Kijken, kijken, niet kopen?

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Kijken, kijken, niet kopen?

The influence of Social Network Activity on

Sales

Philippine van der Stoel 8/19/2013

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Kijken, kijken, niet kopen?

The influence of Social Network Activity on

Sales

Philippine van der Stoel

Master Thesis, Master Marketing Management University of Groningen

19/08/2013

SUPERVISORS: JENNY VAN DOORN, LISETTE DE VRIES (UNIVERSITY OF GRONINGEN) MARK DE BRUIJN (L’OREAL)

Philippine van der Stoel Eerste Helmersstraat 153-‐2 1054DR Amsterdam 06-‐45117161

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Management Summary

Social media platforms are becoming more popular and the call for marketing accountability is growing. Traditional marketing mechanisms are gradually being replaced by social media strategies. However there is no clear generalization what is the effect of both mechanisms on the bottom line, on sales. Therefore this paper investigates firstly the effect of Social Network Activity on sales and secondly it contrasts both traditional and social media marketing mechanisms in the short and long run.

Facebook is the largest online social network and therefore represents the medium of social networks in this research. The brand that is used is the brand Garnier Skin Naturals Face, a skincare brand in the consumer products category. Data are gathered form the Nielsen database and from Facebook measurements.

The literature review on Online Social Networks made a distinction between on the one hand, owned media channels and on the other hand, earned media outlets. The latter mainly used theory on Worth-‐Of-‐Mouth communications as basis for the hypothesis that; Viral Activity does positively influence sales. Whereas the owned media channel considers the Garnier brand page as medium and accordingly, the Fan base activity is the measured. Fan base activity is expected to positively influence sales since the belonging to a brand community positively influences brand evaluation. So, it is concluded that literature suggests that fan base and viral activity both positively influence sales. The results indicate that Social Network Activity on the one hand, did positively influence sales by means of viral activity but on the other hand, fan base activity was negatively related to sales. Viral activity on the brand page of Garnier had a positive impact on sales, which was expected based on the positive impact that WOM communications have on sales. Whereas fan base activity negatively influenced sales, which could be explained by the negative impact that the fellow brand page fans have on the brand perception of the prospective consumer.

Therefore it is recommended that online WOM communications should be enhanced, by stimulating brand post popularity. Furthermore the negative effect of Fan base should be overcome by either changing the image of your fan base in the eyes of the consumer. Or decide not to disclose information about your fan base to the consumers.

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The results that were obtained were only significant in the short run and no conclusion could be drawn in the long run. Short run gains appeared to be largest for the traditional marketing mechanisms of television and print advertising, these results conflict with the hypothesis based on literature.

Initially each model was corrected for shifts price, promotion and distribution. In the end, the impact of promotion and pricing strategies were significant and produced the largest effect on sales in every regression model.

Based on the comparison it is recommended that managers should base their decision on the available budget and decide what marketing tool they would want to use. But it is suggested not missing out on the opportunities that social media offer and therefore it is better to at least participate in this trend. Also both mechanisms are not mutually exclusive so the ideal situation would be to use all available marketing tools.

The main limitation for this research concerns the fact that it was not traceable which purchase was made due to what marketing mechanisms. This could have biased the results since the conclusions could only be based on relative shifts in activity and sales. When sales could have been tracked on an individual level, the gathered information and results would be more realistic.

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Preface

This was the last chapter of my life as a student and I have enjoyed the journey through my bachelor and master degree at the fullest. The opportunity for me to do an internship at such an influential company as L’Oreal allowed me to see a bit of the actual marketing business. It inspired me and gave me the idea to use these insights for my master thesis. I hope that this research can increase the marketing accountability and prove why marketing is such an important part of brand management. It would not have been possible to write this thesis without the help of several people. Firstly, I would like to thank M. De Bruijn Sr. Product Manager of Garnier for his support and brainstorming sessions.

Furthermore I would like to thank my supervisors of the University of Groningen, who supported me with the thesis. I especially want to thank my first supervisor L. De Vries for her time, constructive feedback and kind support. She has guided me through the process and motivated me to push myself for the best results, partially because of her own enthusiasm for this subject. In addition, I would like to thank J. van Doorn for her suggestions and for assessing my thesis.

