The effectiveness of Facebook advertising in Hong Kong - Research Proposal Example

The Effectiveness of Facebook Advertising in Hong Kong Introduction Effective advertising is important for any company to gain competitive advantage over others. Social media is a great platform to advertise effectively in the modern days as most of the target audience with good spending power are ardent fans of Social media sites like Facebook. Social media which emerged before a decade has become a dominant media changing the face of advertising completely. It has eradicated the need for print media advertising which ruled the world for nearly a century (Neil, 2007). In a way it paves way for a greener environment, fast reach and cost-effective means to advertise. Facebook advertising reported around 39% increases in 2011 (Bryant, 2011). The capability to collect precise data about the target audience and generation of inferential data regarding whether the ad has reached them is the main advantage of advertising through Facebook. This research aims in investigating the effectiveness of social media advertising focusing on the most famous social media tool Facebook. It attempts to utilize the geographical region of Hong Kong as it is a ripe market for Facebook advertising. The research will answer some key questions like how effective Facebook advertising actually is and is the ROI generated through Facebook advertising really profitable. Hong Kong is ranked the 44th largest country to in terms of Facebook users. There are nearly 38, 54,380 Facebook users in Hong Kong. Nearly 55.87% of the country’s population uses Facebook with an average of 75.90% online population using it. The largest age group using Facebook falls within 25-34 age group followed closely by 18 - 24 age groups. 47% of the total leadership comprises males and the rest females (Marca, 2012). Experian Marketing Services conducted an elaborate research on the effectiveness of Facebook marketing campaign in Hong Kong. The results of the research clearly states marketers all over Hong Kong are looking for new means of marketing. Most of them felt traditional forms of advertising through TV and print media is no longer enough to survive in the industry. They are keen on advertising in social media, through the smart phones using different apps and in every other new technology. But, most of them do not have a clear idea on how to get a competitive edge over others by investing wisely in the social media. The research analysed the link between the consumers interest on the product and the platform it is advertised. The results of the research stated the marketers perceptions are much different from the customer expectations as well as experience. Abberant decoding is prevalent widely in the industry. The report states nearly 64% of lead marketers in the Hong Kong believe their marketing strategy reaches the correct target customers in an effective way. On the other hand 47% customers simply feel even top brands do not engage effectively in good advertising. They said they give up purchasing three to four brands every year because of misunderstood communications. Marketers do acknowledge that doing business is harder than ever. 52% feel their campaigns get lost as one amongst others no matter how much they invest. The travel and leisure industry is the worst one to be hit by using traditional means of advertising. Nearly 75% of the marketers in the hospitality industry report their adverts and messages do not reach the required target audience that easily. Digital products sellers feel reach the right target group much easily than others. The financial sector also resembles a similar mentality. According to marketing people, the website is the primary source of information followed by search engines and social media marketing. From the consumer side, most of them feel print media comes next to website and rank social media as the third important means of information. While 68% of the customers see print media as the most important source of advertising, only 39% of marketing people view it as an important source. Scope of the Study This gap existing between the user and the consumer communication is quite significant because there is lots of difference between the perceived value and the reality. Facebook has a share price of $ 38 and is harvesting nearly 100 billion dolls of profit annually. The company has created value online very easily without any strong data supporting that its advertising is actually useful. The study gains importance because advertising requires lots of investment and understanding the consumer behaviour is a key feature in planning and selecting the platform of advertising. The main question the project poses is whether the social media marketing is effective and worth investing in. Purpose of the Study Experian survey clearly suggests nearly 85% that is eight out of ten marketing executives think online advertising is effective and nearly 65% of them have decided to invest in Facebook in the following year. It becomes important to