Impact of Social Media in International Marketing - Research Paper Example

? Impact of Social Media in International Marketing Introduction Social media is a new medium of communication on the Internet through the use of audio, video, text, images or a combination of these (Luukka). Social media is a useful tool of communication for individuals, businesses and firms. It has opened up a lot of new opportunities for companies to build and sustain meaningful relationships with their customers. Although these opportunities have great potential, not many have been explored fully in reality. Increasingly firms are devising new methods to attract and retain customers over a long period of time, such as innovative sales techniques, increase in sales and reducing the service costs. Even though a lot of firms acknowledge the potential of the social media to transform the way business is conducted, only a handful have actually gone into action and implemented the strategic changes needed to realize the full value of the social media. Social media promotes the free exchange of information among people. A number of the social media technologies are still in the nascent stage of development. However, the emergence of the social media has had a powerful impact on enterprises. In the coming years, social media has the potential to change the landscape of the business environment and the way organizations conduct their business operations. Companies will have to alter the way they conduct business in order to fully take advantage of the opportunities presented by the emergence of social media. Companies that quickly understand the changes brought about by social media on customer value and customer engagement will be in a good position to realize optimum benefits from the use of social media. Trends in social media business application Two decades ago, not many people could have predicted the paradigm shift in the global economy and the way business operates. Back then cars manufactured were still similar to those introduced in the 1960s. Supermarkets had not yet made their entry and grocery stores did not use electronic inventory and point of sale systems. Few could have the foreseen the introduction and rapid increase in the use of computers and Internet in all fields. After the 1980s, even the areas of medical research underwent dramatic changes in the form of genetic engineering, and investigation and treatment of diseases that were earlier deemed incurable. Within a span of ten years, computers moved from being gigantic machines to sleek and powerful personal computers and further still to portable laptops. In the 1990s, the emergence of the Internet and its wide spread use altered the way companies functioned with the introduction of e-commerce and the virtual marketplace (Lee & Carter). The emergence of new technologies, such as the worldwide web, mobile devices and digital television has created a number of opportunities for businesses to produce and market innovative goods and services. It has also helped customers to get increased value for their money. Traditional marketing approaches limit the number of customers a company can reach to hundreds, thousands or even tens of thousands. These marketing techniques also require a lot of time, effort and cost. In sharp contrast, a business today through the use of computers and the Internet can reach millions of customers with minimal effort and cost. By 2012, e-Marketer (www.emarketer.com) has estimates that nearly 1.7 billion people worldwide (24.5%) will access the Internet at least once every month. Approximately 50% of the people using the Internet will be in the Asia Pacific region. China has gone beyond the United States in terms of the leading country that has the maximum number of Internet users. Asia Pacific will have more than 500 million of the Internet population. In terms of the world Internet population, the percentage of users in the Latin American and South Pacific regions will increase and that of North America and Europe will decrease even though the actual numbers will continue to increase (Luukka). Social media allows for interaction and free exchange of ideas and information. This platform provides abundant opportunities for building and sustaining strong customer relationships. As social media provides ample scope for customer interaction, it helps companies to extend better customer support and relationship marketing. Social media provides an ideal platform for businesses to adapt their communication methods according to the needs of individual customers. It also extends significant benefits to customers enabling them to request information as and when they want at a time and place that is convenient to them. The new technologies also help suppliers a great deal by helping to decrease the cost and time involved in information processing and making it more efficient by reducing the occurrence of mistakes. They also help suppliers to access online databases of bid opportunities, allow them to submit bids electronically and conduct review of awards online. Challenges facing social media applications Jacob Morgan was dissatisfied with the service provided by a local branch of FedEx Kinko’s. He proceeded to post a video about his experience on the Internet. As Mr. Morgan was a social media consultant, he not only complained about the poor service but also provided negative feedback on FedEx. The video was watched by many people on the Internet. Some of them also spoke about their own bad experiences with FedEx Kinko’s. Within 24 hours, an employee of FedEx posted an apology via email and wanted to use the video as a training tool in the company. This prompted Mr. Morgan to post another video giving positive feedback about FedEx’s involvement with social media. FedEx was able to retain Mr. Morgan as a customer. This example just showcases only a small proportion of the huge value this can be to the business. Mr. Morgan recommends FedEx’s services. FedEx uses his videos to train their staff without incurring any additional expense. Mr. Morgan now questions the amount of value that he brings to FedEx. He is keen to know what FedEx will do if tomorrow a rival company tried to woo him. This challenge is faced universally by all companies that are making efforts to move their activities in the social media sphere from experimentation stage to effective implementation. The medium of social media is one that is unlimited with millions of people posting their opinions on Facebook, Twitter and loading videos on YouTube. The key challenge for businesses is to identify those customers from whom they can get maximum value from among the billions of netizens on the social media platforms. In addition, it becomes difficult to quantify the value of these relationships with customers for drawing up business plans. Therefore, at this stage organizations need to figure out a way to measure value the customers add to the overall agenda of the enterprise than just merely looking at the amount spent by the customers. Firms that are looking to quantify the value of customer relationships need to understand that this relationship is volatile and subject to the changes in the market conditions. They need to take a holistic approach as social media is just one of the factors that are bringing about changes in the marketplace. There are changes taking place at a rapid rate in all fields and walks of life. There are a number of factors need to be considered such as, the closing of the gap between the actual and