How Social Media Contributes To Retailing Marketing Essay

The retailing industry has found itself constantly evolving and transforming in the past two decades. Globalization and advanced technology developments have a very big impact on the retailing landscape. One of the major reasons for this process is the drastic increased growth of the internet and social media. The concept of social media has existed since the days of cave paintings but the internet has made things possible on a whole new scale. In this era, social media is one of the best opportunities available for a brand to connect with its customers. Social media is hot and it is the trend. Globally, customers that are buying the items that they wanted via virtual media had increased drastically. Traditional customer relationship management is not sufficient for a company to interact with customers. Social media has definitely changed the way big companies communicate with their customers. This study explains how social media contributes to retailing. Besides that, this study will also describe about the impacts social media have on customer relationship management.

Keywords: social media, customer relationship management

Introduction

Internet is now one of the most important channels of distribution right after high street retailing ever since its commercial launching about fifteen years ago and it is one of the major sources of empowerment and also customer information (Constantinides, Romer and Boria, 2008). The recent developments of internet, information technology and some other Web services had created a bigger area of opportunities in businesses especially retailing. The Internet has changed our lives forever and it allows us to communicate in ways unimaginable only a few years ago (Leary, 2008).According to Borges (2009) it is said that commercial internet started to have a huge boom in about mid-1990s to 2001 and it his highly related to the people’s ability to absorb online information and having the choice to buy online product via ecommerce. In this era of globalization marketing and retailing are slowly embracing social media. The social media had given customers the chance to have “more control, information and power over the market process, posing retailers with a number of important dilemmas and challenges” according to Constantinides et al. (2008). We often turn to the Internet for encouragement, entertainment, knowledge and advice. Advice on what to buy, where to buy it and who to buy it from (Leary, 2008).Besides that, in the recent years there is rapid growth of marketing strategies that involve in the circle of customer relationship (Pietro & Pantano, 2012). Social network which is now widely used by people around the world and it does have a big effect on the systems of customer relationship management and a new way to CRM is coming out as an ideal platform for using social network in the systems of traditional CRM (Pietro, Pantano & Corvello, 2012). According to Divol, Edelman and Sarrazin (2012) it is stated that thirty nine percent of companies that they have surveyed have already started using social media as their first choice of digital tool to reach out to customers. In about four years, the percentage is estimated to rise to forty seven percent. The way organizations are capturing benefits from the internet technology in the enterprise nowadays is totally different from the past where they attend to other enterprise information systems (De Hertogh, Viaene & Dedene, 2011).

Overview of Social Media

What is social media? The term “social media” is made up of two words that have its own meaning. In general, the word “media” means to have advertising and communication of information and ideas with channels and publications while the word “social” implies to the interaction between a group of people or a community (Sisira,2011). According to Sisira (2011) any kind of website that allows its users to have the authority to share the content, views, personal opinion and encourages interaction can be considered and classified as social media. The worldwide users of social media are over 1.5 billion. Social media is now an evolving wave in retailing. Examples of famous social media sites are Youtube, Twitter, Facebook, Blogger and Scribd. There is also Flickr or Snapfish which emerged as support storage, to share digital photos and an organization (Stefanone, Lackaff & Rosen, 2010). Boyd and Ellison (2007) illustrate a better definition of social network site is that it serves as a web-based service which allow people to build a profile within a system whether it is public or semi-public and to connect with a list of people which they have connection to like their family and friends. Social networking had given us a chance to interact with far more people in numbers comparing to our ancestors (Dunbar, 2012). Social network like Facebook and Twitter has the advantage to able to get and win the heart of its customers because social media can connect to them at a very deep level. Now, it seems like a new social network launches every week. To add on to all these famous networks, location-based social networking such as Foursquare and Facebook Places are on the rise (Kidwai & Imperator, 2011).

Out of hundreds of social networking site in this era, Facebook is undeniably the world’s largest social network. Facebook initially started in February 2004 and it is originally meant to be a social networking site only for Harvard University students (Brothers, Dewland, Hahn & Martin, 2011). Somini (2011) states that Facebook has already reached 800 million users worldwide as of as of September 23, 2011 and the users of Facebook press the like button or comment more than two billion times each day. Besides that, they upload a shocking 250 million photos each day too.

Twitter is the second leading social networking site after Facebook. Wasserman (2012) said that twitter has already reached 140 million users as of March 22, 2012. According to Anderson (2011) Twitter is actually a place where its users talk about their daily doings, have a gallery to expose photography and as a platform for famous celebrities to be sure that they are part of their fan’s lives. Twitter is often described as a micro-blog where individuals publish short and personal message about themselves (Brothers et al., 2011). Before the digital revolution, gathering a large amount of crowd is unthinkable but with Twitter, it is now possible (Dunbar, 2012).

