The Impact of Social Media on Consumer Behaviour - Effect of Brand Awareness and Electronic Word of Mouth - Coursework Example

THE IMPACT OF SOCIAL MEDIA ON CONSUMER BEHAVIOUR: EFFECT OF BRAND AWARENESS AND ELECTRONIC WORD OF MOUTH (eWOM) Name Institution Course Date Table of Contents Table of Contents 3 1.0 Introduction 4 1.1 Statement of objective 5 2.0 Importance of consumer behaviours to business managers and marketers 5 3.0 Concept Framework: Major influencers of consumer behaviour 6 3.1 Electronic Word of Mouth (eWOM) 6 3.2 Brand Awareness 7 4.0 Effects of eWOM and Brand Awareness on consumer behaviour 8 4.1 The impact of eWOM on consumers 8 4.2 Effects of brand awareness on consumer behaviour 9 5.0 Marketing implication 10 6.0 Conclusion and further research 11 7.0 References: 13 1.0 Introduction Do social media have an effect on consumer decision-making? Social media has become a significant communication vehicle that individuals employ to hook up with other folks or organizations. Individuals make use of social media to share their incidents, viewpoints, advice, information, tips and warnings as well as any other issue that is of interest to their contacts or friends. That information is very useful and has an impact on consumers’ decision-making. Due to the rise of the number of people using internet, the use of social media has also grown considerably in the last decade and its usage has continuously grown from individuals to businesses. Social media like Facebook, Twitter, LinkedIn, or Instagram among many others have millions of subscribers and the number keeps growing every day. The number of social media users has caught the attention of marketers. Most of organizations currently use social media as a tool to reach out to millions of prospective and repeat customers. Organizations have realized that social media marketing is a significant element of their promotion communication policies. Organizations are also using the social media platform to commune with their clients. These communications assist salespersons in determining the needs of their customers and also in understanding the nature of their market. Communication via social media has impacted the consumer decision-making as well as advertising strategies. Customer socialization hypothesis envisage that “communication among consumers affects their cognitive, affective, and behavioural attitudes” Ward, 1974. Furthermore, making advertisements on social media has developed fresh consumers’ behaviour. Most of consumers are now making purchases or conducting business on social media. The increased use of social media by customers influences companies that are finding it indispensable to take part to hook up with consumers. Most of consumers are inclining towards social media and it has become the new word of mouth (WOM). Since social media is chatty in character and salespersons have no power over it, they have found it necessary to participate so as to deal with the negative effects that social media can have on businesses. The function of this paper is to examine the effects of social media on consumer’s behaviour on the customers’ side and the negative WOM on marketers’ side. 1.1 Statement of objective The purpose of this paper is to discuss how consumers are affected by electronic word-of-mouth through social networking. We aim to understand how WOM through social media affects consumers’ product perceptions as well as purchase intentions. We also want to investigate how social media affects the brand awareness. This is because brand equity is no longer valued based on the amount of money invested in it but rather consumers are dictating the significance of brand equity by what they are sharing on social media. 2.0 Importance of consumer behaviours to business managers and marketers Consumer behaviour can be defined as the behaviour that customer show when planning to purchase, use and evaluate products and services that they think will satisfy their needs. Being acquainted with the consumer behaviour is vital for any organization before launching any product. An organization that fails to analyze how customers will respond to a particular product or service will automatically suffer loss in some way. Consumer behaviour is very complicated since each consumer has differing mind and attitude concerning purchase, consumption as well as disposal of product. Understanding the theories and concepts of consumer behaviour assists in marketing the products and services successfully. Since the trend, living standards, technology and fashion keeps on changing, the attitude of consumers towards purchase of particular product also varies. Understanding these factors is great significance since marketing of products and service mainly relies on these factors. Thus consumer behaviour is a significant tool for marketers in meeting their sales objectives. The success or failure of any business relies upon the behaviour of the consumer or the end-user of the products or services. Consumer behaviour helps the producer understand which products have been positively accepted in the market and the ones that are not and hence will need changes so as to meet consumers’ demands. Consumer behaviour is also important to the intermediaries involved in transferring of products from producer to consumers. Thus knowing the consumer behaviour assists in pointing out the weak areas and also reflects the positive aspects of any business. 