virtual world, the changing definitions of home and work life, the means of communication among people, trust enjoyed by companies from customers, the role that customers expect firms to play, and the level of customer service expected. Initially, people joined online communities in order to communicate with others, meet old friends and make new ones. With time people are open to communicate with brands through these online tools. As a result, this presents a unique opportunity for businesses to build a special type of relationship with their customers that could have been unimaginable earlier. Early entrants into this new market have been fast in understanding the value this platform holds. For instance, Zappos is an online retail company that aims to close the gap between company and customer. The company wants to build a relationship based on community with its customers. Zappos wants to build a strong bond with its customers by making them feel as though they are purchasing from a friend’s store and not view it as a business entity that is after their only their money. Even before social media came into existence, it was always the norm of people to share their experiences about shopping at a particular store or recommending their favorite brands to friends, colleagues and relatives. Social media merely provides a larger platform for customers to share these experiences with others. In the domain of social media, trust and influence take on new meanings. It provides an open and unlimited platform for all types of individuals and organizations irrespective of their background. Earlier, there was no formal platform to put forward customers ‘views on the product or service apart from contacting the customer service department. Social networking sites like Facebook and Twitter allow people to post both positive and negative customer experiences. A number of businesses may view these social media tools in a negative light and as something they cannot have any control. They may be engaged in social networking just to keep a tab on the negative feedbacks from customers instated of fully exploring the full potential of opportunities offered by social media. Business potentials through social media applications Companies have the potential to have more control on social media than they think possible. Social media opens up customer conversations and makes them accessible to all. It is only the organizations that fully understand the potential of this new medium that will adapt themselves and the way they work to make use of this information available for customer engagement. Companies that understand this will devise methods to drive these conversations and tap into the unexplored customer value. The amount of information that companies gather from these customer conversations can be used in a number of ways other than just as a means to increase sales. It can also be put to good use in reducing service costs, attracting new customers, promoting innovation, sharing knowledge and bringing about significant changes in operations. This will result in blurring the gap between customers and company and lead to the creation of a new type of organization. Since a majority of companies are entering the medium of social media, they will enter into new kind of relationships with their customers. This will mean the purchase of goods by customers will be only one of the many ways through they can exert influence on the company and add or reduce value. Companies will have to devise new means to measure this value in order to adapt their functioning according to the needs of the customer. In the context of social media, methods accessing customer value that emphasis only on the purchase of goods and services will be able to measure only a small proportion of a customer’s preferences and potential value. However, it must be remembered that merely understanding this new customer value does not ensure increased sales, profitability and success for an organization. After redefining the customer value and using new metrics to identify high value customers, enterprises need to take the important step of interacting with customers in an effective manner using social media technologies. Originally, customer relationship management focused on engaging customers in a way that would benefit the company the most and deliver increased profits. This would be done in the form of customer segmentation by engaging customers with varied goods and services according to the segment to which they belonged that was determined by the value of their money spend. For instance, high net worth clients would be given superior services and customer support as they brought more value to the company. But the advent of social media has changed things dramatically. When the new factors that impact customer value, such as an individual’s influence in a social media network is considered, the earlier method of customer segmentation cannot be applied now. It is easy for an enterprise to identify the people who have strong social media influence. The more complex and difficult task is that of engaging these persons in a productive manner over a long period of time. If companies try to use the earlier methods of customer engagement, they may not get the expected results. A few companies have tried to provide financial incentives or customized premium services for high-value influencers so that they can promote the products and services. These kinds of tactics may be able to deliver results for the company immediately. But it may not guarantee long-term benefits. These types of incentives cannot be extended over a long period of time. If people in the influencer’s network come to know that he is receiving benefits from the company, the trust level will come down and the influencer will no longer have the same value. The key challenge is to work out the manner in which the influencers need to be engaged by the business. Value co-creation is the only means to do this. For instance, businesses can create an online community to provide a platform for their customers to express their views and opinions of the brand, share positive and negative experiences and use it to garner feedback for product improvement. Only when the increased and customer insights are shared and made accessible, can it deliver maximum value to the organization at all levels. A few companies have tried to implement socialized customer relationship management (CRM) on an experimental basis. But not many have been able to implement it across the organization in a meaningful way. They have faced a number of challenges in integrating social media and CRM. Companies have faced difficulties in scaling customer value analysis and subsequent engagement activity from the experimentation to the actual implementation phase. Firms need to improve the way in which they interact, engage and monitor customer activity. The next problem arises after the customer insights have been gathered with regard to how to put it to optimum use. Companies need to start focusing on meeting the expectation of the customers rather than ensuring process efficiency in order to sustain the customer engagement throughout the organization and over a long period of time. This entails providing the employees of the company with adequate tools and technologies to facilitate collaboration amongst themselves and with customers. It is important to establish the appropriate tools within the organization first so that employees can collaborate effectively in performing their