Procedia - Social and Behavioral Sciences 169 ( 2015 )

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1 Available online at ScienceDirect Procedia - Social and Behavioral Sciences 169 ( 2015 ) The 6th Indonesia International Conference on Innovation, Entrepreneurship and Small Business, August 2014 Value Co-Creation Process in Small and Medium Enterprise by Utilization of Viral Marketing as a Branding Tool: A System Dynamic Approach Aulia Fadil* School of Business and Management,Institut Teknologi Bandung, Jl.Ganesha no 10, Bandung 40132, Indonesia Abstract People like to talk about their involvement with products and services for a variety of reasons. These include the prestige and status that may arise through ownership or a need to share their purchase experiences in order to help others. These conversations are then passed to family, friends and other people in social networks. This reference process is known as Word of Mouth (WoM) communication and is regarded as a powerful and influential form of communication, if only because of the perceived objectivity and credibility associated with the parties involved. Viral marketing has emerged as the electronic form of WoM and involves the principle of passing on or referring news, information or entertainment to another person. Viral marketing is a highly effective internet marketing communications tool, and will succeed if companies understand their online customer and providing a better value than those competitors. Unfortunately some studies have shown that SMEs may lack competence and show low level of awareness and organizational readiness for adopting innovative approaches for interaction with customers. Meanwhile, Internet technology continuously provides new research tools that enable companies to interact and participate in brand value co-creation together with customers The Authors. Published by by Elsevier Ltd. Ltd. This is an open access article under the CC BY-NC-ND license Peer-review ( under responsibility of Center for Innovation, Entrepreneurship, and Leadership (CIEL), School of Business and Management Peer-review under (SBM), responsibility Institut Teknologi of Center for Bandung Innovation, (ITB). Entrepreneurship, and Leadership (CIEL), School of Business and Managements (SBM), Institut Teknologi Bandung (ITB). Keywords: viral marketing; system dynamic; brand awareness * Corresponding author. address: aulia.fadil@sbm-itb.ac.id The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license ( Peer-review under responsibility of Center for Innovation, Entrepreneurship, and Leadership (CIEL), School of Business and Managements (SBM), Institut Teknologi Bandung (ITB). doi: /j.sbspro

2 Aulia Fadil / Procedia - Social and Behavioral Sciences 169 ( 2015 ) Introduction 1.1. Background Utilization of viral marketing integrate with any Social Networking Sites like facebook, twitter, instagram, etc, in one operation system. From any literature review, some providers able to advertise any products or services with some marketing strategy that include information technology to spread some informations about what they sell. Hence, it has a purpose to manage brand awareness of products through reaching and gathering some information about what customer wants and needs. In this research brand awareness has defined as number of people who aware of any kind products or services that have been provided by marketers. This utilization of viral marketing have significant impact in Small Medium Enterprise, which is the need of competitive advantage is very huge. To optimize customer satisfaction, this strategy might be useful by considering marketing cost that increase overtime. Such cost should be linearly correlated to operational cappability of company. This phenomenon have potentially increasing the need of marketing strategy that should be responsive with market demand. There is evidence to suggest that brand knowledge has a direct and positive effect on intention to adopt an online retailer (Chen and He, 2003) and that brand familiarity influences purchase intention (Park and Stoel, 2005), Social networking sites (SNS) have contributed to increasing numbers of contacts between users sharing common interests and to the creation of online communities and digital social networks. In this research, author sought that Information and Communication Technology as input that affecting viral marketing strategy and also affecting whole system in value co-creation process. This iteration process might be enrich brand awareness as an output of this system and also increasing capability of company to produce some products and services that proper with customer demand. Because of there are some need for investment to apply this Information and communication Technology in Small and Medium Enteprise, providers must considering the effect of this technology utilization compare with number of products or services able to provide to customers. But there is some research gap, some studies have shown that SMEs may lack competence and show low level of awareness and organizational readiness for adopting innovative approaches for interaction with customers ( Webb and Sayer, 1998; Mehrtens et al,2001; Beckinsale et al, 2006 ) Meanwhile, Internet technology continuously provides new research tools that enable companies to interact and participate in brand value co-creation together with customers Research objectives To find another possibilities to enrich and managing brand awareness. To identify some possible scenarios that related to the policy making in viral marketing utilization. These scenario had purpose to improve brand awareness of product or services. 2. Literature review Branding has been characterized as the process of creating value through the provision of a compelling and consistent offer and customer experience that will satisfy customers and keep them coming back (Aaker, 1991; De Chernatony and McDonald, 1992) and brands cannot be controlled centrally or in a top-down manner in online circumstances. People like to talk about their involvement with products and services for a variety of reasons. These include the prestige and status that may arise through ownership or a need to share their purchase experiences in order to help others. These conversations are then passed to family, friends and other people in social networks (Allsop et al.,2007) Actually, brand awareness can affecting marketing cost, when a new product is marketed under a well-known brand name, failure rates and marketing costs are reduced (Milewicz and Herbig, 1994; Keller, 2003) Viral marketing has emerged as the electronic form of WoM and involves the principle of passing on or referring news, information or entertainment to another person (Danilo; Chris, 2008). Viral marketing was suggested as a cost-effective marketing strategy that drives sales in a short time and facilitates interconnections among companies and potential buyers (Dobele et al., 2007). Viral marketing is a highly effective internet marketing communications

3 260 Aulia Fadil / Procedia - Social and Behavioral Sciences 169 ( 2015 ) tool (Datta et al.,2005) and will succeed if companies understand their online customer and providing a better value than those competitors. Kiss and Bichler (2008) define viral marketing as marketing techniques that use social networks to produce increases in brand awareness through self-replicating viral diffusion of messages, analogous to the spread of pathological and computer viruses. System Dynamic has its origins in control engineering and management; the approach uses a perspective based on information feedback and delays to understand the dynamic behavior of complex physical, biological and social systems (Angerhofer,2000). 3. Model building 3.1. Scope of the model Fig. 1. research scope In this scope of model, Information and Communication Technology can be an input for this process. And brand awareness as an output.

