USE OF ONLINE SOCIAL NETWORKS AS A MARKETING TOOL: A CASE STUDY

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1 USE OF ONLINE SOCIAL NETWORKS AS A MARKETING TOOL: A CASE STUDY Abstract Online Social Networks is a global and crescent phenomenon used by companies as a marketing tool for communication, business information management and customer relations management and other marketing tasks. Through a case study research, the paper describes and analyzes how companies use Online Social Networks in marketing strategy. A literature review and six cases of Spanish companies from different industries and sizes are presented. The analysis suggests that despite the novelty, the results are excellent. Also suggests that its use will grow, and it will be determinant in the relationship between companies and customers. Key words: Online Social Networks, marketing strategy, case study research. Track: New Technologies and E-Marketing. 1. Introduction Internet and technological changes have transformed the world in recent decades. Online social networks (OSN) emergence on Internet has allowed people to communicate in another way, creating relationships that lead to constant and immediate interactions. Companies, seeing the rise of the OSN, are using the tools they offer, because the low cost and popularity have begun to use OSN within their marketing strategies (Harris & Rae, 2009). OSN are mainly used for promotion of their products or services, communication with customers, market research, knowledge of consumer behavior or even as a sales channel. This paper analyzes how OSN has become a marketing tool and how they are employed by companies in marketing strategy. The study focuses on five main areas: i) why firms decide to use the OSN as a marketing tool, ii) how the team is conformed for managing the OSN, iii) how OSN are used within marketing strategy, iv) how marketing actions in OSN are measured, and v) what the customers perception are from marketing activities in OSN. In the first section some of the main features of the OSN will showed, its particularity in Spain and how they are becoming a marketing tool. The second part focuses on the description of the research design, research questions, methodology, sample definition and analysis process followed. Third section shows the main results of the study and a discussion. Finally, main conclusions, implications, limitations and future research are presented. 2. Literature Review Online social networks (OSN) are a service based on a web platform that allows people to build a public or semi-public profile in a bounded system, articulate a list of users to share a

2 connection, and view and cross the list, and those made by others, within the system (Boyd & Ellison, 2007). OSN supports the community interaction and helps build trust and a common feeling among the members (Leimeister, Sidiras & Krcmar, 2006). Some of OSN important features are continuous interaction among members, formal and informal conventions, the willingness of people to interact, the global dimension and the speed with relationships are developed (Fuchs, 2008). OSN could be classified as social networks (eg. MySpace, Facebook, LinkedIn and Xing), virtual reality sites (eg. SecondLife) and virtual communities (eg. Wikipedia, YouTube and Flickr) (Jansen, Zhang, Sobel, & Chowdury, 2009). However, there is no consensus among researchers and practitioners on how OSN should be called or classified. OSN is a global phenomenon, but only some are global dominators like Facebook and Twitter. Facebook, for example, has reached unexpected dimensions in recent years, achieving more than 500 million users in just 6 years of funding and being the second most visited webpage, with a market value of $15 billion (Crunchbase, 2010). Since Classmates.com creation in 1995, great number and variety of OSN have created. The boom in 2004 and 2005 allowed the creation and consolidation of the strongest, becoming more difficult to create a new one with great success (Jansen, Zhang, Sobel, & Chowdury, 2009). ONS have exceeded to become the fourth most popular Internet sector, after searches, websites and software applications. 2/3 parts of Internet population regularly visit a blog or OSN, and now accounts for almost 10% of time spent on Internet (Nielsen, 2009). However, not everything about OSN can be considered positive. Issues such privacy or data security suggest that OSN needs a structural control, otherwise, their attractiveness, credibility and the value of its contents may decrease significantly (Otto & Simon, 2008). People's habits in Spain are changing and Internet consumption is bigger than television for the first time (EIAA, 2010). In 2009, while the advertising declined in traditional media (newspapers, magazines, radio and television), despite the economic crisis in Spain, the Internet sector increased by almost 18%. Many Spanish companies are changing their approach to communication and promotion, using alternative channels rather than mass advertising, because the costs are lower and the effectiveness is higher (InfoAdex, 2010). Spain is one of the countries where OSN use grows faster. In March 2010, more than 19.7 million customers used them, 10% more than during the same period last year. The ranking is headed by Facebook, Blogger, Tuenti, WordPress, Myspace and Twitter (Nielsen Online Spain, 2010); and eight of twenty most visited Web sites in Spain are OSN (Alexa, 2010). OSN have/s been considered as consumer s global phenomenon, generating company s expectations on the way they can use them for achieving marketing goals (Nielsen, 2009). In fact, Lindgreen, Palmer and Vanhamme (2004) anticipated some marketing types that would have a major development, including electronic, interaction and network marketing. Companies are using OSN in different marketing strategies like building brand reputation and customer relationships (Harris & Rae, 2009), branding (Christodoulides, 2009), to communicate with their customers (Jansen, Zhang, Sobel, & Chowdury, 2009), to measure customer s satisfaction (Crofchick, 2009), and to explore friendship patterns (Hogan, 2008). OSN allows companies to address to end consumers in a quicker and direct way at a relatively low cost with higher efficiency than traditional tools, so are not only relevant for large firms but for SMEs, and even for non-profit businesses or government (Kaplan & Haenlein, 2010). There is no doubt that OSN will play a key role in the future of marketing, helping to replace disappointment for customer loyalty (Harris & Rae, 2009). But, although companies can measure some interaction elements with customers, is not clear that strategic or tactical