3.0 Concept Framework: Major influencers of consumer behaviour 3.1 Electronic Word of Mouth (eWOM) Presently, the internet has become a fundamental part of a many peoples’ daily lives, and social networking sites have attracted millions of persons from all corners of the globe. Due to this, word-of-mouth has shifted to the digitalized world ad a new term has emerged, namely the electronic word-of-mouth. Due to the development of Internet and social networking sites, eWOM has the power to reach more individuals and is thus perceived as more influential. The efficiency of eWOM has been evaluated for a long time now. Research has shown that eWOM or just WOM is very significant to marketers in increasing their sales. Other studies have shown that eWOM had the strongest influence on clients’ assessment on high risk-perceived commodities and that it has the capacity of shaping and moulding other consumer’s opinions, Trusov, et al., 2009. Park and Kim 2003, showed that consumers are likely to send negative WOM if they bought a product or service and it did not satisfy their needs, so they send to friends to discourage them from buying. On the other hand, consumers will share positive WOM as a result of involvement, self-enhancement or dissonance reduction, Keller, 2007. It has been observed that unconstructive WOM has a bigger impact on clients’ behaviour than constructive WOM. Prior to customers making a choice to purchase a merchandise or service, they tend to collect information to minimize the perceived risks of the unknown, Wu & Wang, 2011. Purchasing behaviour is influenced by product involvement, which is how significant a certain product is to a person; the higher the value of the product to the consumer, the higher the apparent risk for the prospective buyer, Wu & Wang, 2011. Most consumers have various methods of communicating with companies in order to collect information concerning the product from print and electronic sources before making decision to buy. Studies have revealed various sources of information that influence consumers’ buying decision. Among these sources, the most popular is browsing retail stores and the second most popular is recommendations from contacts and close friends, or electronic word of mouth (eWOM) Godes & Mayzlin, 2004. According to Godes and Mayzlin, 2004, eWOM has a large influence on brand attitude as well as judgement as compared to other influential sources. The rise of the internet has raised the consumers’ ability to acquire unbiased opinions on products and improved the chance to share these views across a large number of people with a lot of ease, Hennig-Thurau & Walsh, 2004. The transparency, accessibility and size of the Internet have given marketers the ability to influence and monitor eWOM, Kozinets, et al., 2010. Moreover, companies are able to monitor what is being said concerning their products and consumers’ attitudes towards the company, and hence are able to adjust where necessary, Goyette, et al., 2010. And since eWOM can reach a large number of people at a lower cost, it is very popular, and thus if eWOM is managed well, it has a high potential of transcending a product from small market to a much larger market, Park & Kim, 2007. However, it is also significant for the companies and marketers to monitor eWOM, since opinions online are available to the public or a group of friends and contacts for unlimited period of time and thus ay negative eWOM can damage the image of the company. WOM is considered to be reliable since comes from consumers who have no self-centredness in the product and also it is thought to be unprejudiced information coming from similar types of customers, Brown, et al., 2007. eWOM has a vital power on consumers’ buying intentions, since the depend on eWOM before doing the actual purchase of the product. Consumers believe on viewpoints concerning a product that are supported by a strong argument in addition to agreeing with consumers’ beliefs. 3.2 Brand Awareness The term awareness describes peoples’ perception as well as cognitive response to a situation or incident. The term does not essentially mean understanding since it is a nonfigurative impression. Awareness could be focused on an inner condition, like an inherent emotion, or on exterior events like sensory perception. Brand awareness is the ability of end-users to be acquainted with or remember a brand. Brand awareness is a process from where the brand is just known to a level where it is highly ranked by the consumers; the brand becomes the ‘top of mind’, Aaker, 1991. Brand awareness is all about communication. Brand awareness is significant since most of consumers feel that if the brand is well known then it has high quality. But the most important about brand is not how well it is known but rather what it is known for. Brand awareness depends on both the situation and the level of achieved awareness. The levels of awareness can be categorized into three sections: 1. Brand recognition: It is the initial stage of brand awareness. It is when the consumers can manage to identify a particular brand among others; ‘aided recall’. 