Also I would like to thank some close friends and my mother whom have pushed me, had discussions with me about this thesis, giving me feedback along the way and giving me support and motivation. Without the help of the above-‐mentioned people it would not have been possible to finish this thesis. Thank you!

Philippine van der Stoel, Amsterdam, June 2013

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1. Introduction

‘We live and compete in a perpetual era of Digital Darwinism, the evolution of consumer behavior when society and technology evolve faster than our ability to adapt.’

(Brian Solis, 2011)

Over the past decade, the media landscape has dramatically changed (Stephen and Galak, 2012). These days, promotion mechanisms go beyond television commercials and print advertisements, companies can advertise on all sorts of new media: banners, online games, forums etc. As new forms of promotion mechanisms are increasingly being developed online, traditional media outlets are gradually being replaced (Pfeiffer and Zinbauer, 2010). For example, in 2009 in the UK Television advertising expenditures had already been taken over by Internet as the largest advertising sector by market share (IAB, 2009). The growth in new media channels is a major challenge for advertisers and researchers and waves of anticipatory enthusiasm put pressure on advertisers to (over) invest and to avoid being left behind (Romaniuk, 2012).

The most prevalent development of the last years is perhaps that of Social Media, popular examples of which are YouTube, Twitter and Facebook (Muntinga et al., 2011). By 2011, approximately 83% of Fortune 500 companies were using some form of social media to connect with consumers (Naylor et al., 2012). These new technologies are no longer just for younger tech-‐savvy consumers but have entered the mainstream public (Stephen and Galak, 2012). The research agency Comscore (Comscore, 2011) calculated that in 2011 82% of all Internet users was active on online social networks. And for instance, it is estimated that about 75% of the Internet-‐using adults in the United States use social media regularly (Bernoff et al., 2008). The large number of users; consumers and firms, make social media an indisputable element of the contemporary society. Therefore present-‐ day marketing is forced to include social media in promotion strategies; decision makers, as well as consultants, try to identify ways in which firms can make profitable use of these applications (Kaplan and Haenlein, 2010). But in order to integrate this new medium into existing marketing strategies it is essential to understand what is the impact of social media on the bottom line.

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instance research has shown that interactions with and about brands have a much stronger impact on consumer behavior than traditional forms of marketing and advertising (Chiou & Cheng 2003; Villanueva et al. 2008). Furthermore Chevalier and Mayzlin (2006) discovered that online consumer-‐ generated content such as online reviews can affect sales. However their research only considers two online book review websites and does not research social network structures or consequences of social media involvement. Especially there is a discrepancy on the effects of social media networks, which represent a grey area in which no unified opinion has been formed.

Hence, in spite of the previous mentioned findings there is limited academic literature on the direct effect of Social media networks on brand performance. It is constituted that social media has a positive effect on brand equity (Bruhn et al., 2012). But brand performance has not yet directly been linked to the activity on social media. Meanwhile the call for marketing accountability is growing (Srinivasan, 2010) and linking social media activity directly to a brand’s performance could be a key insight. In other words, there is not yet any research that supports the idea that social media influences the consumer behavior in terms of sales. Therefore this research aims to capture the direct relationship between social media and sales.

1.1 Social media

Social media comes in many forms of which the 8 most popular are: blog, microblogs (Twitter), social networks (Facebook, LinkedIn), media-‐sharing sites (YouTube Flickr), social bookmarking and voting sites, review sites, forums and virtual worlds (Second Life) (Zarella, 2011). But Facebook is by far the most popular online social medium (and network) and will therefore be the subject of this research.

Facebook currently has more than one billion active users worldwide, more than half of those users log onto the network every day. The average user is connected to 80 community pages, groups, events and brand pages (Facebook, 2012). Brand pages, next to banner advertisements, applications and events, are the main means of brand communication on Facebook (Zarella and Zarella, 2011). According to Zarella and Zarella (2011) brand pages are key to a brands’ marketing on Facebook, as they offer companies the possibility to promote their brand in an interactive way. Therefore in this research the activity that takes place on the brand page will be used to indicate the Social Network Activity (SNA).

