Use of Social Media by e-Commerce Businesses to Enhance Business Model - Coursework Example

Use of Social Media by e-Commerce Businesses to Enhance Business Model Name: Lecturer: Course: Date: Table of Contents Table of Contents 2 Introduction 3 Application of social media to enhance business model 4 Customer engagement and brand loyalty 4 Shared ownership of products 5 Promote e-commerce website traffic 5 Reducing marketing expenses 7 Extending customer base and product sale 8 Guiding customers on e-commerce sites 9 Conclusion 10 Use of Social Media by e-Commerce Businesses to Enhance Business Model Introduction The internet has created new opportunities of gathering and sharing information as a result changing simple communication acts into critical elements of businesses. Essentially, the internet has changed dramatically from having a narrow set of services to complex services based on connectivity (Almeida et al. 2013). This has resulted to the emergence of social networks, or sub-communities. These networks have spearheaded the processes by which businesses can meet their communication and marketing needs. The term social media denotes a set of technologies and tools that enable individuals or organisations to create social networks and sustain relationships (Kim 2012). Social media has five sub-categories, namely podcasts and blogs, social networks, virtual worlds, content aggregators and communities. Social networks include; Facebook, LinkedIn, MySpace, Google Plus, YouTube and Twitter (Almeida et al. 2013; Khalid & Khna 2012). The social media has created more business opportunities and drove changes towards new business models (Baghdadi 2013). This paper critically evaluates the ways by which e-commerce companies use social media to enhance their business model. Application of social media to enhance business model Customer engagement and brand loyalty Social-based comment systems, such as the Facebook Comments, consist of robust social networking tools that provide experiences of commenting on products and conversing with other users (Junco et al. 2010; Sitel n.d.). The tool is engaging and credible for social verification of e-commerce website. More critically, the tool can be leveraged to engage customers online and to promote brand loyalty. This is since online shoppers tend are essentially dependent on web information to make their purchase decision. Indeed, a study by PwC found that 23 percent of online shoppers globally prefer the social media to learn about products. Hence, e-commerce businesses should actively use the social media to engage customers. According to PwC more online shoppers globally are engaging with brands online, with 44 Percent in Hong Kong, 40 percent in China and 32 percent in U.S (Figure 1). Figure 1: Percentage of online shoppers who engage with brands E-commerce businesses can therefore use the tool to engage their customers resulting to higher sales (Zailskaite-Jakste & Kuvykaite 2012). This idea has been tried by an online lighting design company called Cree LED. The company gets customers to share ideas on lighting designs or their experience with the purchases. The company has integrated several social networking sites such as Twitter and Facebook, which are further incorporate into its marketing strategy with the view of engaging its online customers in day-to-day conversations on lighting designs. In this way, Cree LED ensures that its Facebook profile is highly engaging. Shared ownership of products A mostly used feature that e-commerce businesses use to share products includes social sharing buttons or plugins that they embed on their sites. Most online retailers use Facebook, Twitter and Google Plus because sharing products on such social networking sites relates to the interests of the users. To promote interaction on their sites, e-commerce businesses can integrate social media plugins into their webpage that contain product listing. This idea is extensively used by FreePeople, an online clothing retailer, to build community of fashion lovers using Facebook, Google Plus, Twitter and Pinterest. Right from FreePeople website, online consumers select items to form their own ‘style collection’ that can afterwards be shared to the social networking sites for viewing and voting by other visitors (See Figure 2). At the same time, since most content on business products are generate by the online customers who share texts, videos or photos, e-commerce businesses can take advantage of user-generated content on their brands by drawing attention to it to engage customers (Xiaoyan 2011). These create a sense of ownership among the customers as a result promoting brand loyalty. Promote e-commerce website traffic Social media provides e-commerce businesses with a means of increasing traffic back on the websites. This boosts their visibility on search engines, hence enabling potential customers to easily identify them on search results (Neti 2011). Statistics by HubSpot (2012) show that 61 percent of marketers choose to use the social media to increase lead generation -- or generating traffic to their websites (Figure 2). It should therefor be argued that a decision by e-commerce business to use social media conforms to the ongoing trend in the industry. Figure 2: reasons businesses use social media Hubspot (2012) related to a study by Lim (2010), which found that that direct traffic lead to sales by 15 percent compared to social media, which increases sales by 4 percent (Figure 3). Figure 3: percentage inbound ads lead to customer generation Therefore, online retailers with huge social media presence can leverage the social media to generate leads, eventually leading to active customers. One way of achieving this end is using playlists on YouTube. For instance, Vat19, which is a specialty-goods retailer, has an extensive social media presence on Facebook and Twitter. It has also taken advantage of YouTube. When combined, its video channel on YouTube has over 115 million