2. Brand recall: in this level it is the task of consumer to name the trademark in a product class. The level involves ‘un-aided recall’ since the consumer is not provided with examples of specific brands. At this level, brand decision is normally made before going to the store. It involves purchase of regular goods like detergents, coffee or painkillers. 3. Top of mind: it is the first brand that always come into consumers’ within a given product class. Brand awareness has the strongest effect on decisions regarding purchase on habitual behaviour of low involvement products and services. In fact it is a dominant factor in consumer decision-making process. 4.0 Effects of eWOM and Brand Awareness on consumer behaviour 4.1 The impact of eWOM on consumers Nearly all consumers seek WOM information before making any decision of purchasing a product, Godes & Mayzlin, 2004. WOM is of major interest to companies, because it is acknowledged to have an impact on consumer behaviour and influences their general preferences. Being exposed to a positive WOM can lead one to buying a product, while a egative WOM have the opposite effect. Recommendations on on-line platform like social media also have the same effect and can increase or reduce a product’s overall sales, because they influence consumer’s opinions concerning a product and thus can encourage or discourage a purchase, Cheun, et al., 2009. Product recommendations on social networking sites have a huge impact on the receivers’ product selections. eWOM has been recognized by many researchers to have huge impact o consumers, Hongwei, et al., 2012. eWOM is perceived to create consumers’ brand awareness, assists a company in forming buzz, and has an influence on consumers’ brand loyalty. eWOM has an effect on purchase intentions as well as decisions, but with some products more than others. Consumers who purchase products online are more likely to be affect by eWOM than other consumers. The following example helps to understand the effects of eWOM on consumers. Toyota Company had manufactured cars with faulty accelerator pads. The buyer of the Company’s vehicles lamented about the same on social networking sites. This portrayed a bad image of Toyota brand. In response to save its brand identity, Toyota recalled 2.3 million cars due to faulty accelerator pads in 2010, Wasserman, 2011. This recall was very distressing to a corporation whose status was built on quality. The social media team at Toyota resolved to handle the issue through Digg.com where consumers addressed their issues to the president of the company. This comeback design displayed lucidity and dependability, which is very vital in social media. Even though the brand equity has not returned back to its point prior to the unconstructive eWOM, the corporation’s social media reply was received positively and helped in increasing the constructive customer acuity of the brand, Wasserman, 2011. It is therefore clear that, consumers’ attitudes towards products and companies can be influenced by friends on social networking sites, if their comments are posted concerning a particular corporation or product, since friends share similar interest are professed to be reliable. 4.2 Effects of brand awareness on consumer behaviour Brand awareness plays a significant role on purchase intention since end-users prefer buying a familiar and well known product. Brand awareness affects procure judgment through brand relationship, and if a brand has a positive brand image, then marketing activities will be easier. A brand name provides a symbol that help consumers in identifying service providers and in predicting service results, Davis, Golicic & Marquardt, 2008. Brand awareness assists consumers in recognizing a brand from a product category as well as in making purchase decision Percy & Rossiter, 1992. According to Macdonald and Sharp, 1996, brand awareness has significant consequences on customer resolution making by determining which brand enters the contemplation set, and it also determines which brand to be selected from the consideration set. Brand awareness has an effect on the latter by its use as heuristic for preference (for instance, “I will choose the brand I know”) and its impact on assumed quality, (“I have heard of this brand, so it must be good”). Brand awareness also has an effect on customers’ perceived risk evaluation as well as their self-confidence in the acquisition resolution, both in case of products and services. Furthermore, the significance of brand awareness in perceived risk evaluation is considerably higher in the case of durable goods, Keller, 2003. Brand awareness has a huge impact on selections and may be a preceding contemplation base in a produce class, Hoyer & Brown, 1990. Finally, brand awareness acts as a decisive aspect in the consumer purchase intention, and certain brand will acquire more preference in consumer’s mind and hence influence consumers’ purchase decision. A product with higher level of brand awareness will receive higher consumer preferences since it has higher market share and quality evaluation, Grewal et al., 1998. 