Taking the growth in popularity of social media and the call for marketing accountability into account, the main research question is constituted as follows:

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What is the impact of the Social Network Activity on a Brand’s Facebook brand page on Sales? Yet, in the current environment both traditional promotion mechanisms and social media coexist and insights on how cross-‐media campaigns are using online and offline advertising to create value for brands are limited (Pfeiffer and Zinnbauer, 2010). Therefore this research aims to capture not only the isolated effect of Social media but also the effect of traditional media mechanisms on sales.

1.2 Traditional media versus Social media

Traditional Marketing mechanisms capture traditional advertising (e.g. television, radio, print), sponsorships, brochures, retail in-‐store visual advertising etc. (Stephen and Galak, 2012). Previous research has demonstrated that traditional media affects marketing outcomes (Trusov, Bucklin, and Pauwels, 2009). Additionally, prior research has established a connection between specific types of traditional media and their effects on various performance metrics (Sethuraman, Tellis & Briesch, 2011; Smith et al., 2006; Vakratsas & Ambler 1999). The effectiveness of advertising is often measured in terms of elasticity, and it was established that short-‐term elasticity is generally lower as long term elasticity (Sethuraman, Tellis & Briesch, 2011). Furthermore Vakratsas and Ambler (1999) studied 250 journals to establish how advertising affects the consumer. They conclude that there is no clear hierarchy but that it advertising, amongst other effects, is reflected in the context of the market en marketing mix. Still more integrated study is warranted, because this same academic literature typically isolates the impact of either traditional media or social media on performance metrics. Meanwhile research has proven that there is a complex interplay among communications efforts, meaning that advertising in one media channel can increase promotion effectiveness in other channels (Leclerc and Little, 1997). Furthermore Integrated Marketing Communications theory has shown that different types of media outlets have a different advertising effectiveness and could therefore eventually be combined in one ideal promotional mix (Vakratsas & Ma, 2005; Kitchen, Brignell, Tao & Jones, 2004). Therefore to properly understand the impact of social media on sales, it is necessary to have an integrative perspective that also considers traditional media. This research aims to take the complete set of promotion mechanisms into account and measure their effect on brand performance in terms of sales. Therefore this article addresses a second research question: What are the relative impacts of the level of Traditional Media and of Social Network Activity on the level of Sales?

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1.3 Research design

The goal of this research is twofold; it researches the effect of Social Network Activity on brand performance, while also taking into account the traditional media mechanisms. The primary goal will be to constitute whether there is an influential effect between sales and social media activity. In order to conceptualize this research the framework of the Marketing mix will be used as a guideline. Essentially, the ‘P’ of Promotion will be the main focus point but the other dimensions in the Marketing mix cannot be ignored: firms still have to make decisions on how to allocate their marketing budgets, what they are going to sell, how and where they are going to sell it, and at what price. In other words, firms must still devise product, pricing and distribution strategies as part of their marketing programs. Therefore the four dimensions of the Marketing mix will be integrated when constituting the conceptual framework.

The data used stems from the Nielsen database and includes the sales records of several retailers in the Skincare market of 2012.

The outcomes of the research could, from a managerial perspective, imply how management should allocate their marketing budgets and support marketing accountability. Secondly, from an academic perspective, contribute to the limited academic research investigating how firms can benefit from social media activities as opposed to other promotional actions. Hereby it can offer clarification into the payoff of social media and suggest areas for future research.

The remainder of this research is structured as follows; first the theoretical framework will discuss the concepts that are relevant for the different marketing mechanisms. Thereafter the conceptual model is constructed and hypotheses are formed. Thirdly, the research design is discussed and the variables are operationalized. Next, the results section introduces the outcomes of the analyses. The discussion chapter will review the results and reference these to theory. Lastly, the conclusion aims to answer the research questions and constitute recommendations, thereafter limitations and areas for future research are mentioned.

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2. Theoretical Framework

This chapter concerns a literature review in which the most important prior researches will be reviewed and accordingly hypotheses are formed. Subsequently the conceptual model is visualized.

