Effects of Viral Marketing

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Viral Marketing

1.1 Viral Marketing

These years, the competitions among companies become more and more furious. Song (2004) pointed out that many companies in order to survive even to develop, they try to make good use any way that can help them to enlarge their market share and build a strong brand. The traditional Medias such as television, newspaper, radio and printed Ads were over used in the last decade. This view was supported by Mogg (2006) who believed that using these traditional ways to promote a product or service not longer can stimulate audiences’ passion and urge effectively. Because in some extent, audiences were get used to receive information of these ways, they need something new, need a new “flavor” of the information they receive (Sally, 2006).

The era that customers rely on marketers’ suggestions or advertising to make a purchase decision was gone. Czinkota (2007) argued that only supply the information that you think customers would need is not working, not enough to persuade customers, and can not fulfill their needs and satisfy them. Customers already become smart enough; they do not like to be persuaded by marketers or advertisings in many situations. They prefer to be active in the buying process and use their own knowledge and standards to decide what they need, and what they happy to buy (Grewal, 2008). A strong brand can make customers have faith in a company and its products. This view seems acceptable for Fill (2005) who agreed that building close relationship with customers is vital; companies try their best to pursue the best marketing strategies with the purpose to be strong and profitable.

Word of mouth is one of the effective ways for a company to promote its products (Anderson, 1999). Word-of-Mouth (WOM) was described as oral, person-to-person communication between a receiver and a communicator which the receiver perceives as a noncommercial message, regarding a brand, product or service (Haywood, 1989, pp53-66). It can help a company use less money to do the mass promotion. This view was supported by Buttle(1998), he believed that customers are easier to be persuaded through this way as they think it is a noncommercial way. They consider that they are on the active position to receive information and make a buying decision, not be persuaded to do that.

With the evolution of technology, and the growth of the internet, the arena of many companies have move from realistic world to a new world—the internet (Castells, 1997). Word of mouth has upgrade through internet, and gets a new name “viral marketing” these years (Modzelewski, 2000). Base on Dicher’s (2001, pp47) research, “viral marketing is a strategy that companies use to stimulate their customer to pass on something about their products to their network of colleagues and friends”. For the company, viral marketing can help a company use a little budget to promote itself sharply, since the information you send out, customers would pass them on by themselves. In the customers’ side, viral marketing help customers feel better as they think that they make the purchase decision by themselves, and they get information from their friends who seem more reliable than marketers or advertisings. (Wangenheim, 2007, pp131-146)

Base on the advantages of internet, using viral marketing relate to internet can make the promotion effect like a nuclear bomb. Internet can make the information deliver very fast, even exceed your expectation. Sudaraman and Rajagopalan(2003) found that since you use viral marketing to send out your information, it may reach every corner of world that has internet connections only need a few days. Internet seems something bring information deliver from the “Stone Age” to “21st century”, it acting like a pair of wings of information delivery, make information deliver reach to an incredible speed.

Considering the effective of viral marketing strategy, this report decides to examine the effects of viral marketing that can make to a company. The author is very interested in the effects of viral marketing, as it is a trend for future business; it is so useful to company’s promotion and information delivery. To know clear about the viral marketing can help author to enrich his marketing knowledge, and will be very helpful in his future job or business, even can help readers of this report to know more about viral marketing. In order to make the research more reliable and get accurate analysis, this report would choose MySpace, an online company which seems to be success on using viral marketing strategy to assist the analysis.

1.2 MySpace

Tom Anderson (born November 8, 1970) is the President of the social networking website, MySpace. He is one of the people identified as a founder of the site, along with CEO Chris DeWolfe (Boyd, 2006). At the beginning, it was a website with a small number of users, which used to make friends. Then they invite some famous people to join in, these famous people bring many fans in. since more and more bands build up their website on this station, MySpace becoming bigger and get huge number of users. It develop from a music wed station to a core of young people’s live in America, then explore all over the world(Diving into the Myspace Pool, 2006). It chooses to give users enough freedom to build what they like in this wed station, and this freedom and right make it explore so quickly. People can use their email address to sign up as the user of it. (Source from Dwyer, 2007)

Every user can upload the things they like, such as video and sound clips, pictures and many other things. MySpace listen to their users and improve the wed station, like increase blogs, message board, discuss rooms, and online communications. Users can talk to their friends there, play games together, even use wed camera to meet each other when they talking.(source from Boyd, 2006) This wed station can make users feel so free in it; they can talk what they like with their friends here. So users invite their friends to join in MySpace (Diving into the MySpace Pool, 2006).

In such a way, MySpace reach to a great success. Until 2006, MySpace only set up three years, but its development speed was faster than any wed station in history, it is a myth of the internet development history. It already beyond Yahoo and Google to be the biggest wed station in USA. It was set up with a very small cost, but in 2005, Rupert Murdoch, the CEO of The News Corporation Limited, use 580 million dollar to buy it. One year after it was purchased, it earn 900 million dollar from Google for advertising fee. (Source from Hempel and Lehman, 2005)

It seems that MySpace really a success example to make good use of viral marketing strategy, that why this report choose UK MySpace as the case study to assist the research and analysis.

1.3 Research Objectives

a. Examine the effects that viral marketing can make to a company, associate with case study—–UK MySpace

b. Access to customers attitude and reactions to viral marketing through primary and secondary data analysis

c. Find out the effects of viral marketing for a company’s success at last.