5.0 Marketing implication The study has shown that it is imperative for marketers and companies to have a social media strategy. With the rapid growth in the use of social media by consumers, marketers and companies ought to be prepared to handle any type of negative eWOM. There are five strategies that marketers and companies can adopt to deal with negative eWOM, namely partnership, delay, responding, censorship and legal action. These strategies have a tendency of overlapping, thus producing an amalgam version of several strategies that a marketer or business may employ to deal with a harmful social media battle produced by customers. Getting involved in social media and defining a social media plan in advance of harmful eWOM is the most efficient standpoint a business or marketer can take. Undertaking a more proactive approach will help in implementing the most excellent plan that adheres to the general policy of the business rapidly and best shields the corporation’s brand. Being proactive helps the marketer and corporation to become acquainted with the usage and supremacy of social media, recognize the most excellent employees to stand for the corporation in social media, and set forth guiding principles for managing harmful attacks before they take place. Marketers should also pay more attention to the impacts of brand awareness, perceived quality and brand loyalty on acquisition intent. The marketers need to build a strong brand within customers’ mind by forming an affirmative brand assessment, an accessible brand attitude, as well as a constant brand image. Brand awareness is a precondition for the market achievement of both durable and non-durable brands. So as to build, sustain and increase own brands’ choice share, marketers and companies have got to be aware of the significance of increasing and controlling brands’ aided and unaided awareness and take action consequently. Marketing integrated communication ought to be put into practice, with strong stress on promotion and buyer affiliation management, which play key part in this direction. 6.0 Conclusion and further research Social media is here to stay and it is the responsibility of marketer and corporations to make it a priority to produce a reliable face in social media. Knowing how to use social media to increase their level of market and also having plans for how to mitigate harmful social media prior to an assault helps a business to enjoy the fruits of social media. Participating actively in social media offers the companies and marketers with an opportunity to build strong brand awareness in addition to being authentic and transparent, which are necessary for the survival of businesses against negative eWOM. Companies and marketers need not only reduce the impact of negative eWOM, but also to the harmful assault into a constructive ending like what Toyota Company deed in order to build strong brand awareness and gain consumers’ confidence in the end. With the development of social media, salespersons ought to think less like customary, one-dimensional advertisers (through radio and television) and become more interpersonal affiliation administrators and client service promoters. Salespersons have to be prepared to pay attention and commune, even confer with customers, since they no longer have total power over the eWOM. Social media channels offer superior authority to clients but also give salespersons a means of promptly understanding customers’ needs and share this information within the corporation. Marketers should therefore actively engage themselves with social media and develop tactical policies needed to be both proactive and reactive in tackling this kind of advertising communication. Since eWOM and social media attracts particular ages, it is highly recommended that further research should be done on other ages. Suggestions are offered for research to be done of the effect of gender and age on the relation between eWOM through social media and consumers’ product purchase perceptions. Finally, companies need to be acquainted with more information concerning how to handle consumer-generated harmful social media crusades and prospect study should go on with shedding more light on this multifaceted subject matter. 7.0 References: Aaker, D.A. 1991, Managing brand equity: capitalizing on the value of a brand name. New York: The Free Press. Brown, J., Broderick, A.J., & Lee, N., 2007. 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