3 impact is high yet. There is a complex problem to measure and monetize OSN marketing activities (Clemons, 2009) and still no consensus on how to measure the performance. As a social and business reality, it is interesting to study how companies can use OSN towards achieving their marketing objectives and goals. We pursue an academic effort to know and understand the phenomenon and see the application into business world, because although the phenomenon has attracted the interest of academics and business executives, little attention is paid to OSN study (de Souza & Preece, 2004). 3. Research Design 3.1. Research questions and methodology Through this exploratory study, the objective is to determine why and how OSN are used within businesses marketing strategy. The multiple case study method is particularly suitable for these research questions, because allows deeper understanding of complex issues in the company's environment and is particularly useful when dealing with emerging or poorly studied issues in literature. For this purpose, multiple sources of information are used in order to make comparisons and giving more validity to analysis (Yin, 2009). Case study allows analyze the actual context using both quantitative and qualitative evidence (Eisenhardt, 1989). We created a map code, a structured document where emerging issues of the interviews are written and coded. Using Atlas TI software, we made the crossing of information among different cases in order to identify similarities and differences between them Sample, field work and analysis process. The research was conducted to Spanish companies with active use of OSN as a marketing tool, with a criterion for selection: diversity of economic sectors and size, to eliminate bias in the results regarding the availability of human, financial and technological resources. Sample firms were identified visiting their web pages and profiles on different OSN. From an initial list of 20 companies, direct contact was taken with marketing directors, digital marketing managers or Community Managers (people who manage OSN), using LinkedIn and Xing (two professional OSN). The group of six companies that comprise the sample was defined depending on the availability of people. The sample size is based on the adoption of the criterion of theoretical saturation (Glasser & Strauss, 1967) and the numerical limitations encountered by researchers when they study in-depth qualitative data (Gersick, 1988). The participating companies are: i) FC Barcelona: Sport club with professional sections in football and basketball among other sports. It has more than 170,000 members and their recent success and its history has become a global benchmark ii) Sony Spain Electronics: produces and sells audio and video components, video games and laptops; iii) L'Illa Diagonal: Barcelona's leading commercial mall with 170 stores, focused on high standing customers; iv) Banco de Sabadell: actually is the fourth largest commercial bank in Spain; v) Editorial Clie: leading Spanish language Christian religion publishing company in Spain and America, and vi) Bere Casillas: Fashion Designer specialized in design, manufacture and selling of wedding dresses. He has become a Spanish benchmark with his "Elegance 2.0 concept.

