The role of social media in managing customer relationship - Essay Example

?The role of social media in managing relationship Introduction The essay will encompass the role of social media in managing relationships. At the current epoch modern business firms face cut throat competition among themselves. Most of the contemporary economies in the world abide by the free market principles. ‘Consumerism’ is the pivotal goal or motto of almost all the enterprises in the modern world. Business firms can never be successful in generating economic surplus without enhancing and modifying customer relationships. Buyers view for a commodity or a service manufactured by a business firm largely influences the brand loyalty and image of the company. This in turn affects the gross turnover of the organization. Thus, implementing strategies to win over customer relationships is the primary success factor for any corporate business organization. With the progress and development of Information Technology, business firms have enjoyed substantial economic surplus with the help of the modern marketing methodologies. Social Media is a tool that has upgraded and modified itself over time to help business organizations built efficient and good customer relations. Social media involves certain internet sites that help the people freely communicate with each other through writings, videos and pictures. With the advantages of social media, constrains like distance and time differentials have reduced to a large extent. Modern individuals can never think of a life without the social networking sites. In the late 19th century, the CompuServe was the first social network site available in United States. Over the time, the percentage of internet users has significantly increased. The modern social networking sites like YouTube have 4 billion viewers per day. Facebook users are as high as 1.11 billion. 255 million users for LinkedIn, 87 million members for Flickr, 500 million users for Twitter shows the gross popularity of social networking sites in the modern world. Such sites are used for both economic and non economic purposes. Modern business firm’s uses social networking sites for marketing their manufactured products and achieving customer’s loyalty. Customer Relationship Management is a pivotal theory of consumer behaviour management. Social media has largely helped the corporate retail firms to anticipate the requirements and demands of the contemporary potential customers. Thus, at this juncture it is highly rational to analyze the role of social media in facilitating corporate customer relationships. This essay will enumerate the various aspects and perspectives of social media. It will also throw light on the superior and inferior outcomes generated by social media over time. The learnt from this academic based essay would surely enable readers to acquire an implicit knowledge about the benefits and problems of social media augmenting customer relations. Critical analysis Impact of social media on customer relations The discussion presented above shows that the social media is a platform that is rising in importance among the marketers. In this context, it must be understood that the social media has both positive and negative impacts on consumer relationship. The positive impacts have been discussed below followed by the negative impacts. Social media as a public forum provides a strong way to establish customer relationship and increasingly engage them into the process of designing, producing and distributing products. There is a huge difference between social media and other forms of communication, such as telephones. The difference is that telephones provide one to one communication among the people that are participating in the conversation, but the social media is such a forum in which a very large number of people that are virtually present in the forum can participate in the conversation. This allows all customers to review the opinions of other consumers. Thus, it makes the information conveyed across the target population very fast and also allows the companies to get all relevant information about customers through the networking sites. Social media, on one hand, makes the intentions and future plans of the companies visible to the existing as well as customers, while on the other, they also make the views of the customers visible to the companies. Every interaction with the customers creates an opportunity for the company to cast either a positive perception of value or a negative impact on their customers. While good perception leads to higher retention of customers, negative perception has a strong potential to curb away customers’ attention from the brand. In social media, companies can track the number of customers that ‘like’ the company on these sites or are the following it. Mistreating the customers on the social media would reflect on the physical level of customer inflow (in the form of purchases made) that might reduce after the mistreatment. Not only the mistreatment of the customers can cast significant impact on their intensions to purchase these brands, but also the experiences of other customers (that are revealed over the social networking platforms) are powerful enough to create an overall perception about the company. A new customer always has the opportunity to verify the quality of service provided by the companies from the existing customers. If they find a negative perception about the company from other customers, they might shift their buying decision to other companies. Impact of social media on business relationships Businesses to business relationships are as important for the long term sustainability of organizations as customer to organization relationship. With the improvement of technology, use of social media has become common among the people of the developed as well as the developing world. This makes it important to know the ways of leveraging the value contributed by social networks. Although the importance of social media is increasing, research shows that the customers use this platform more extensively than the business organizations operating around the world. This implies that the social media channels are not fully utilized. Hence, these organizations cannot reap the benefits of social networking. Companies have realised that for achieving success in businesses, ‘effective’ relationship building plays a very important role. In the current business scenario, when waves of globalization have reduced the world to a global village, development of relationships is considered as