4 Aulia Fadil / Procedia - Social and Behavioral Sciences 169 ( 2015 ) Causal loop diagram Fig. 2. causal relationship In this causal relationship, the generated of brand awareness will be affected by the number of online community integration, intention to buy and marketing cost Stock and flow diagram Fig. 3. Main formulation

5 262 Aulia Fadil / Procedia - Social and Behavioral Sciences 169 ( 2015 ) Figure above show Stock and Flow Diagram that represent real world situation in value co-creation process between customer and provider, in this case this stock and flow diagram show how viral maketing utilization can be intervention of this model. 4. Experiments 4.1. Scenario 1 Fig. 4. scenario 1 With impact of influence: 80 % Viral marketing utilization: 15 (influencer utilization: 5 people/month and time to do viral: 3 month/people) 4 advertisement /month (marketing cost: Rp /month and cost per advertising: Rp /advertisement) 4.2. Scenario 2 Fig. 5. scenario 2

6 Aulia Fadil / Procedia - Social and Behavioral Sciences 169 ( 2015 ) With impact of influence: 100 % With impact of influence: 100% Viral marketing utilization: 20 (influencer utilization: 150 people/month and time to do viral: 4 days/people) 4 advertisement /month (marketing cost: Rp /month and cost per advertising: Rp /advertisement) 4.3. Scenario 3 Fig. 6. scenario 3 With impact of influence: 80 % Viral marketing utilization: 15 (influencer utilization: 5 people/month and time to do viral: 3 month/people) 0,1 advertisement/month (marketing cost: Rp.5.000/month and cost per advertising: Rp /advertisement) 4.4. Scenario 4 Fig. 7 scenario 4 With impact of influence: 100% Viral marketing utilization: 20 (influencer utilization: 150 people/month and time to do viral: 4 days/people)

7 264 Aulia Fadil / Procedia - Social and Behavioral Sciences 169 ( 2015 ) ,1 advertisement/month (marketing cost: Rp.5.000/month and cost per advertising: Rp /advertisement) 4.5. Scenario 5 With impact of influence: 100 % Fig. 8. scenario 5 Viral marketing utilization: 20 (influencer utilization: 150 people/month and time to do viral: 4 days/people) 10 advertisement/month (marketing cost: Rp /month and cost per advertising: Rp /advertisement) 5. Conclusions From those experiments, viral marketing utilization has an impact in online community integration, it positively related with it. And traditional marketing utilization has positively related with brand awareness (it can accelerate awareness rate of people) but negatively related with purchasing rate (more cheaper marketing cost, more early to get potential buyers) and also negatively related with online community integration. This model exposed that provider who optimizing viral marketing in their small and medium enterprise able to get more integrated with their online community, but when viral marketing had utilized, provider should decrease their traditional marketing strategy like advertisement to accelerate purchasing rate from buyers although traditional marketing still a better tools to increasing brand awareness. Although this simulation model show some advantages for provider, this research also have some limitation, hopefully it can be discovered by further research to make some improvement. References Aaker D., Managing Brand Equity. New York: The Free Press, Allsop, D., Bassett, B., & Hoskins, J. (2007). Word of Mouth Research.-Principles and Applications. Journal of Advertising Research, 47(4), pp Angerhofer, B., and Angelides, M., 2000, System dynamics modelling in supply chain management: research review. Proceedings of the 2000 Winter Simulation Conference, Joines, Barton, Kang, and Fishwick (editors) Beckinsale M. and Ram M (2006), Delivering ICT to ethnic minority businesses: an action- research approach. Environment and Planning C: Government and Policy 24(6), pp Chen, R. and F. He (2003), Using Brand Knowledge to Understand Consumers Intention to Adopt an Online Retailer, in: International Journal of Services Technology And Management, 4 (4-6),

8 Aulia Fadil / Procedia - Social and Behavioral Sciences 169 ( 2015 ) Danilo, Cruz. and Chris Fill, "Evaluating Viral Marketing: Isolating the Key Criteria", Marketing Intelligence & Planning, Vol. 26 (7), 2008 pp Datta, P., Chowdhury, D., & Chakraborty, B. (2005). Viral marketing: New form of word- of-mouth through internet [Electronic version]. The Business Review, Cambridge, 3 (2), Dobele, A., A. Lindgreen, M. Beverland, J. Vanhamme, and R. van Wijk, Why pass on viral messages? Because they connect emotionally. Business Horizons, 50 (4) pp , J. Park, L. Stoel, Effect of brand familiarity, experience and information on online apparel purchase, International Journal of Retail & Distribution Management, Vol. 33 Iss: 2, pp , Kiss C, Bichler M, Identification of influencers - measuring influence in customer networks,in Decision Support Systems, 2008, 46(1): pp L. De Chernatony, M. McDonald, Creating Powerful Brands: The Strategic Route to Success in Consumer, Industrial, and Service Markets. Oxford: Butterworth-Heinemann, Mehrtens J., Cragg P. and Mills A. (2001) A Model of Internet Adoption by SMEs, Information and Management, Vol: 39, pp Milewicz, J., Herbig, P., Evaluating the brand extension decision using a model of reputation building. Journal of Product and Brand Management, 3 (1), pp , Webb, B. & Sayer, R. (1998). "Benchmarking Small Companies in the Internet," Long Range Planning 31 (6), Pp