average monthly Google searches of the term ‘native advertising’ has gone from 800 January 2013 to 4000 in 2014.) Native advertising includes ads that ‘blend in’ with the content that surrounds them, but are actually branded and paid for. Evidently, the success of one such native ad is to create content that 1) enhances brand equity, 2) adds to the publisher’s / platform’s value, and most importantly; 3) is valuable for the audience that needs to be engaged.

The nature of this paper and the reason for writing.

This article will merely reflect upon my interpretations of the information that was collected and processed, and it is written to provide deeper understanding of native advertising. But most importantly; it tries to identify native advertising’s place in the existing marketing paradigm and to relate it to current movements within consumer culture.

After reflecting back upon the recent paradigm shifts in society and in internet marketing that are relevant to the rise of native advertising practices, I will display the findings from a literature search, highlighting authors that made future predictions in regards to the development of (internet) marketing and advertising. In the second part, the empirical data resulting from an explorative study using netnographic methods and secondary data sources will be analysed and discussed. After illustrating the essence of native advertising and how native advertising has developed to what it is now, I will provide the reader with an argument that explains the success of native advertising for brands. The paper will conclude with a discussion of native advertising and how its success might be predicting the future form of advertising in Web 3.0

Consumer resistance to online advertising.

Online advertisements are everywhere. It seems that there is no way to escape them, even though we were fairly quick to adapt our cognitive efforts to the overwhelming amount of stimuli; nowadays 90% of the banners is selected out by our brain and does not even reach our conscious mind (Benway, 1998) (Burke et al., 2005) (Buscher et al., 2010).

Digital advertisements have become more and more intrusive, some colourful, some beautifully simple; but they all annoy us to a certain degree. Certainly, advertisers and marketing agents have become better and better at drawing the online wanderer’s attention along the way, using a variety of methods (Winer, 2009, p.110).

‘’The early part of the 21st century has witnessed an explosion in new media utilized by marketing managers to reach their customers’’ (Winer, 2009, p.119). Not solely through visual attractions, no, a fine-tuned mix of audio-visual materials is often used to facilitate a desperate call for attention. Think of the time you were listening to your favourite playlist on Spotify, rudely being interrupted by an audio advertisement in your native language, along with a screen-size billboard popping up on your screen. Think of the times you were distracted by extravagant banners on the side of the news article you were trying to read. Think of that, and you’re thinking of the post-modern internet era, an era of ‘advertising deficit disorder’ (Rubleski, 2008).

A simple, but effective way to deal with these annoying banners and ads, is simply to install so-called ad-blocking plug-ins such as Adblock, that claims to have been downloaded over 200 million times (Palant, 2014). When companies started blocking Adblock users with software called Adblockblock, activists invented Adblockblockblock to avoid that (Smith, 2013), indicating an endless cat and mouse play.

Literature study: Are we witnessing the maturation of Web 2.0?

Even though the past decade has shown us numerous examples of brands that successfully drew the attention of their target audience, it seems like the ‘traditional ways’ of online marketing (Winer, 2009, p.110) are getting out of fashion. More specialized online marketing such as interactive methods have emerged in the past years, indicating a possible maturation of the online marketing paradigm as we know it (Wind, 2008) (Varadarajan & Yadav, 2009, p.20). 

This maturation of internet marketing goes along with shift in society as a whole. The paradigm shifts that have taken place in consumer culture naturally have their effect on marketing. In the current postmodern consumer culture, brands are used primarily for identity building projects. A growing body of literature from a more consumer culture perspective deals with how advertisements are perceived by consumers nowadays. Slightly older, but still very relevant contributions to this body of literature were made by Mick and Buhl (1992) and by Ritson and Elliot (1999). The former argue that ads function considerably as carriers of social meanings and are actively being used for identity building and creation. The latter argue that ‘’advertising can form the basis of for a wide variety of social interactions’’ (p.273). Firat and Venkatesh (1995) argue, - in their rather elaborative description of the postmodern condition of consumer society-, that “...it is not to brands that consumers will be loyal, but to images and symbols...’’ (p.251). Deighton and Kornfeld (2009, p.9) therefore argue that of their five possible strategies for interaction with online consumers, the one that facilitates people’s identity projects and that contributes to a collective sense-making will be the most successful.