Firstly the digitization of the 21st_{century
and
the
development
of
new
media
channels
are
discussed.} Secondly the marketing channels are studied and concepts that exist within the territory of social media are defined. Thereafter hypotheses will be formed based on expectations from prior researches and accordingly the conceptual framework will be formed.

2.1 The digitization of the 21

st

_century

Firms have had to deal with enormous shifts in their external marketing environments and therefore strategy and tactics behind marketing have changed dramatically in recent years. Contemporary marketing is driven by the emergence of information and communication technologies (Constantinides, 2006) and their presence plays a dominant role. Accordingly, the marketing environment of the 21st_{century
has
forced
marketers
to
fundamentally
change
how
they
develop} their marketing programs. Marketers are increasingly abandoning the mass-‐market strategies that build brand powerhouses in the 1950s, 1960s, and 1970s, and are implementing new approaches (Keller, 2008). Approaches are shifting towards strategies in which themes such as; innovation, customization, relationship building and networking have become of vital significance (Constantinides, 2006).

The most important drivers of the new economy are perhaps the digitization and connectivity, which are mainly present via Internet, intranet and mobile devices (Farell, 1999). Within this field, integration and personalization have become increasingly crucial factors in building and maintaining strong brands.

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This technological progress has evolved to give customers and firms, new capabilities. The need for personalized marketing is brought in sharp focus for firms because the new economy celebrates the power of the individual consumer and the rapid expansion of Internet and the continued fragmentation of mass media (Locke et al., 2000).

In the past few years’ social networking sites have become increasingly popular on the Internet. For marketers it is important to recognize the changes in buyer’s behavior in order to engage with today’s business environment. However most sales managers are very slow in recognizing social media’s potential; in a recent survey only 5% of business-‐to-‐business managers said that social media was a well optimized part of their marketing mix (Giamanco & Gregoire, 2012). The figures on consumer behavior in social media remain surprising. For instance, studies by Experian Marketing Services (2012) indicate that social networking now accounts for 15% of Internet visits in the USA. Furthermore it is said that 55% of buyers turn to social media when they are searching for information, according to business.com (2012). Additionally, a recent report by the Mintel group (2011) disclosed that 41 percent of online adults report to engage with their favorite brands through social media applications (Trainor, 2012). Therefore, it can be concluded that the potential of social media is growing according to the most recent findings.

Social media has become an inevitable part of today’s marketing environment and has the potential to grow even further. Since the concept is relatively new it is important to clearly define the terms and definitions that are of relevance. Therefore the next paragraph will review the existing marketing channels and will also discuss the existing social media channels.

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2.2 Marketing Channels

As we have discussed in the previous paragraph the marketing environment is changing and new media outlets are emerging (Trainor, 2012). The next chapter maps the different types of media outlets that are present in today’s marketing setting.

According to Stephen and Galak (2012) there are two types of distinctions to be made. Firstly between Traditional and Social Media Outlets and secondly, the terms ‘earned, paid (bought) or owned’ media have become very popular in the interactive marketing space of today (Corcoran, 2009). Firstly, paid media concerns the channel where a brand pays to leverage that outlet, whereas an owned channel is a channel that is controlled by a brand, for instance their website. And lastly earned media is the channel in which the customer him/herself is the passage and therefore mainly concerns worth-‐of-‐mouth communications (Stephen and Galak, 2012; Villaneuva et al., 2008). The different types of media channels are visualized in table 2-‐1 and several examples are given for each category.

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Table 2-‐1 Marketing Channels

2.2.1 Paid Media

The paid media channel concerns the channel where ads are generally displayed and a vast part of the marketing budget is spent on (Vakratsas & Ma, 2005). Paid media, or advertising, refers to media activity that a firm generates (Stephen and Galak, 2012). This channel encompasses for instance online banner advertisements, radio, print media but also sponsorships of events (Villanueva, Yoo & Hanssens, 2008). The main goal of paid media is to create awareness for your brand and to increase the level of sales (Goodall, 2009). Furthermore advertising could generate a carryover effect and thereby help to produce traffic to your owned media and /or stimulate earned media activity (Trusov, Bucklin & Pauwels, 2009). The message in these types of media is usually more product-‐ focused and is intended to influence the purchasing behavior (Vakratsas & Ma, 2005).