Social media’s contribution to retailing

The use of social media occasionally begins in public communication, marketing and retailing department or other department that have direct connection with stakeholders and customers whether it is in business or non-profit organizations (Evans & McKee, 2010). There has been a dynamic change in the retailing industry in this 21st century. It is all because of the rapid growth of the web and social media. Generation Y are putting a greater emphasis on networking by using social media because they approaches work in a different way from their progenitor (Karen, 2009). If you are a marketer or building a brand, do not be worries that your company has missed the boat on taking advantage of social media because the majority of social media programs are actually fighting with each other too (Taylor, 2011)..According to Burby, Atchison and Sterne (2007) social media allows super fast and easy communication with billions of customers in a short amount of time and have certainly raised the speed where company and its brand can be created, have more exposure and grow. Social media has an enormous potential and capability for companies to engage with customer, thus increasing revenue and efficiency of the company (Baird & Parasnis, 2011).The change in this industry does not depend on the size or a big idea of the company it is now nevertheless more focused on customer demand. The information about weaknesses, the good or bad and how can the product have further improvement can be analyzed within a week now compared to older days where much more time is needed to do so (Yazdanifard, Obeidy, Yusoff & Babaei, 2011). Decision makers are trying to find ways to enable firms to earn profit by making use applications such as Facebook, Twitter, Youtube and Wikipedia (Kaplan & Haenlein, 2010). Social media users have the opportunity to offer feedback and feel more involved with a brand when the profile’s status is update with positive information and challenges. It enables organizations to increase customer loyalty while at the same time getting feedback from customers and discovering what changes they want (Friedman & Friedman, 2008). According to an eMarketer study in 2008, nearly six out of ten United States users now communicate with businesses and believe that the businesses must “interact with their consumers” and “deepen the brand relationship” via social networking website (Abedniya & Mahmouei, 2010). According to Gilbert (2010) social media cost may be low but there is a need to invest time and energy in it to be successful. For example, if a retailers want to start a blog or Facebook page, they need to update it regularly or no one will return to see the content (Gilbert, 2010). Simply creating a presence on a popular platform like Facebook or Twitter does not guarantee that customers will be attracted to a firm’s page and engage with the firm and other customers (Culnan, Mc Hugh, Zubillaga, 2010). This is also because the use of social media by customers are voluntary and interaction among members need time, organizations need to take great steps in order to build communities and learn from the interactions (Culnan et al., 2010).

Figure 1: The Social Feedback Cycle (Burby, Atchison & Sterne, 2007)

As we can see in Figure 1, it is the social feedback cycle. The word of mouth is important as we can see in the figure. According to Brown, Broderick and Lee (2007) a big part of online customer interaction is word of mouth communication and it influences on a person’s evaluation and will to purchase a product. With social media, retailers can get data from their customer’s opinion or talk and use it as a consideration to enhance their product. As retailers and marketers, brand and business are very important and activity that they do need to have a return on investment, whether it is by increased sales, market share or brand recognition and social media that changed the way people interact with one another have a significant help for marketing, retailing, business and also branding (Drury, 2008).

How do retailers turn this potential into real business opportunity and how does social media contributes to retailing?

As an example, we can take a look at the best practices of some company in the retail sector. Take a look at IKEA’s “Social Catalogue”, their objective is actually to raise awareness of a new IKEA store with almost no media budget at all. According to Shercan (2010) IKEA is the world’s largest furniture retailer that is held privately and sells accessories and ready to assemble furniture. In the late 2009, IKEA had a Facebook campaign where the idea is contributed by Forsman and Bodenfors to promote a new IKEA store to be launched in Malmo and it was claimed to be a social media campaign that have the most innovation in Facebook (Shercan, 2010). The approach of this campaign is to upload photos of the rooms in the ikea showroom to Facebook, then they allow people to “tag” themselves against an item of furniture for the chance to win it in real life (Lindsay, Matthew, Jamie, Eveline & Chris, 2011). When a person is tagged in a photo on Facebook, their friends will automatically receive an update that shows the photo. This simple competition will make people have the desire to get free stuff which also meant that this campaign had received a huge amount of public relations. With this, IKEA can increase their company’s revenue. Dunay and Krueger (2010) also said that Facebook offers unique ways to communicate with customers such as the Facebook Ads as it can be bought on a cost per click basis and it is very popular as it let company to reach the audience that they desire whether it is narrow or wide.

Besides that, there is also Starbucks Mayor Offer where mayor of Foursquare in Starbucks at any local store gets to buy a frappuchino at only one dollar (Keath, 2010). This is special as it is the first national special for mayor using Foursquare. In this situation, customers get value from the discounts and they will have a sudden ego boost to become the mayor of their favorite Starbucks or the one nearest to them. Starbucks will of course get popularity in a form of word of mouth and they are able to identify its top customers.