{C}{C}{C}{C}In Why do brands cause trouble? (2002), Holt predicted a paradigm shift from postmodernism to what he calls ‘post-postmodernism’. He provides evidence for the impact that contemporary anti-branding movements will have on marketing as whole, and based upon the exploratory research that was conducted, this paper suggests that these predictions are to a large extend applicable to the online marketing paradigm as well. The recent changes in consumer attitude towards brands show that branding has become a fine art and is now subject to growing consumer scepticism of brands, producers and capitalist systems in general (Holt, 2002) (Barwise & Meehan, 2010). The well-awake and self-educated brand critics that we used to call consumers are now questioning the authenticity of each branded article, advertisement, blog or other content they come across. Advertising online is subject to a changing power balance between producer and consumer, and brands will be valued as long as they allow interaction from both sides and can be used to create meaning (Vargo & Lusch, 2004). As Christodoulides (2009) argued already 4 years ago: “Post-internet branding is about facilitating conversations around the brand” (p.142).

The empowerment of the consumer is enhanced in the numerous user-generated content (UGC) platforms: “…whether the news is good or bad, they will tell everyone.” (Levine et al., 2001). Recent examples of consumer empowerment include single Youtube videos posted by one single individual, resulting in substantial losses (or gains) in brand equity when going viral, and proving why Word Of Mouth (WOM) is one of the strongest means through which a brand can gain exposure. Later on WOM will be discussed further. 

Consumers have turned to UGC to inform themselves and others about brands and products, rather than listening to companies (Xiang & Gretzel, 2010, p.180). Now the companies seem to have their answer: settle in between the audience through native advertising.

Part 2 of this paper will take the above into consideration when discussing empirical examples of native advertising as an answer to this changing power balance, as well as its successes and limitations. It will offer visual aid while explaining the essence of native advertising.

The effect of Social Media – Should companies abandon Traditional Advertisement? Part 2

October 30, 2014

Written by  Elisabeth Matsson

Part 2- Social Media versus Traditional Advertisement

The benefits of social media

The massive rise of social media has been a phenomenal sensation and has affected our everyday lives (Powers et al., 2012). As mentioned before, social media has not only effected consumers’ way to act but it has also increased the companies’ possibility to gain valuable information about their customers (Brawise & Meehan, 2010). Social media encourage people to share their thoughts and feelings online, which is consider being both positive and negative for the (Tuten & Angermeier, 2013). This has resulted in that transparency and authenticity of companies has become even more vital due to the arena of social media and this must be a priory for every participating company (Scott, 2008). When a customer feels deceived by a dishonest company and spreads the word, there can be devastating consequences for the company which indicates the importance for companies to be honest (Scott, 2008; Vázquez-Casielles et al., 2013). The effect of social media cannot be denied but whether it is the number one marketing activity for companies of today still remains uncertain.

What about traditional advertisements?

As stated before, social media has made it possible for word of mouth to reach a larger audience and is now considered to be one of the most effective communication tools for companies (Vázquez-Casielles et al., 2013). It has also been proven that positive word of mouth has a positive impact on brand-purchase probability (Vázquez-Casielles et al., 2013). Since social media encourage word of mouth, and word of mouth has an impact on increasing sales, should companies then focus more on social media than traditional advertisement?   

Traditional advertisement can be defined as one-way communication where there is no interaction between the company and consumer (Varisha & Vaish, 2013). Communication through social media invites the consumers to discuss, request and share their opinions with both the company and other consumers as well. Social media has the advantage of being accessible for interactions and providing the company with consumer insights and encourage word of mouth (Brawise & Meehan, 2010). However, traditional advertisement has its advantages as well which cannot be ignored. Traditional marketing allows the company to keep control over the message they wish to communicate and it is also easier to measure the outcome of traditional advertising compared to social media (Armelini & Villanueva, 2011).