the most critical factor to success. Therefore, it is important for organizations to consider the social networking forums as an important channel to expand their business deals. Perspective: Agreement or disagreement on the statement According to the research made for this paper, the fact has been agreed upon that; social media is one of the most important channels of marketing in the modern business world. In fact, it holds a critical position in the success rate achieved by the organization. It has been found that companies that have invested sensitively in social media marketing have been able to increase total revenue from higher sales. However, on reviewing the topic critically, it has been established that although the social media supports business organizations in their efforts to increase customer loyalty there are various disadvantages associated with this process. These disadvantages might hinder smooth running of the organization’s operating system. Thus, it is re-established that the social media platforms have to be dealt with seriously and carefully by organizations. Key aspect of customer relationship Business firms have realized the importance of internet in trade and many of them are utilizing the benefits of this platform for marketing purposes as well as for post sales services. The key aspect of customer relationship is maintenance of good level of communication. Social media helps companies to communicate with their customers (Goldman, 2011). It is a two way platform that allows the sellers to send messages to the customers and also gather feedback from them. Unless the process of communication is two way, it does not allow either party to gain maximum satisfaction from the communication. Social media is a platform that enhances customer care service provides to the consumers and also allows sellers to stay fully aware of the grievances of dissatisfaction of the customers. Advantages and Disadvantages There are various advantages of social media marketing, but this process is not free of disadvantages. The advantages of using social media marketing have been discussed below. The proliferation of social media potentially casts notable effects on current business activities. Range of relationships developed within the business scenario is vast. Social relationships can be built between the organization and its customers and also amongst the organizations themselves. There can be strong relationships as well as weak relationships. The social communities are the places in which weak relationships develop mainly for work related purposes. However, these are channels that provide precise valuable information or provide assistance or collaboration for making business activities. Through discussions with their contacts on the social networks, organizations might generate new ideas, share these ideas with the others and enhance them or they might simply discuss issues of interest. Companies find easy solutions to various business problems through the ideas generated through these discussions. However, the problem of using social networking sites for the development of business relations is that all organizations around the world do not consider these channels as effective mode of relationship building. Social media platform is not a widely used platform for establishing business relationships. For organization-customer relationship, weak relations often create lack of transparency. This provides space for miscommunication or communication of wrong ideas. Often the companies fall prey of public scrutiny of their activities and any miscommunication might harm its brand image. This in turn would adversely affect customer loyalty. Besides, companies need to allocate additional amount of resources for developing the content to be published in websites and for managing them. If the social media is not adequately managed, the end result would be higher cost and lesser revenue. Additionally, it is also argued by market observers and businessmen that the maximum benefit is achieved from the offline contacts that businessmen have personal contact with. This is because of the lack of credibility or reliability of the suggestions provided by the weaker contacts made on the social networking sites. However, in the modern world, electronic modes of communication have been largely used channels for interacting with people. Therefore, it has reduced the chances of direct interaction; both face to face meetings and telephone calls have reduced considerably in this era of networking through the internet. It has been found through survey that customers often ignore the messages that are electronically sent to them by the companies. There are scores of such messages that arrive to the customers daily but do not relate to their necessities. Hence, the messages are often ignored by the customers. Lack of direct contact makes it difficult to maintain strong business relationship in the long run. Examples of good and bad impacts of social media marketing One good example of using social media sites is that the companies develop weak ties with the other companies that are present in the particular social forum. This acts as a source of information and opportunity to collaborate on certain projects. It also offers the opportunity to the company to strengthen up these weak ties for further business transactions to be made in future. For example, companies can develop good rapport with the contacts that are present in ‘LinkedIn’ and make them strong connections in the course of time. One example of the adverse impact of social media usage for marketing purposes is that customers are bombarded with promotional messages from a large number of companies. It becomes difficult for them to manage these messages Literature Review The literature review will enumerate the various facets of social media rationing customer relationship management on the basis of several articles and books. Social Media enhancing Customer Relations Modern business firm treat marketing through social media as an investment made for building relationships with customers. More than 90% firms of the modern world actively participate in building efficient business strategies to market products in the digital sites. The satisfaction, loyalty and quality of customer relation largely depend on the gross amount invested by a company to market its manufactured products through social media. Though the cost of marketing through social media is very high, the threshold of satisfaction that consumers achieve through such commercials is also high. Empirical studies