On top of that, there are small businesses that use social media as a real business opportunity. As an example is Wrigleyville, a small company that sell sports related clothing in Chicago and Pittsburgh. Wrigleyville has build a Facebook page for three years and now has twenty two thousand likes and the company tracks sales and marketing efforts from Facebook. They also had contest on Facebook on Mother’s Day for visitors to upload some picture of Mom demonstrating why she’s the biggest fan of Chicago Cubs (Doug, 2012).

Social media’s impact on customer relationship management (CRM)

Customer relationship management is a combination of technology, business processes and people that want and seek to understand a firm’s customers and it focus on the incorporation approach on relationship development and customer loyalty (Chen & Popovich, 2003). The premise of CRM is that is is a process of relationship building and dual creation of value between firm and its customers, to create win-win situations, enhance customer life time value and increase profitability ( Nguyen & Mutum, 2012).According to Jayashree, Pahlavanzadeh and Shojaee (2010) customer relationship management is the collection of processes, people and technology that seeks to find costumers of organizations and CRM develops customers’ retention and relationship.Progress in Information Technology and organizational changes in customer-centric procedures have positive effect in the development of CRM. Organizations which implement CRM successfully, will gain customer loyalty and profitability (Jayashree, Pahlavanzadeh & Shojaee, 2010). All employees in a firm are managers of customer relationship, whether you are the receptionist who answers the phone or customer service operator, and everyone in the company handles customers in the departments (Ronald, 2001). CRM focuses on the integration of customer information, knowledge for finding and keeping customer to grow customer lifetime value and it also has an important role to help organizations to keep their customers and to make them loyal. Organizations should know the reasons of leaving customers and finding the ways of keeping them (Ramakrishnan, 2005). With billions of people having access to a variety of social media, the ability of the word to share and connect is infinite and from a business point of view, companies are now allowed to create a customer experience never before done in the past. Traditional CRM was born in the early 1990’s and customer behavior is in a very different phase today (Rich, 2010). According to Vissing (2011) CRM is one of the most fundamental elements in any organization because of the emergence of social media in the industry. “According to IBM research, there is a large perception gap between what the customers seek via social media and what companies offer” (Baird & Parasnis, 2011).It is important to master online communication in order to know the people that can influence a particular market. Retailers today are working in a challenging era but they are now able to get closer to their customers and engage with them with a timely and relevant manner (Green & Starkey, 2011). Together with CRM, social media can achieve a higher financial benefits to companies and it does not matter which sector they are in (Green & Starkey, 2011).

What does this change mean for CRM and how this social media phenomenon change the way firms interact with their customers? To engage with customer by using social media will definitely fail if conventional CRM approaches remains the same (Baird & Parasnis, 2011). CRM has slowly moved to become social customer relationship management (SCRM). A more strategic and holistic approach that combines social media with more aspects in businesses improves the rate of consistency in achieving success (Leary, 2012). Social CRM is often called CRM 2.0 and it grew because of the empowerment of customers that each customer has the experiences, tools and products with the company that satisfy their personal desire (Mosadegh & Behboudi, 2011). Social CRM had pulled the world of customer relationship management into sticking with social media and it results in a very unique and interesting way of working (“How do you think,” 2012). Social CRM is about joining ongoing conversations customers and prospects that are already engaged in while trying not to control them and it is also about understanding where and what kind of people you want to do businesss by hanging out on the Internet (Leary, 2008).Social CRM is now a new paradigm in combining social networking into traditional CRM systems (Askool & Nakata, 2011). At the same time, the interactions between buyer and seller can now be effortlessly stored in a CRM database system for the benefit of the marketer and retailers (Nguyen & Mutum, 2012). This interactive era has not only increased collaboration between firm and customer but coupled with continuing technological advances, a marketer has now the ability to track and store customer information optimally, in order to customize offerings to suit individual customer needs and desires (Nguyen & Mutum, 2012). Kaftalovich (2010) claims that social media allows company to go into their customer’s social network and enable them to connect with the customers in an informal way. She also mention that social media is its own lead generation machine and at Luxor CRM, they found that Twitter is extremely effective because they can gather customer’s curiosity, opinions and interest in the products as well as gathering about the audience’s preferences and buying behavior. According to Green and Starkey (2011) SCRM can deliver insight, which will help drive real customer centric innovation. However, what is sometimes proposed is nothing more than the refreshing of old ideas such as one-to-one communication, relationship marketing or customer engagement applied to social media. Such thinking actually misses the crucial main point that social media is about people interacting with each other (Ang, 2011). To develop a good social media strategy, it is important to realize that technologies are now allowing people to quickly connect, converse, create and collaborate with each other (Ang, 2011).