Traction or just interaction?

There are many ways of how companies can interact with their customers through social media, for instance by creating Facebook pages, blogs et cetera. Nevertheless, it is important to understand the real effect by using these interacting channels. Having a Twitter account, a Facebook page et cetera should not be considered as a billboard, it should rather be viewed as a café where people do not just receive messages from the company, instead they interact with each other and obtain information from others (Armelini & Villanueva, 2011). If a company instead chose to use an advertising banner on a webpage, it works just like a billboard and this is categorized as traditional advertisement since it is one-way communication.

It is important to distinguish what traditional advertisement is in relation to social media since they can both occur on the same arena but in two completely different ways.  Social media does not focus on a specific sales offer, it focus is on creating an engagement with the consumers and encourage them to buy their products when there is an arising need (Trends Magazine, 2012). Traditional advertisement is however famous for targeting a specific segment for a specific product or service offer (Kotler & Keller, 2011).

Social media versus traditional advertisement

To communicate through social media is relatively inexpensive since companies do not have to pay a huge amount for the marketing space (Swilley et al., 2013).  However, it is easy to be fooled to believe that the use of social media in total is a low-cost alternative towards traditional marketing activities. This is only true to some extent. To establish a presence in social media costs relatively little but to generate content can be very costly since it requires time, creativity and qualified talent (Armelini & Villanueva, 2011).

Regardless of the  evidence of social media functioning as a success-maker for companies, Armelini and Villanueva (2011) and Barwise and Meehan (2010) both states that social media should be viewed as a complement to traditional advertisement. It should not be used as a company’s only communication tool. Pepsi learned this the hard way when they put almost their entire marketing budget into social media. The campaign was successful in terms of followers, fans and votes, but in terms of sales, Pepsi fell down from a second place to a third in the US (Armelini & Villanueva, 2011). According to Powers et al. (2012) offline advertising and brand perception are very important components to the media mix which means that without it, social media would not be a success for companies. Further, Barwise & Meehan (2010) argues that it is because of social media that it has become even more vital than ever before for companies to get their basics right and focus on traditional marketing activities. If they do not, the social media will only create buzz, not sales.

Picture: http://www.bet.com/news/fashion-and-beauty/2012/12/10/beyonc-s-beautiful-face-lands-on-pepsi.html

Even though social media is being rewarded for encouraging word of mouth and increasing the possibility to reach a large audience, not all word of mouth happens online. In fact, according to Keller and Fay (2012), most of the word of mouth happens face to face. A company cannot rely on social media to drive conversations, other tools are needed as well. Both online word of mouth as well as offline word of mouth has been proven to increase sales. However it has also been proven that it is the traditional advertisement that actually triggers word of mouth (Keller & Fay, 2012). If companies disregard traditional media, it will simply result in a lack of word of mouth. Keller and Fay (2012) states that companies should focus on the social consumers instead of social media and that the most effective way to increase sales is to use traditional advertising which gets people to start talking about it. Unfortunately, there is no magical solution for how a company should balance social media and traditional advertisement, it has to be judged in every specific situation (Armelini & Villanueva, 2011). The formula that will be ideal for one company will not give the same outcome in another.

So, what does this mean?

Social media and traditional advertisement are two very different things, but still very related. They are both connected to each other and have a mutual effect on each other’s outcome. Traditional advertisement gets people to start talking and by using social media, their thoughts can reach a larger audience. With this said, it is vital for companies to understand the importance of keeping their doors open for both social media and traditional advertisement. Social media is simply depending on traditional advertisement and the effect of traditional advisement is simply depending on social media as well. There is no magical solution on how to balance this in terms of percentages, it all depends on what effect the advertisement should have, the specific brand as well as the consumers the company wants to target.