The paid media channel allows the marketer to exercise control over the message and the audience that is reached. Media agencies (for example Zenith) allow you to determine the reach in terms of GRPs, therefore specific consumer groups can be targeted. There is also a downside, because this type of medium is costly (e.g. paid media); the creation of advertisements is usually expensive and the level of GRP’s is depends the available budget (Vakratsas & Ma, 2005). Furthermore, this type of medium could have a lower credibility towards your consumers since the ‘receivers’/the consumers might be suspicious towards a brand’s commercial message (Aitken, Gray and Lawson, 2008).

Prior research on Traditional Advertising effectiveness

Vakratsas and Ambler (1999) have performed taxonomy of 250 journal articles and books of relevant literature that study the relationship between the consumer and advertising efforts. According to their framework a model, in which price, advertising, and promotional measures are directly related

Paid Earned Owned

TMO

(offline) Sponsorships _{Display
ads}

Television, radio, print, outdoor

Professional media outlets Publicity and press coverage Free publicity Retail-‐in-‐store displays Brochures Press releases SMO

(online) Paid search (Google _AdWords)

Facebook Ads Banner advertising

Blogs

Tweets on twitter

Status updates on Facebook Consumer-‐to-‐consumer WOM

Brand website Brand page Facebook Twitter account

SNA Sponsored posts Consumer-‐to-‐consumer conversations about brand, Invitations

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to purchasing behavior, is classified as a market response model. Additionally the data consists of brand advertising expenditures, gross rating points, and brand sales or market shares on a weekly basis, which classifies it as an aggregate level study (Little, 1979; Hanssens, Parsons, & Schultz 1990; Vakratsas & Ambler 1999). Vakratsas and Ambler (1999) conclude that advertising cannot be evaluated on temporal sequence, but should rather be evaluated in the space of Experience, Affect and Cognition. Furthermore they suggest that the context should be taken into account which includes; product category, competitive environment, other marketing mix components and target audience. Additionally behavioral (market share) and affective components should be measured. However this taxonomy is very extensive, furthermore almost 13 years have passed since it has been performed and this period has witnessed many changes that might impact the measurement of advertising effectiveness (Sethuraman, Tellis & Briesch, 2011). For instance, the arrival of TiVo allows consumers to opt out of television commercials and secondly the rise of Social Networking and online advertising. Therefore, in the next paragraphs other research will be reviewed as well.

Sethuraman, Tellis and Briesch (2011) have performed a meta-‐analysis of economic estimates of advertising elasticity across a wide range of consumer products. The measurement of advertising elasticity concerns the effectiveness of advertising in terms of the percentage increase in sales or market share for a 1% increase in advertising spending (Sethuraman, Tellis & Briesch, 2011). In their research, elasticity is used as main means of comparison and proved to be a successful measurement tool. They conclude that there is a reduction in the effectiveness of this conventional advertising because both short-‐ and long-‐term advertising elasticity have been declining over time. Furthermore Sethuraman et al. (2011) confirm the necessity of this research because they argue that further research should investigate the effects of online advertising and incorporate them in a meta-‐ analysis to find out the duration of advertising.

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a net contribution. However it is difficult to measure these effects and for this research it will not be possible to take this dimension into account.

2.2.2 Owned Media

The owned media channels are the channels that are within the ownership of the firm itself (Stephen and Galak, 2012). These channels can be either online (brand website, twitter account, Facebook brand page), or offline. Common forms of offline examples include for instance press releases (e.g. during product launch), in-‐store materials (displays and communication on the shelves) and brochures (PR-‐kit) made by company representatives (Stephen and Galak, 2012). Owned media channels can be used to build longer-‐term relationships with existing and potential customers (Corcoran, 2009). From the firm’s perspective, it is valuable that these channels are cost efficient and within your own control. On the other hand consumers usually are cautious towards company communication and might be skeptical (Zhu & Zhang, 2010). Secondly it cannot be guaranteed that traffic will be generated towards these channels and hereby (potential) customers are attracted. Furthermore, the call to action is normally lower for this type of channel because the information displayed is more general (e.g. information about products and assortment); therefore it is less likely to influence the purchasing decision.