4 Table 1. Companies involved in the Case Study. Company FC Barcelona Sony Spain L Illa Diagonal Banco de Sabadell Editorial Clie Bere Casillas Sector / Size Sport / Medium Technology / Big Commerce / Small Bank / Big Editorial/Med. Fashion / Small Website ( fcbarcelona.cat sony.es lilla.com bancsabadell.com clie.es berecasillas.es OSN start June 2009 October 2009 April 2009 January 2010 June 2009 January 2009 Facebook 1 1,970,503 fans 188,403 fans 1,940 fans 3,012 fans 91,457 fans 1,487 friends Tuenti / Twitter No / Yes Yes / Yes No / Yes No / Yes No / No Yes/ Yes Youtube / Flickr Yes / No Yes / No Yes / Yes Yes / Yes No / No Yes / Yes Corporate Blog Yes Yes No Yes No Yes Source: Own elaboration. Fieldwork was conducted during March and April Semi-structured interview techniques, direct observation and secondary data analysis were used in order to contextualize the interviews. We developed an interview protocol, tested with an expert, and adapted with the first two interviews. Interviews were conducted by one researcher. Interviews were transcribed using F4 Transcriptions V.3.1 software and processed with Atlas TI v Results This study tries to show why and how companies use OSN in their marketing strategy. From the analysis of interviews, we crossed the case information to extract similarities and differences, allowing us to generate the study's conclusions about the decision to use OSN, how the manage team structure is, the OSN use in marketing strategy, how marketing actions in OSN are measured, how customers perceive marketing actions in OSN, how OSN marketing actions investment is done, how customer perceives the marketing actions in OSN, and the future of OSN as a marketing tool. In general, the interviewed companies are using OSN not long ago. In fact some OSN as Facebook, YouTube, Flickr, Twitter and Tuenti were created just five years ago. Its acceptance was initially given by users. In the cases, Bere Casillas -the smallest company- is the longest using the OSN as a marketing tool, since January 2009 (see Table 1). This demonstrates the novelty of the phenomenon, and cases like Sony Spain, FC Barcelona and Banco de Sabadell started just one year ago. The cases show an inverse relationship between firm size and the beginning of OSN use. Larger firms began later to use OSN, contradicting Bengtsson, Boter and Vanyushyn (2007), that pointed that as larger a company is, the development of Internet-based marketing routines has been initiated earlier. Perhaps it is that unlike the actions of conventional Internet marketing, for the use of OSN is not necessary to invest high amounts of money or have high skilled people, important entry barrier for SMEs. It would be necessary to conduct an extensive analysis to generalize this conclusion. On the decision to use OSN, companies have little time using them systematically. Cases like Bere Casillas, Editorial Clie and L'Illa Diagonal can be categorized as proactive, because they 1 Number of fans or friends per company (April 22 nd 2010).

5 saw an opportunity to differentiate themselves from competitors and to be pioneers in their sectors. By contrast, F.C. Barcelona, Banco de Sabadell and Sony Spain took a more reactive position, waiting for the OSN consolidation to enter later. About the team structure, within companies the OSN management lies primarily in marketing or communication areas. There s no a generic structure, and depends of company size. In some cases, depends of small teams, and in other cases the tasks are taken by one person, usually called "Community Manager". In all cases, there are very small teams of people, and something common to all cases is the participation of agencies or consultants in digital marketing. The use of OSN involve two-way interaction with the customer, so it s necessary to empower, engage and train employees to understand the concept of marketing In general, the companies interviewed are using the OSN primarily as a direct, fast and effective communication channel with their clients. However, some companies are beginning to use the OSN not only in this way. For example, the OSN can be used to obtain ratings from users, as a tool to position the brand or even to generate sales. The OSN most used by the companies interviewed are Facebook, Twitter, YouTube, Flickr, Tuenti and blogs, and depends on marketing objectives and customer target. The OSN marketing actions are combined with other media such as websites, magazines and TV ads, marketing and search engine advertising. Regarding whether the use of OSN is determined by the type of product or consumer, in general, the interviewed companies believe there is a direct relationship. Digital marketers are so concerned about the issue of measuring results. There is a complex problem to monetize and measure the actions carried out in OSN (Clemons, 2009). In general, companies are using very basic indicators to measure the outcomes, based on statistics provided by OSN. Although there are tools to measure some of the results, the true analysis is that marketers do with the data. There is no standard criterion for determining when an OSN marketing action is profitable. However, all cases agree that the obtained results are excellent. In general the basic use involves no investment, just time management, but little investments are made in punctual projects, but invest will grow, pointed all the firms interviewed. The companies wonder how their customers perceive the participation in OSN, and the conclusion is that there is a great acceptance. The customer wants to consume company contents for interest, avoiding spam 3 concept, so common in marketing strategies. Due the novelty of OSN phenomenon, it would think if it is another marketing fad. But nothing could be further from reality, just if companies internalize the concept and get appropriate mechanisms of response to manage their customer s relationships. 5. Conclusions, Limitations and Future Research. This study shows, in a descriptive way, how companies are using the OSN as a marketing tool. The recent emergence and growth of the OSN, have led companies to begin to see how they could use their presence to achieve marketing objectives. It s then a matter of nascent and emerging research, and academic effort should be devoted to know and understand the OSN phenomenon and the application into the business world. 2 Marketing 2.0 is the adaptation of the concept of the philosophy of Web 2.0 to marketing strategy. 3 Unsolicited electronic messages, unwanted or unknown senders, usually containing advertising on Internet.