To sum up, I would strongly recommend managers to participate in the social arena to boost their brand awareness and engaging customers to spread the word. This will be seen as a complement to their traditional marketing activities that should not be ignored. The combination of these two will generate a better outcome and provide the consumers with both the possibility to express their opinions through social media as well the opportunity to receive controlled message from the company’s traditional advertisement. If this is managed in the correct way, it will increase sales and generate a more profitable outcome.

References

Armelini, G. &Villanueva, J. (2011). Adding social media to the marketing mix. IESE insight, no. 9, pp. 29-36

Barwise, P. & Meehan, S. (2010). The one thing you must get right when building a brand. Harvard Business Review, vol. 88, no. 12, pp. 80-84

Bolton, R.N., Parasurman, A., Hoefnagels, A., Migchels, N., Kabadayi, S., Gruber, T., Lourerio, Y.K. & Solnet, D. (2013). Understanding Generation Y and their use of social media: a review and research agenda. Journal of Service Management, vol. 24, no. 3, pp. 245-269              

Dahlén, M. & Lange, F. (2009). Optimal marknadskommunikation, vol. 2, Liber

Deighton, J. & Kornfeld, L. (2009). Interactivity’s Unanticipated Consequences for Marketers and Marketing. Journal of Interactive Marketing, vol. 23, no. 1, pp. 4-10

Keller, E. & Fay, B. (2012). Word-of-Mouth Advocacy: A New Key to Advertising Effectiveness. Journal of Advertising Research, vol. 52, no. 4, pp. 459-464

Kotler, P. & Keller, K. (2011). Marketing Management-Global edition, 14th edition, Harlow: Pearson Education

Persson, N. (2010). An exploratory investigation of the elements of B2B brand image and its relationship to price premium. Industrial Marketing Management. vol. 39, no. 8, pp. 1269–1277

Powers, T., Advincula, D., Austin, M., Graiko, S. & Snyder, J. (2012). Digital and Social Media in the Purchase Decision Process: A Special Report from the Advertising Research Foundation. Journal of Advertising Research, vol. 52, no. 4, pp. 479-489

Scott, D.M. (2008). The New Rules of Marketing and PR: How to Use Social Media, Blogs, News Releases, Online Video, and Viral Marketing to Reach Buyers Directly: John Wiley Sons

Singh, S. & Sonnenburg, S. (2012). Brand Performance in Social Media. Journal of Interactive Marketing, vol. 26, no. 4, pp. 189-197

Swani, K., Milne, G. & Brown, B. (2013). Spreading the word through likes on Facebook: Evaluating the message strategy of Fortune 500 companies. Journal of Research in Interactive Marketing, vol. 7, no. 4, pp. 269-294

Swilley, E., Hill, P. & Hampton, A. (2013). Blog, Pin and Online Review Effects on Advertising Attitudes and Purchase Intensions. Society for Marketing Advances Proceedings, vol. 25, pp. 174-175

Thomsen, D. (2013). Det måste vara nolltolerans. Dagens Media, Available online: http://www.dagensmedia.se/nyheter/dig/article3633541.ece [Accessed 4 February 2014]

Trends Magazine. (2012). Putting Social Media Advertising to the Test. Trends Magazine, no. 116, pp. 22-26

Tuten, T. & Angermeier, W. (2013). Before and Beyond Social Moment of Engagement: Perspectives on the Negative Utilities of Social Media Marketing. Gestion 2000, vol. 30, no. 3, pp. 69-76

Varisha, R. & Vaish, A. (2013). Content Fusion in Traditional and New Media: A conceptual Study. Journal of Internet Commerce, vol. 12, no. 2, pp. 225-245

Vázquez-Casielles, R., Suárez-Álvarez, L. & del Río-Lanza, A.B. (2013). The Word of Mouth Dynamic: How Positive (and Negative) WOM Drives Purchase Probability: An Analysis of Interpersonal and Non-Interpersonal Factors. Journal of Advertising Research, vol. 53, no. 1, pp. 43-60

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”

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”.