2.2.3 Earned media

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2.3 Online Social Networks

The largest online social network is Facebook (Facebook, 2012) and from a marketing perspective the managers nowadays are concerned with managing their brand pages and the activity that takes place on this platform (Lipsman, Mudd, Rich & Bruich, 2012). A firm can create a sponsored brand page of which the content is owned and managed by the firm, which is therefore considered as an owned media channel. But since Social Networks allow for the generation of online WOM, viral activity that takes place on a brand’s facebook brandpage will be considered as form of online WOM activity. The way in which consumers communicate with each other about a brand on Facebook is considered a form of word-‐of-‐mouth and is categorized as ‘earned’ media. Trusov, Bucklin and Pauwels (2009) also consider the invitations sent out by members to become part of a certain online society as WOM that can drive the growth of online communities.

2.3.1 Fanbase Activity on Brand pages (Owned media)

When companies want to benefit from online social networks they can create their own page, these online brand communities are usually created on Facebook and are called brand pages. When a consumer clicks on a brand post, it will lead towards the brand page. Thereafter the consumer has to decide whether to become a brand fan or not, and this is influenced by the information that he encounters on the brand page. A Facebook wall filled with trivial or mean-‐spirited comments, or having nothing to do with the solution the consumer is seeking, will not trigger them to become a brand fan (Giamanco & Gregoire, 2012). On the other hand, when the consumer is triggered by what he/she encounters on the brand page it can convince him/her to like the page and become a fan. Subsequently, customers have become a fan of these communities and interact with a company by liking or commenting on brand posts (de Vries, Gensler & Leeflang, 2012). These brand communities allow companies to foster their relationships with customers. Facebook brand pages can create greater community engagement because members can display profile pictures, and consumers can for instance post pictures of themselves using a brand (Algesheimer, Dholakia, Herrmann, 2005). This allows social networks to make the identity of a brand’s supporters transparent to prospective consumers in ways that have no offline analog (Naylor, Lamberton & West, 2012). Furthermore recent study mentioned that while online Social Networks are very large, the communities within these networks are usually relatively small (Leskovec, Lang, Dasgupta & Mahoney, 2008).

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online networks managers can form explicit friendship and business relationships, exchange content and communicate with one another (Ansari, Koenigsberg & Stahl, 2011). Ansari, Koeningsberg and Stahl (2011) claim that it is important to find out the connectivity structure of such Social Media networks because it is a great external interface with your customers. The existing literature on social networks can help us to comprehend and predict economic outcomes with regard to owned media channels (Naylor, Lamberton & West, 2012; Trainor, 2012). Research has demonstrated that consumers interact similar with brands online as they do offline (Naylor, Lamberton & West, 2012). The membership of the brand fans that are depicted on a brand page is a factor that has been researched in terms of social networks. For instance, the identity-‐signaling perspective demonstrated that people often diverge from dissimilar out-‐groups to avoid the costs of misidentification. In this regard Berger and Heath, (2007) argue that seeing similar others supporting a brand will lead to a greater affinity for the brand, however negative identity signals could discourage potential brand fans. Additionally Naylor, Lamberton & West (2012) researched whether to expose demographic information about your fans on a social network, and demonstrated that it can influence a target consumer’s brand evaluations and purchase intentions. Then, Ansari, Koenigsberg and Stahl (2011) have aimed to map the connectivity between multiple relationships that exist within social networks and state that actors belonging to a social network connect with each other using multiple relationships of possible different types. Therefore the relationships formed in a social network can differ greatly in their substantive content but also in their directionality and intensity. Their research used data from an online Social networking site involving interactions among a set of musicians, it showed how referrals to join a community could affect a network’s growth. The study by Naylor et al. (2012) argues that the fan base on a social networking site can influence the consumer’s brand evaluations, without directly interacting with a target consumer. This indicates that mini-‐connections with consumers created through social networking can actually yield positive effects on brand evaluations and purchase intentions (Naylor et al., 2012). Taking into account that a fan base can convince a consumer to join a community and that a fan base can influence a consumers brand evaluation, it can be expected that the membership of a brand page could positively influence the perception of a brand and create a connection with the consumer. Secondly this relationship can influence purchase intentions and therefore sales. Therefore the following hypothesis is formed:

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Even though a brand page is considered as an owned media channel, the Social Network Activity that is generated via brand posts or status updates on the brand page are part of earned media. These are ‘reactions’ of the consumers themselves and therefore considered as part of WOM-‐ communications, which is discussed in the paragraph about viral activity on the brand page.