find out whether social media marketing is really effective and it provides the required ROI in Hong Kong. It is evident that majority of the people in the advertising industry are quite confident that their ROI will be profitable. This study conducts a research on the reality by observing the consumer behaviour and interviewing them directly. The research will aim in fulfilling the following purposes To determine whether Facebook advertising is really profitable considering the ROI or Return on Interest To explore the true customer perception and customer behaviour about Facebook advertising To fill in the gap between marketer perceptions and the reality by providing them efficient recommendations to make social media advertising more profitable. Literature Review Businesses use Facebook to share the news, promote new offers and to advertise in a large scale because the way people relate to each other and communicate with each other in Facebook is very favourable for product promotion (Heerde, 2007). Communication through Facebook is transparent, instant and creative. Every organization spends a great deal of money advertising their products. But, only social media sites like Facebook give a chance for calculating the ROI or return on investment. Effective Facebook monitoring help in tracking the desired actions induced after viewing the ad like visiting the products website, calling a customer care executive or simply taking part in a contest (Hindshaw, 2005). WPP, the world’s largest marketing group have reported that Facebook is the best place to advertise compared to other social media tools and it fares better than traditional advertising in many aspects. The demographic info based advertisement became even more ubiquitous after Facebook allow users to share their current location from April 2010 (Bilton, 2010). Facebook allowed companies to advertise a product based on certain demographics like people living in a certain regions. This demography research based advertisements is a boon for local businesses (Gerard, 2009a). Hence, the importance of Facebook advertising is unavoidable for some local companies. The most famous websites like Facebook, YouTube and Twitter get nearly 5 million visitors a day. Hence, they are considered as an important media for advertisement (Sarah E Needleman, 2011). Advertisement has both short-term power as well as long- term power. Short-term power provides information about new features added in the product, creates awareness about the uniqueness of the product and build reliability (Robin Neifield, 2010). On the other hand long-term power helps in maintaining brand image by creating an emotional attachment to the product. It also helps in maintaining the positive reputation built over years (Robin, Neifield, 2010). Facebook has over 500 million users and is ranked as one of the highest profiting website of the world. Its total value exceeds ten billion dollars (Foe, 2010). Many marketers forget the difference between social media marketing and traditional means of marketing leading to massive failure of their social media campaign (Tuten, 2008). Usage of proper interestitials, and superstitials is a must while advertising in social media. Determining whether a pop-up which comes in front of the reading page or a pop-under which can be viewed after closing the page is to be designed will also make a significant impact on the campaign. Most users tend to simply close the pop-ups without having the patience to read them. But, if they see an interesting page after they have closed the page they were working on, they are tempted to spend a few more minutes viewing it (Belch & Belch, 2009). A major advantage in using Social media sites for advertising is that consumer-generated contents can also influence the sale of a product substantially (Marland, 2008). As we could see most of the graphical images and witty comments passed on the Facebook regarding the merits and de-merits of the products are created by consumers themselves. Social media transforms consumers into free advertisers for products. Usually huge companies in developing countries like South Africa spend much on advertising while small companies usually rely on the very creative and cost effective advertising methods (Godin, 2008). Hence, Facebook is fast becoming the favourite advertising ground for most of the small scale business in Hong Kong. The effectiveness of advertisements can be measured only by studying the degree of the desired effect they generate (Nysveen, 2006). Measuring these effects is important because advertising requires significant investment and these statistics are necessary to prove the investments are paying back. It is very easy to measure the advertising impact of Facebook in most of the scenarios. In most print media ads, the data generated is based on the data given by the media. But in social media the link between the customers, advertisers and the ad is transparent making this measurement very easy especially when data regarding immediate sales is concerned (Pavlou, 2000). There