have formulated that social media has helped to augment customers relations and increase sales for a business firm. A modern company can never think of enhancing its business sales without marketing its brand name and product through social media. The rise in the aggregate internet users indicates that sales promotional activities of a company through social media help the firm advertise their products to a large number of consumers. However, it cannot be ignored that those innumerable companies advertising their products through social media has made many consumers ignore the infinite commercial messages. Customers are found to often ignore such commercials. The competition in the online industry between firms is higher than the traditional marketing modes but the search engines are more developed, marketing expenditures are reduced and sales are always augmented. The relationship building marketing technique through the social media provides mutual benefits to the producers and the consumers. However, it should be considered that the quality of communication should be excellent, when the business firms would market through social medium. This will help to facilitate regular communications between the marketers or business firms and the consumers or internet users. Nevertheless, it should also be analyzed that the marketing activities through social media creates information asymmetry. The business organizations are often found to possess greater information about the nature and quality of the product than the consumers. Business firms communicate with consumers in a completely modern approach through social media. It should always be considered that if the business firms desire to co-create value, they must incur costly investments and provide special incentives to the buyers for tapping more potential economically influential consumers in the market. Thus, it has been observed that those business firms, which have incurred costly investments to market their products via social media, have gained greater benefits in form of relational outcomes. These outcomes are in the form of increased customer loyalty, satisfaction and word of mouth performance. Individuals consider social media more suitable for non business purposes (Clark and Melancon, 2013). Social Media Enhancing Business to Business (B2B) Relationships It is believed by many analysts that social media only facilitates in improving and nourishing the business to consumer relationships. In reality this traditional view should be changed because in the current epoch, social media also facilitate in strengthening the B2B relations. However, it is empirically found that the underlying factors influencing the B2B relations through social media are much different from the factors influencing the business to consumer relations. It has been claimed by many academicians that it is a bit complicated to analyze the use of social media by core business firms that completely engages in the manufacture of commodities that are only sold to the other business firms. There are a lot of commercial and non commercial elements in social media. The field includes much more than what is comprised under the jargon of Facebook and Twitter. The managers in the contemporary business organizations use social media less frequently in business because they are familiar with the entertainment segment of the same. Associating Twitter and Facebook with social media has forced business organizations use it less frequently. Web 2.0 tools like Wikipedia sites are used in business activities to some extent, but the overall use of social media in B2B transactions is low. Some academicians made a survey in Finland to judge the extent of social media use in business firms in Finland. The survey was made primarily on the CEO’s, strategic managers and CIO’s. It was found that only 25.4% of the professionals concluded that they used Web 2.0 tools in their business activities. 16.4% stated that they would use social media for the purpose of professional tasks in future (Bottles and Sherlock, 2011). While the rest of the individuals concluded that they had just no plans and programs in future for using social media. Thus, the survey clearly emphasized that business firms are still not familiar with the used of social media for their professional activities. A number of facts evolve when the underlying causes for difference in social media usages in business-to-business and business-to-consumer dealings are concerned. Unlike the products of the business-to-consumer markets, the manufactured products in the B2B dealings are much complex and complicated. Business firms might find it difficult to market such complex commodities to the other business firms through social media. Moreover, the numbers of customers in the B2B dealings are less than that of the business-to-consumer dealings. Business officials might find it useless to use social media for marketing their products to their handful of business clients. Figure 1: Social Tools Usage in B2B Dealings (customer interface) (Source: Jussila, Karkkainen and Immonen, 2013) Figure 2: Social Tools Usage in B2B Dealings (with partners) (Source: Jussila, Karkkainen and Immonen, 2013) The two above bar graphs shows the scanty utilization of social media among business firms. Social Media Affecting Brand Loyalty There is always a debate among the researchers about the contribution of social media in enhance the class or status of a brand. It is believed by many of them that social media helps to enhance the brand loyalty for a company by building efficient customer relations while the other believe the contrary (Georgi and Mink, 2012). A study comprising of 441 respondents was conducted to analyze the true answer of the debate, it was found that use of social media helps to boost the popularity of a brands, product, image and trust. The brand trust plays a primary role in converting developed relationships in the brand community towards loyalty for a brand. Social networking sites like Facebook comprise of 955 million active users, each and every user logs into the site at least once in a day. In a mean estimation, it can be enumerated that about individuals spend approximately one third of their total time in social media consumption. In order to survive in the current competitive market, business firms should take the opportunity of using social media to reach up to a wide clientele. Different likeminded individuals and corporate business firms can only conjoin themselves successfully with the help of social media. However, some critiques believe