responsibilities. The next step is to enable employees to collaborate outside the organization with customers and do it a unified manner so as to satisfy customer requirements. Before they do this, companies need to acknowledge the fact that providing employees access to social media does not come with certain limitations. The Institute of Internal Auditors (IIA) in a guide to social media has placed social media as one of the top nine risks that executives need to be worried about. Often it is seen that the responsibility of social media is given to junior employees because management feel that the younger people can understand its value better. Even if the junior executives have the capability to engage the customers through social media, they may not have the requisite skills, knowledge and experience to divert the social media outcomes towards contributing to the overall objectives of the company. They may not have the required information that is available to only the top management in the company that could help them in making the connection between customers and the company goals (Luukka). However, this is not the only risk. Legal compliance and intellectual property protection also pose risks. Organizations need to have adequate policies in place to ensure that these risks are minimized. According to IIA, only 38% of organizations that use social media have a policy in place to govern activity. Of these, nearly 71% do not have training programs in place or encourage employees to be aware of the governing policy (EIU). Businesses also need to consider another kind of risk posed by social media. On the one hand, customer engagement through social media platforms generates valuable customer insights for use in the formulation of business strategies. On the other hand, firms face the risk of causing damage to their brand image and equity if customers feel that they are crossing limits and intruding their privacy. Even though people may be open to treating their favorite brands as friends, their motive to enter social networking sites is not to communicate with the brand. Individuals become part of social networking sites in order to communicate with their friends, colleagues and relatives. The question arises then as to how companies can fit into the equation. If they are not able to make that critical connection with their customers and justify why they are present on social media, they run the risk of being viewed by people as intruders. For example, recently Facebook has received a lot of complaints from users voicing their concern on their posts being used for commercial benefits. It becomes difficult to predict what people will view as acceptable and non-acceptable behavior on the part of companies. It is also very subjective and varies from person to person. For instance, few people do not like to make purchases online due to security reasons while others are freely willing to make online purchases. Zappos aims to mitigate the risk by being more open and transparent to customers with respect to how data is collected and used. With time and wider acceptance of the use of social media as a means of engaging customers, people will be more willing to share a greater amount of information. This will help the company to manage customer interaction more effectively and deliver required information to customers. Even then transparency will still continue to pose problems. Companies need to invest a significant amount of money, effort and time to design new methods of customer understanding, interaction and engagement. Even though a large number of businesses are willing to experiment with social media, it cannot be implemented in the organization unless the costs involved can be justified. Organizations may be willing to devise new methods of customer engagement. But to transform from experimentation phase to actual implementation, the whole organization needs to be flexible and be able to take advantage of the changing market conditions. This requires support from the top management which can then flow through the organizational hierarchy from the top management to the entry level employees. Increasingly, customers desire a special type of relationship with the company and brands whose products they use. As a result, the task of CRM becomes more difficult and complex. Social media is a double edged sword that has both positive and negative consequences for CRM. On the negative side, it further complicates the function of CRM. But on the positive side, it also opens up new opportunities for businesses to engage the customers in a way that can prove beneficial to both parties involved. In the coming years, companies that can identify the real potential value of social media and tap it to their optimum use through effective scaling and sustainability will be the market leaders and leave their competitors far behind (EIU). In this new quest for leadership in the context of social media, organizations need to be aware of the below facts. Social media has increased the potential of customers to add value to companies. Even though, recommendations, referrals and word of mouth publicity was always present, social media provides a unique platform to actually measure these factors and their influence on customer value. But companies need to design new methods to measure these factors and assess their success. Conclusion The existing metrics in place in social media may only measure volume and not the actual value for organizations. Companies need to acknowledge that even though social media make lack clarity and structure, interactions can be put to productive use after appropriate understanding and analysis. The first step is to identify the customers that exert the highest influence. This is followed by identifying ways to engage these customers effectively. The traditional CRM methods may not suit the new domain of social media and could lead to negative results. Consumers want companies and brands to engage them with an element of human interaction. This is difficult to scale to a large number of customers. Businesses need to adapt a strategy that can used over a long period of time by clearly setting the objectives and providing adequate tools and support to employees. This is not without risks. Organizations need to put in place effective governing policies and training programs to limit the risks. Companies that are serious about reaping the full benefits of customer value through social media need to have a lot of mechanisms in place. This includes promoting collaboration internally across teams and departments. They need to make optimum use of the human capital to customize the experience of each customer and satisfy their requirements. All this necessities an adaptive organization that can respond to market conditions at a rapid pace. The top management needs to be convinced that new customer insights provided by social media can bring positive changes to the company and help it to gain significant competitive advantage over competitors. It is only when employees from the top to the bottom in the organizational hierarchy collaborate can customer engagement through social media be implemented successfully at an enterprise-wide level (EIU). References 1. EIU. RE-envisioning customer value. 2011. Economic Intelligence Unit report. 2. Lee, K. & Carter, S. Global marketing management: changes, challenges, and new strategies. 2005. Oxford University Press. 3. Luukka, K. Towards to the social media leadership theory. 2011. University of Wales. Read More