6 Companies are applying the method of trial and error, trying to see how they can take better advantage of the OSN. Companies, with some exceptions, have decided to start using the OSN simply because their competence did it, or some suppliers have proposed projects or even because their customers demanded it. Marketers have to convince themselves and internalize the philosophical concept behind the OSN, and thus take profit of the potential they offer. Marketers have been overwhelmed by the novelty, and are beginning to qualify themselves, to form interdisciplinary teams, and using specialized external agencies. Something that seems common to marketers is the difficulty to measure the impact and ROI of OSN marketing activities. This may be clarified when companies understand why they want to use OSN and how contribute to improve performance. In fact, it opens a new line of research in marketing metrics. Due company participation in most OSN is still free, companies have begun investing basically the time of people who manage them. Once the companies confirm that a continuous and responsible presence in OSN creates more value for the customer, they will increase investment, definitely integrating them into marketing strategy. It s not clear yet whether the OSN is a fad. Despite the novelty, is expected to play an important role in the future of marketing (Harris & Rae, 2009). We believe that the OSN can become a marketing tool that enables enterprises improve performance. The main uses are as a tool for promotion and communication, communication with customers, market research, knowledge of consumer behavior or even as a sales channel, but it seems that companies still aren t using all the advantages that the OSN provide. According Castelló (2010), OSN are configured as the Internet tool more suitable for those business strategies focusing on customer orientation, concerned about personalizing messages and the interaction in a two-way communication to get customer s loyalty. This study suggests several implications. Managerial: marketing managers should understand the emerging OSN phenomenon. According to the product/service offer, customers and marketing strategy, companies should use the OSN as a marketing tool to take advantage of its potential with the support of digital marketing specialists. Policy makers: the agencies that promote entrepreneurship and enterprise development should take note of the phenomenon to generate training, taking into account success stories to serve as inspiration for new and existing businesses, especially for entrepreneurs and SMEs. Academy community: we believe that the academic community should take more account of what is happening around the new information technologies and its marketing applications. In terms of limitations, it s important to highlight the sample size, being able to expand it to more firms in other sectors and economic activities, as well as have interviewed just one person per company. However, the case study methodology does not perceive this as a limitation, but as an opportunity to enrich the knowledge about a topic. Also, this is an exploratory work, so that future research should help better understand the phenomenon, aided by new studies and the increasing application of OSN in marketing. Among the future lines of research, could be considered: i) It would be interesting to conduct a longitudinal study to see how it changes the use of OSN as a tool marketing firms. ii) Is there a relationship between the use of the OSN as a marketing tool and performance?, iii) Are the marketing efforts made in OSN more effective than traditional media?, iv) How can we measure the ROI in OSN marketing activities?, v) Is there a direct relationship between the type of product/service and the intensity or type of OSN used as a marketing tool?, and vi) Is there a relationship between company size and the use intensity of OSN? Additionally, different theoretical frameworks could be used: the Resource Based View Theory (dynamic capabilities), the Market Orientation or Entrepreneurial Orientation concepts.

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