that social media is only useful to connect individuals not brands. Figure 3: Brand Community, Customer Centric Model (Source: Laroche, Reza and Richard, 2012) The above diagram shows the modern motto of ‘consumerism’ followed by most of the modern economic systems abiding the materialistic principles of livelihood. Brand, product, marketer or the customers all encompass the focal customers. Social media largely contributes in upgrading the customer centric model in the modern world. With the rapid development of science and technology, geographically bounded technologies are now removing the geographical obstructions. Brand communities substantially help business firms to increase their sales. Like Jeep and Harley Davidson have customized their brand communities in the famous social networking sites like MySpace and Facebook. Brand communities in the social internet networking sites comprise of customers or individuals with similar characteristics features. Researchers have taken the help of statistical tools to analyze the strong of relationship of customers in online brand communities with products, other customers, company and brand. Figure 4: Results of the Statistical Test (Source: Laroche, Reza and Richard, 2012) The values of the (value>.05) Cronbach’s ? shows that online brand community has strong association with product, brand, company, other customers, brand loyalty and brand trust. Figure 5: Effects on the Brand Community in the Social Media (Source: Laroche, Reza and Richard, 2012) The above flow chart clearly shows how brand loyalty can be generated with the help of brand communities in the social networking sites. Customer Equity in Marketing Activities of Social Media Many researchers have been made to judge the nature and characteristic features of social media marketing (SMM). Analysts are always very keen to understand the extent of brand, customer equity maintained in the marketing activities of social media. The marketing and business of luxury brands through social media involves, entertainment, trendiness, interaction, customization and word of mouth are the five underlying driving forces. Value and relationship equity are significant factors that determine the purchase or buying intensions of the individuals. Relationship equity is not very influential to determine the level of consumer purchase decision in social networking sites. The rising per capita income levels of the individuals in the global economy has caused a significant rise in the demand for luxury products in the market. Luxury products manufacturing companies like Mercedes and Lacoste are interested to know the implicit nature of the customer purchase intentions for their products. Business firms are constantly upgrading modern strategies to market their products in the widely used social networking sites. The demands for luxury products are significantly high in the emerging economies in the world like India and China. However, the recent global financial crises have created a detrimental impact in the total demand for luxury products in the market. Thus, business firms are enthusiastic to know about the new ways to market their products. It is found that the customers are contended with the online commercials of the comfort products of companies like Chanel, Yves Saint Laurent etc. Moreover, the problems of the retailers and merchants are also avoided and business firms find it highly compatible to convey the correct messages regarding the nature and quality of the products. Social media actually causes significant impacts on the brand image of a company (Stephen and Toubia, 2010). The value provided by the customers is not limited to the single transactions in business. The customers generate aggregate profit for the firm for the whole lifetime. Thus, contemporary business firms treat customers as intangible assets (Kim and Ko, 2012). It is viable on behalf of the organizations, that they maintain, acquire and maximize the intangible assets like consumers in their business. Customer equity is considered as the most valuable factor that helps to generate long term business equity. Equity among customers is nothing but the sum of the discounted values of customers over their entire lifetime. Social media marketing activities is empirically found to generate sufficient amount of customer equity that is often not maintained in the traditional modes of marketing. Even in this crisis period, social media has helped pricy luxury firms augment their sales. This is only possible with the essence of customer equity maintained in social media marketing. Marketing activities through social media, achieves customer equity by fortifying the customer relations and purchasing intensions. Co-Creation Value and Facebook Shopping Social networking sites like Facebook and Twitter are widely used in the modern days for promoting sales of various types of goods and services (Razak and Marimuthu, 2012). This is successfully done by the business firms by co-creating value for the manufactured goods and services produced by the firms. Modern consumers are found to analyze the nature of the products implicitly by browsing before they take a purchase decision. Some consumers are also found to search for various product choices before they make their buying choice. The increased number of internet users have forced the sellers to market their products in the online sites other than conventional shops. The Social Forrester Research have stated that the total number of internet shopper have increased from 56% in 2007 to 75% in 2008 (Walsh, et al., 2010). It is empirically found that individuals have a greater inclination to make their purchase intension via Facebook because it helps them to share their product experiences through pictures, videos etc to the various communities. In short, popular social networking sites have helped in incrementing gross sales of various goods and services by co-creating value with the marketers. Social networking sites have largely helped in up keeping with the retail sector of different economies in the world, even in such an epoch, when the velocity of money circulation in the economy is low. It has been empirically found that trust and faith are the two non economic factors that determine the level buying intensions of the consumers in online shopping. On the background of the Theory of Reasoned Action, co-creation value is the single statistically significant factor that determines the online purchase intensions of the consumers. Social customer relationship management Social Customer Relationship Management (Social CRM) refers to the theory of relationships existing among people (both buyers and sellers) and looks at the issue from the perspective of customer demand. In the modern word rapid technological advancements are taking place, which is affecting all the sectors in the global economy. This has led to the widespread use of internet, for commercial purposes as well as in households. The social media has become one of the most important factors that affect the relationship between the buyers and the sellers. Social media is a platform that enhances customer care services and also allows sellers to stay fully aware of grievances or dissatisfaction of the customers. Virtual communities that exist by courtesy of the social media platforms engage customers to a great extent and cast far-reaching impacts on customer loyalty. According to Trainor, et al., (2013), social media has a powerful effect on the loyalty of customers. Hence, in recent times, marketers emphasise on the use of social media for establishing a concrete relationship with the target customer base. Two way communication There are a wide variety of platforms that are parts of the social media. The most common platforms on the basis of their popularity and customer visit are Facebook, My space, Twitter and Orkut (Belhfnkonda, 2010). Since these are growing in popularity, marketers are also increasing their efforts to understand the utility and usage of these communicating channels. Various programs are launched on the social media that are aimed at increasing awareness about their respective brands among the target customer segments (Escobar-Rodriguez and Cravajal-Trujillo, 2013). One of the basic advantages of social media is that people of almost all ages belonging to the developed and the developing countries use social media channels for communicating with their friends, relatives and virtual community members. Through these channels companies can convey their messages to the customers and also collect customer views. This facilitates the process of customer care since the companies can get the customer reviews very quickly and might incorporate them into their production and distribution processes. Cost of marketing through social media The other reason that has made the process of social media marketing important to the companies is the low cost of this channel of marketing. The cost of marketing through the social media is quiet less. Compared to the very high ‘reach rate’ (the rate at which the target customers are reached by the advertisement), the level of cost incurred by the companies for marketing using the social media is very low. Different researchers have conducted extensive studies, using information gathered from case studies, surveys and interviews, to assess the importance of this social media marketing on customer loyalty. In the current business scenario, closeness with the customers determines the level of success achieved by the company (Walsh, at al., 2010). Never before have the companies been able to come into such close relationship with their customers in such a timely and cost effective manner, until the development of the social media channels. The most important benefits of this form of marketing are centred on the concept of customer engagement. The benefits of increased customer engagement is increased level of customer loyalty. Customer care and loyalty are one of the key factors that affect and drive business performance to higher levels of success. Companies receive financial benefits from the increased levels of customer loyalty. This is because the more customers are loyal towards a brand, the more repeat purchases they make from the particular brand that they are loyal to. This increases sales for the company, thereby increasing total revenue. Since the social media channels are based on networking among people all around the globe; any information, advertisement or message displayed on these sites spread across the target group very rapidly. It reduces cost of advertisement for the companies, but they receive better responses from customers. It must be understood in this context, that Social CRM is not a substitute of generally existing CRM activities. Rather it adds higher value to the results achieved through CRM efforts. Social CRM boosts up the relationship building aspect of existing CRM methods and leads to the development of more improved and meaningful interactions. The rapid emergence of social networking sites has transferred the power of relationship building from the organizations to the customers. With the advent of the social networking media, customers have received the platform to connect with one another crossing the barrier of space and time. Customer reviews educate customers more about companies and their products, than the information companies themselves provide to the customers through their websites. Therefore, organizations have realized that they would have to participate in the ongoing conversation on the social sites in order to stay updated about customer views and opinions about the products and their brands. This would allow the companies to serve better and subsequently increase loyalty of customers towards the brand. Conclusion The discussion presented throughout this paper shows the importance of social media marketing in improving customer relationship and increasing customer loyalty. The paper shows that the perception of customers regarding a commodity or service offered by an organization influences the brand loyalty of the company enormously. Companies are becoming aware of the growing importance of social media and are therefore, increasing the use of this platform for making their business transactions. This new adaption also casts certain negative impacts on the customer relationship maintained by the business firms. Lack of transparency in communicating ideas and information among customers might create communicating gap and give rise to wrong perception among the customers. Discontent among the customers often hurt the value attached by customers to a brand. Also, lack of proper guidance that sometimes leads to the development of false rumours about companies causes decline in customers’ faith on companies. The study reveals one important fact about the social media networking. Till date, these channels have found greater use among individuals for non commercial purposes than for business purposes. Organizations still have to work harder to utilise the benefits of social media networking for business purposes. 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