are several statistics generated based on the clicks on ads in Facebook space. Every company aims in investing in a field which will yield them the best results. Using the data provided by the Facebook statistics properly will help the organizations to invest properly targeting the right customers earning very high yields (Aitke, 2008). These statistics are used for various purposes in advertising (Gibs, 2010). Most of the statistics like page views, frequency of visit and number of unique visitors are effective in studying the info regarding the audience interested in the ad. This will help the advertising companies segregate their target group and also cross check whether their ad reaches the perfect audience. Many other totally irrelevant statistics which do not help in studying the effectiveness of Facebook sites are also found. For example, Banner ads. Banner advertising actually proves inefficient in most of the social media sites because people using sites like Facebook concentrate on networking and viewing pictures rather than looking at ads. The last thing they need there is a list of products to buy (Shields, 2008). Social media marketing is said to take only one hour a day. But, that is not the case in most of the scenarios (Dave, 2008). A survey conducted among nearly 500 small business owners about the topic states it takes more effort than stated to create an effective social media campaign (Smith, 2010). The communication effect is defined as the ability to reach the right target customer and the capability to transfer the required message to them (Gerard, 2009b). The communication effect influence the consumer behaviour in a profound way. The purpose of every advertisement developer is to identify the reason for certain consumer behaviours and link that reason to their product (Nagar, 2009b). Hence, studying communication effects with various variables like psychology and social psychology is very important for effective advertising. Avoiding "Aberrant decoding" (Ambekar, 2009) is also necessary. "Aberrant decoding" is the process of understanding what was not intended to be understood. For example an ad showcasing a man driving vigorously can be interpreted as a super fast bike by one party and the bike is only fit for adventurous people by others. Customer behaviour is very independent on the internet. They are not influenced by the any third party. Hence internet is considered the best media for pull strategy (Dave, 2003). Any act which boosts the company image in the public eye is considered as public relations (Kotler and Armstrong, 2006). It urges the public relations companies to make best use of the tool (Bradshaw, 2010). The social media marketing will be much more effective if the company profile is updated regularly and the fan page or the Facebook pages are maintained actively. The customers should get something new every time they visit the page instead of having to look at an ideal page for ages (Ochman, 2009). Methodology An effective survey was conducted to find out the real effects of Facebook advertising. A questionnaire was distributed among 50 consumers. The answers required were analysed to measure the real effectiveness of Facebook advertising as the consumers are the ones who view, click and buy products through the ads. The research is important because investing millions of dollars which can be otherwise used for an organizations growth is stagnated in the social media advertising in all fields. There are very little empirical studies underlining what customers actually like the Facebook ads. This research aims in filling this gap. Sampling Group People from various backgrounds mainly from the 18 - 35 age groups are selected. The participants were students, lawyers, professionals, medical people, unemployed and entrepreneurs. They were asked how they view Facebook advertising from a consumer point of view. The participant list was shortlisted with the help of an ISP. A list of their customers spending maximum time on internet was gathered and they were contacted with a request to participate in a survey. 50 people from the list were shortlisted based on the number of hours they spent on Facebook each week. These participants spent maximum 15 to 40 hours every week in Facebook. They were mailed a survey form with mostly multiple choice questions. Those who filled it successfully were given a small appreciation token, a coupon worth $5 which could be used deduct the same amount on their internet bill. Results The results of the completed survey clearly stated, most of the consumers seldom use Facebook ads unless and until they are extremely creative or attractive. 1. 30% of the customers clearly state they distrust Face book ads and are fed up of frequent ads in the page. 2. 44% reported they never click on a banner ad or a Facebook ad. They prefer using the ads in search engines, and the ones they see in TV or newspaper. 3. Only 3% of the Facebook customers actually click on the ads regularly. But, they do not agree purchasing the products every time they click. 