Besides that, the impact of social media on CRM is the raise of customer centricity. In the world of CRM, the enhanced emphasis is being placing focus on the developing measures that are more customer-centric and that give manager a much well rounded idea about how their CRM is performing (Russell, 2001). This growth of social media had an indirectly result to the growth of much more and better customer centric companies. With social media, it does not matter how much revenue you invest but it is the time, knowledge and patience that you offer in order to satisfy customers (Kaftalovich, 2010). The comparison between traditional CRM and social CRM is that traditional is more data driven and process centric while social CRM is more content driven and conversation centric (Leary, 2008).With social media nowadays, people does not really care about companies that kept promoting themselves, instead individuals are seeking companies that can actually provide them with value. According to Heckadon (2010) if brands want to succeed in social networks environment then marketers must keep content fresh and relevant and the information in social networks must be easy to understand and share. In order to become successful in today’s retailing world retailers need to understand about people opinion on their brand in the social sphere. Smart retailers will take a look at their social CRM from the public relations, customer support, product development to maximize connection with customers (Bush, 2011). Retailers can help a brand create top-of-mind awareness by responding effectively to user communications (Heckadon, 2010). Retailers should alsofrequently update their brand’s social networking profiles and status, and establish RSS feeds so followers can subscribe and obtain updated content on their computers and mobile devices (Heckadon, 2010). Besides that, one of the biggest advantages social CRM has over offline CRM is that social CRM can have a much bigger volume of real-time data and it can be used to personalize experiences of the company (Bush, 2011). The growth of more customer-centric companies had resulted in social media being a new wave of customer service and it is all about maintaining long term relationship and partnership with their customers and this is not just a business deal. The development of customer centric firms and lead generation definitely is the impacts of social media on CRM.

Discussion

As conducted and explained earlier, the purpose of this study is to explore the contribution of social media towards retailing and its impact on customer relationship management. The world of retailing is changing rapidly as time pass. Trends and major development in social media is one of the causes for the rapid change in retailing industry. This paper shows an overview on social media from Facebook, the world’s largest social networking site to Twitter, Foursquare, Youtube and so forth. Then, it can be observe that major networking sites really helps a lot in the retailing industry. Many companies limit their employee to have access to social media sites because of their concern on their employee’s productivity (Karen, 2009). Social media allows company to communicate with a wide amount of customers much faster and efficiently. Retailers will also know how to further develop their product as they can get data about customer’s opinions, preferences and talk through the word of mouth about their product in a short amount of time. This would eventually make the retailers produce what the customers want. Besides that, social media had helped retailers to have more real business opportunities. Firstly, there is IKEA who launches the “Social Catalogue” and is able to raise awareness with zero media budget. They focus on the desire of human being to get free stuff and consequently they get a huge amount of public relations. Then, we have Starbucks that have the Starbucks Mayor Offer on the Foursquare application. With this, Starbucks is able to gain popularity and also revenue. This shows that creativity does pay off in social media marketing campaign. Social media has definitely contributes to retailing with unique strategies in getting to know more about company’s own product and also improving their sales and revenues.

Furthermore, it can be observed by reading this paper that social media also have an impact on customer relationship management. We know that all employees are important in managing customer relationship in a certain company and that social media had changed traditional CRM in a more holistic way and soon it became social CRM. The two major impact social media has on CRM is the growth of customer centricity and social media has become its own lead generation machine. Social CRM also enable company to promote and grow their brand through social media tools like Facebook. There has been a shift in power that can be observed when reading this paper as customers are being given much more priority compared to older day where seller or company had the power. Companies that implement a successful CRM will get the rewards in obtaining customer loyalty and long run profitability.

Conclusion

There is no way to escape social media these days whether it is for individuals or business companies. It is almost impossible to draw a line separating online world from social media. There are many reasons that social media rapidly gain usage in this era of globalization. The ability to achieve news and information through social media is one of the reasons. Companies are changing and rethinking about their traditional retailing and marketing strategies. This shows that social media is contributing to the retail world. Social network is free and is available for everyone to access and it is generating a mass amount of data which is a big help to marketers and retailers. By carefully understanding the importance of customer relationship management, companies can target their customers more specifically as they have the data of their preferences and opinions. This is the impact social media has on customer relationship management. This is the time where every business takes social media seriously and adopts it in their departments. It is now a baseline requirement that whether you are a small or large corporation there is need to have online presence and prolonged conversation with customers. Different retail brands will have different needs and they have to adopt different approaches with different customers. It is very interesting to see how the retailing world will be affected by Facebook and Twitter in the upcoming years.