2.3.2 Viral Activity on Brand pages (Earned media)

Online Social Networks are also part of the earned media channel, since viral Social Network Activity (SNA) can be generated through this medium. When analyzing the viral activity on Facebook and Social media several concepts come into play. For instance, research has confirmed that customers are surprisingly responsive to short messages sent via social media (Giamanco & Gregoire, 2012). This could mean that the posts, which are in theory short messages, can generate a substantial amount of SNA. Furthermore popular posts are more often depicted in newsfeeds, which triggers consumers to check out a brands brand page. De Vries, Gensler and Leeflang (2012) have researched how brand post popularity can be enhanced and concluded that it depends on the content of the brand posts. Several traits, such as vividness and interactivity can increase the number of likes, whereas a ‘question’ in a brand post will enhance the number of comments. Overall, this indicates that companies can stimulate Social Network Activity towards and on their brand page.

Online Worth-‐Of-‐Mouth

Developments in the commercial landscape and changes in consumer and organizational attitudes push marketers to explore new theoretical approaches (Keller, 2008). And online earned media outlets have become part of WOM advertising and in the most recent researches social media is considered as part of WOM theory (Stephen & Galak, 2012; Zhu & Zhang, 2010; Trusov, Bucklin & Pauwels, 2009; Chevalier & Mayzlin, 2006). In this research the earned social network activity moreover is concerned with the user-‐generated content that is created by the consumers and not by the brand themselves on the brand page.

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peoples opinions (Ansari, Koenigsberg & Stahl, 2011). In the next section, the most relevant findings on WOM and brand performance for this research will be reviewed.

Firstly, Stephen and Galak (2012) have extensively researched how traditional and earned social media activity affect sales on a micro lending website. They measure daily sales and earned media activity across multiple TMOs and SMOs during 14 months, after which it was concluded that earned TMOs typically have a greater reach as earned SMOs have. Furthermore earned TMO’s showed a larger per event impact on sales, however the earned SMO also drove traditional earned media activity. In the end they conclude that the impact of social media is very important and the elasticity is larger than that of earned TMO on sales when corrected for event frequency. Overall, their research does indicate that social media activity did influence the level of sales. However sales on a micro lending website is very different from the sales at a retailer. It does mean that consumers can be influenced WOM information they encounter online. This is supported by Chevalier and Mayzlin (2006) who studied online user reviews, and found that they become an important source of information to consumers. They show that customer WOM affects consumer-‐purchasing behavior by displaying how online generated book reviews influence sales. It was discovered that the impact of a negative review was greater than that of a positive review. They conclude that online WOM on product quality is substituting and complementing other forms of business-‐to-‐consumer and offline WOM communication. Zhu and Zhang (2010) obtained similar results when researching the impact of online consumer reviews on sales in the setting of the video game industry setting. They imply that managers’ online marketing strategies should be contingent on product and consumer characteristics. For instance, online reviews were more influential on less popular games and on the other hand players who have more Internet experience are more influential.