10% of people agree they click on the ads once in a while and make some purchases if it is really attractive. 4. Retail advertisements are the most viewed in Facebook. While the CTR of all other ads is 0.5% to 0.8% the retail ads garner a CTR of 0.8 to 1.0% easily. 5. Most of the customers nearly 86% who view an ad in the print media or TV click on the ad when they view it on the Facebook again intuitively. In fact they search for it in Facebook and feel disappointed if they are not able to find any details about the ad in Facebook. Analysis of the Result The data collected through the survey was fed into a spreadsheet and manual analysis was made on the data sample. Though most of the customers do not have the habit of viewing the Facebook ads, they expect it to occur in the social media site as it has grown in to an unavoidable form of advertising like the TV. Kimuyu, the director of media advertising in a leading firm said "When running both the traditional ad format alongside a sponsored story format, we tend to see at least a 30% increase in conversion rates, again with retail leading across the sectors". Though only 3% of regular viewers use the Facebook ads, and very few among them actually buy a product through the Facebook ads, most of them agree viewing the ad frequently in Facebook pages makes them buy the products sooner or later, though not through the Facebook ad. Hence, investing in Facebook pays off though not directly. Further it becomes an important tool to maintain brand image. Any major products that do not advertise in Facebook or have a page is considered to lack back by nearly 75% of the customers. Further the Facebook pages are used to get data like contact information rather than the companys direct website by nearly 63% of the people. These people will go to other similar product producing competitors if there is no advertisement in Facebook. Conclusion Facebook advertising is an unavoidable part of marketing in the modern days. Though the direct ROI in the Facebook advertising is very less, the effectiveness of Facebook advertising cannot be undermined in any way. It is an important and easy way to reach the customers, study the consumer behavior in general and maintain a brand image. 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Retrieved 8 April 2013 from http://blogs.wsj.com/in-charge/2011/09/19/advertising-on-social-media-good-for-small-business/ 28. Shields, Mike. (2008) Facebook Friends Brands. Media Week, 18. Retrieved 8 April 2013 from http://www.economist.com/specialreports/displaystory.cfm?story_id=15351026 29. Smith, Robert. (2010). Social Media Adoption by U.S. Small Businesses Doubles Since 2009. Retrieved 8 April 2013 from: http://www.rhsmith.umd.edu/news/releases/2010/021610.aspx 30. Tuten, Tracy L. (2008). Advertising 2.0, Social Media Marketing in a Web 2.0 World. New York: Praeger Publications. Questionnaire 1. Your Gender Male Female 2. How many hours you spend on Facebook every week? 15 20 25 40 3. Age Group 15-25 26-35 36-45 46-55 55-65 4. How often do you click on the ads in Facebook Always Never Sometimes Often Attracted by particular ad Influenced by viewing the same ad elsewhere 5. I Purchase Items by clicking on Facebook ads Strongly Disagree Disagree Disagree in Some Cases Neutral Agree in some cases Agree Strongly Agree 6. The factors that influence me when deciding to buy a product are Commentary on the Internet/Web site Word-of-mouth Sales/service representative Industry publications Advertising Trade shows/events Other 7. Do you have positive reactions to advertisements on Facebook? Strongly Disagree Disagree Disagree in Some Cases Neutral Agree in some cases Agree Stongly Agree 8. In the time spent on Facebook, how many times you see an advertisement for a product? 1 time 2 times 3 times 4 times 5 times More than 5 times 9. I will inquire more information on the product because of the advertisement Strongly Disagree Disagree Disagree in Some Cases Neutral Agree in some cases Agree Strongly Agree 10. What factors mentioned above influence your choice in choosing products from the market? Quality Quantity Price Branding of product Other 11. What do you recollect when you hear about the product in your chosen advertisement? The advertisements The attributes of the product The brand ambassador The showrooms Other 12. Do the visuals and slogans of the chosen advertisement provide a memorable familiarity to the brand ? Strongly Disagree Disagree Disagree in Some Cases Neutral Agree in some cases Agree Strongly Agree 13. I find the claims made by the advertisement to be believable Very unfavorable Unfavorable Slightly unfavorable Neutral Slightly favorable Favorable Very favorable 14. Does the product advertisement give you a pleasant feeling? Very Unfavourable Unfavourable Slightly Unfavourable Neutral Slightly Favourable Favourable Very Favourable 15. How do you rate the absence of an advertisement in Facebook affecting you? Very Unfavourable Unfavourable Slightly Unfavourable Neutral Slightly Favourable Favourable Very Favourable Read More