views, which has resulted into substantial traffic back on its website. Essentially, YouTube playlists provide a useful tactic for increasing the length of time visitors stay on a business’ YouTube channel. Reducing marketing expenses The social media offers inexpensive means of marketing by eliminating a huge marketing team or unsustainable budget. Indeed, e-commerce sites tend to employ social marketers to manage their social media accounts to leverage on the low charges. For instance, as of 2009, Facebook charged a minimum of $5 daily budget an addition $0.01 depending on the type of advertising (Assaad & Gomez 2011). Additionally, a study by HubSpot (2012) showed that 63 percent of businesses that use social media has realised increased marketing effectiveness. The study also showed that 45 percent of businesses agreed that the social media reduces marketing cost (Figure 4). Figure 4: Benefits of marketing using social media Based on this analysis, it is critical to argue that e-commerce businesses stand to benefit from reduced marketing costs by deploying social media in their marketing strategies. Extending customer base and product sale The social media provides ecommerce businesses with innovative ways of increasing customer base to increase sale of products (Neti 2011). This is since consumers tend to trust reviews and recommendations from friends or other consumers. Therefore, using the social media to harness customer reviews can be a vital tool for increasing customer base. Studies have showed that consumer-generated reviews have significant impact on business. A recent study by Nielson Company showed that 70 percent consumers tend to trust consumer opinions posted online while 90 percent trusted recommendations from people they know (Figure 5). This gives the social media extra weight in being used for promotion of products (Lim 2010). Figure 5: Consumer trust in advertising channels (Lim 2010). Another study by HubSpot (2010) indicates that social media conversations from retailers induce purchases by up to 35 percent and 55 percent for friends (Figure 6). Figure 6: Rate in which social media conversations influence purchases This shows that e-commerce businesses that use the social media can realise higher sales. This strategy has been used by ThinkGeek, which is an e-commerce retailer, in extending reach to consumers through Twitter. In addition to targeting audience who are active on Twitter, the company has developed a conversational style that generates immediate response, as result garnering more than 500,000 followers. By using the right kind of communication on Twitter, it maximises social engagement. Extending its Twitter community has attracted more users. In turn, it has increased brand loyalty, customer base and increased sales significantly. Guiding customers on e-commerce sites E-commerce businesses use social to guide users on their websites and eventually converts them into potential buyers (Neti 2011). This is targeted at providing convenience to the online customers. Aside from price, convenience is a factor that e-commerce businesses need to embrace. A study by PwC (2012) showed that in addition to price, convenience factors matters if e-commerce business has to be successful. For instance, providing users with product comparison is favoured by 6 percent of global shoppers, ability to shop anywhere is favoured by 25 percent of the shoppers, better product information is favoured by 1 percent of the shoppers (Figure 7). Hence, it is argued that e-commerce businesses can integrate these information to their social media platforms to gain an extra advantage. Figure 7: How online shoppers favour convenience (PwC 2012). Indeed, social media has enabled businesses to be more creative in using custom apps in directing Facebook users to take action. A good example of a company that has utilised this concept is online retailer Shoe Dazzle. The company uses Facebook Apps to guide users in a strategic (See Figure 1). The online footwear retailer has customised its Style Profile app. Once the online visitors access the app, they are taken to the next stage where they complete a quiz to locate their style matches. Afterwards, they are directed to the corresponding purchase pages on ShoeDazzle site. In this way, the social Conclusion The social media, particularly social networking sites, facilitate marketing of e-commerce businesses and gaining insights on the brands. This in turn offers innovative ways to carry out the crucial marketing processes. Businesses also get to engage and monitor online discussions that benefit the company. As analysed, e-commerce companies use social media to enhance their business models in a range of ways. First, they use social media to guide users on their websites. Social media also provide e-commerce businesses with a means of increasing traffic back on the websites. Additionally, social media platforms offer inexpensive ways of marketing by eliminating a huge marketing team or unsustainable budget. They also ensure customer engagement and brand loyalty. Businesses also get to understand customer demands based on what is trending online. At the same time, businesses can achieve shared ownership of products with the customers. Lastly, social media provides ecommerce businesses with innovative ways of increasing customer base to increase sale of products. Reference List Almeida, F, Santos, J & Monteiro, J 2013, "E-Commerce Business Models In The Context Of Web 3.0 Paradigm," International Journal of Advanced Information Technology (IJAIT) vol. 3, no. 6, pp.1-12 Assaad, W & Gomez, J 2011, "Social Network in marketing (Social Media Marketing) Opportunities and Risks," International Journal of Managing Public Sector Information and Communication Technologies vol. 2 no. 1, pp.13-22 Baghdadi, Y 2013, "From E-commerce to Social Commerce: A Framework to Guide Enabling Cloud Computing," J. Theor. Appl. Electron. Commer. 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