The research on online reviews only include a limited area of earned SMO which makes it hard to draw conclusions in relation to our research question. Brand page activity is not necessarily the same as an online review, however these empirical findings of online reviews suggest that there is a link between SNA and brand performance since a brand page offers a location where consumers can freely express their opinion about a certain brand or product. From previous research, it is possible to conclude that online WOM information is substituting offline advertising as a source of information for consumers. Additionally this source is more transparent and therefore trustworthier in the eyes of the consumer. Hence, this indicates that positive activity on your brand page can indicate more positive purchase intentions and thereby increase the level of sales. This allows to constitute the following hypothesis:

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2.3.4 Social Network Activity

In the previous paragraphs the effect of the Fanbase and the Viral activity on a brand page have been discussed for their relationship with sales. Firstly, it was concluded that the membership of a brand page can positively influence the evaluation of a brand. Furthermore, it was established that consumers take the information they encounter online into account, and the source (e.g. other consumers) is more transparent and believable towards them. Facebook fans can form an emotional attachment to the brand and generate positive word-‐of-‐mouth advertising, which in return can positively influence their buying behavior (Dholakia & Durham, 2010). Overall, most of these researches have captured how WOM has an influence on brand performance, and thereby on sales. The above-‐mentioned findings together lead us to believe that the following hypothesis can be formed.

H1: Social Network Activity has a positive effect on Sales 2.3.5 Integrative Marketing Communications Theory

Research on the relationships between multiple media channel is still limited (Stephen and Galak, 2012). Much of the extant multichannel literature focuses on paid media and earned media in social networks has not yet been incorporated in the majority of studies. Earned media, or Word of Mouth communications, were traditionally only assigned to TMO’s and therefore are excluded in many of the integrative marketing communications theories. But in order to answer the research question it is important to gain an understanding of the multichannel literature.

Integrative Marketing Communications theory assumes that there is interplay amongst different marketing channels and their effects on brand performance. Prior literature has established that paid and earned media have an influence on brand performance and therefore both mechanisms are of importance when reviewing advertising/SNA effectiveness (Trusov, Bucklin & Pauwels, 2009; Naylor, Lamberton & West, 2012).

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IMC assumes that media operate as a system, in which multiple connections among network actors are present. Ansari et al. (2011) analyzed these connections and created a rich framework to model multiple relationships, using data from an online social network involving interactions among a set of musicians. They indicate that online brand communities allow for a great interface with your consumers.

A different research by Tuli, Bahradwaj & Kohli (2010) relate integrated marketing efforts to the level of sales. They find that in a business-‐to-‐business setting, increasingly multiplexity in relationships leads to an increase in sales and to a decrease in sales volatility to a customer. Vakratsas and Ma (2005) suggest that every advertising outlet should be monitored for a longer term in order to assess their individual contributions to sales. Furthermore Kitchin, Tao, Bignell & Jones (2004) argue that the marketing environment has changed, including communication strategies, which means that strategy behind IMC should be evaluated again. They further indicate though, that it has always been complicated to measure the outputs of IMC strategies and most researches have focused on the input. Therefore it is hard to make generalizations on the effectiveness of this type of strategy. Research has shown that e-‐commerce sites that use photos of people benefit from an increased level of trust and higher overall conversion of sales (Schlinke & Crain, 2013).

Prior literature on integrated marketing communications shows evidence of multichannel effects of TMO and SNA. Furthermore there is the possibility that traditional marketing outlets push the consumer to look for a brand in social networks (Trusov, Bucklin and Pauwels, 2009). This leads us to believe that traditional marketing activities can increase WOM activity, which in return could also increase SNA. Traditional marketing activities may stimulate WOM, which in a later stage might also indirectly effect customer acquisition. WOM may be passed along beyond its originally intended audience thus increase the site’s potential to recruit sign-‐ups in the future.

So, both traditional and social media influence the consumer at a different moment in the decision making process (Stephen and Galak, 2012). In this regard it could be argued that traditional media influences the consumer at an earlier stage in the decision making process. Traditional media might encourage a consumer to engage in social network activity, which could in return increase the pressure to make a purchasing decision. Therefore it can be argued that in some cases traditional media drives social media.

Kijken, kijken, niet kopen?

Kijken, kijken, niet kopen?

The influence of Social Network Activity on

Sales

Kijken, kijken, niet kopen?

The influence of Social Network Activity on

Sales

Philippine van der Stoel

Management Summary

Preface

Table of Contents

1. Introduction

1.1 Social media

1.2 Traditional media versus Social media

1.3 Research design

2. Theoretical Framework

2.1 The digitization of the 21

century

2.2 Marketing Channels

2.3 Online Social Networks

_century