Chapter 2 Literature Review

2.1 The Background and Development of Viral Marketing

Marketing is a social process which satisfies consumers’ needs. The term includes advertising, distribution and selling of a product or service. It is also concerned with anticipating the customers’ future needs and expectations, often through market research (Frenzen and Nakamoto, 1993). This view was supported by Eugene (1998) who believed that marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

Pamela (2000) pointed out that traditional marketing is the marketing techniques that are used for many years, it mainly using mediums such as, television, newspaper, telephone and radio. Nowadays, there are many new technologies are used to replace the traditional mediums to do promotions: Internet, multimedia mobile phone, blogs and so on. These new mediums can help marketers to reach more customers and cut cost.

This view was supported by Wegert (2004) who believed that the traditional mediums do not work effective as before, they make many audiences feel boring and many offers what they dislike. Customers want to see something new and soothing, really make them interesting and happy, so the new mediums may work effective and can catch their eyeballs (Anderson, 1998, pp104-141).

These years, more and more people like to surfing on internet (Wangenheim, 2007). This situation leads to many marketers focus on internet to promote their products and services. Especially, young people prefer using internet to traditional mediums. For a company’s future development, holding the young people now can make them get a big market share in the future (Bayus, 1985). So to make good use of the internet to do promotion is vital for many companies, especially the company which rely on internet to do business.

There are many advantages to use internet as an advertising medium: message can change quickly and easily; create own page cheaply; low cost; direct sales possible and so on (McWilliams, 2000). Base on its advantages, more and more companies choose to use internet to do advertisings. Several main online promotion techniques are recognized by marketing researchers, viral marketing will be the focus of this research as it can reach mass consumers in a short time with a low cost.

2.2 From WOM to Viral Marketing

During the last decade, customer satisfaction and perceived service quality have been important topics in the marketing literature. This is due to the empirically verified belief that increases in satisfaction and quality will finally result in higher profitability (Wangenheim, 2007). Over the past 10 years however the focus of research on satisfaction and quality has slowly shifted from understanding how “service quality perceptions and satisfaction judgments” are formed to a more “outcome-oriented view” of assessing the returns on service quality and satisfaction based on a thorough understanding of the associated costs and benefits (Buttle, 1998, pp76-89).

A strategy called “viral marketing” was used by many companies to pursue the profit. Before the “viral marketing” appears, a marketing strategy called “word of mouth” was used in that way. Haywood (1989) believed that Word-of-Mouth (WOM) refers to oral, person-to-person communication between a receiver and a communicator which the receiver perceives as a noncommercial message, regarding a brand, product or service.

Even though WOM strategy can bring huge benefits to a company, the development of technology usage has upgraded the word of mouth strategy to a new one call “viral marketing” (Richins, 1999). These years, stationary Internet consumers’ communication environment has been changed and enriched. As a result WOM has gained new significance and WOM on the stationary Internet was termed “viral marketing”.

This view was supported by Godes and Mayzlin (2004), that Viral or word-of-mouth marketing has become very popular because it has a new medium—the Internet. According to one venture capital firm, 76 percent of new business plans have the words “viral marketing” in them (File, Cermak and Prince, 2000). Using e-mail makes it incredibly easy to pass information on to a friend or colleague, especially if it involves something fun or free. With millions using the Internet all over the world, the potential for exponential growth is quite huge.

2.3 What is Viral Marketing

Since the term viral marketing was introduced in 1997, many disagreements exist about its definition. Subramani and Rajagopalan (2003) view it as word-of-mouth advertising in which consumers tell other consumers about the product or service. Yang and Allenby (2003) argued that true viral marketing differs from word-of-mouth in that the value of the virus to the original consumer is directly related to the number of other users it attracts. Shirky (2000) suggests that, in generally, viral marketing would be word-of-mouth advertising to most people. More importantly, however, he adds that the concept describes viral marketing as a way of getting new customers by encouraging honest communication among consumers. The originator of each branch of the virus has a unique and vested interest in recruiting people to the network. (Modzelewski, 2000, p.30).

According to Senecal and Acques (2004) suggestion, purchasing is part of a social process, it involves a one-to-one interaction between the company and the customer and many exchanges of information and influence among the people who surround the customers. They also suggest that many effective networks comprise hubs, clusters, and connections among clusters. In these networks, people will notice a constant flow of green sparks between certain nodes.

Wilson (2000) said that viral marketing is sort of this explosion that you start with one customer and he/she will tell people and pass it on continuously. In Dichter’s (2001, p47) opinion, “viral marketing is the idea that you incite your customers or referral sources to pass on something about your business to their network of colleagues and friends”. There is a similar saying that viral marketing describes any strategy that encourages customers to pass on a marketing message to others, creating the potential for exponential growth in the message’s exposure and influence (Hogon, Lemon and Libai, 2004). Nalor (2002) claimed that viral marketing is a marketing tactic relying on some aspects of the system to promote itself as initial targets pass the promotion on to others.

Depend mostly on Hogon, Lemon and Libai’s perspectives, the current article views viral marketing as the process of encouraging honest communication among consumer networks, and it focuses on email as the main channel.

One example of viral marketing is encouraging current and potential customers to tell others about a company’s products and services, and then encouraging those others to tell even more consumers, make the information go forward continuously (Subramani and Rajagopalan, 2003 ). These strategies like viruses, can take advantage of rapid multiplication to explode the message to thousands even to millions customers in a short time.

“The term viral marketing is also used to refer to stealth marketing campaigns—the use of varied kinds of astroturfing both online and offline to create the impression of spontaneous word of mouth enthusiasm”(Hennig-Thurau, Gwinner, Walsh and Gremler,2004, pp 95). Out of the internet, viral marketing has been described as “word of mouth”, “creating a buzz”, “leveraging the media”, “network marketing”. However, on the internet, whatever, it was called “viral marketing” (Helm, 2000, pp 57-71).

Datta, Chowdhury and Chakraborty (2005) used the term as “network-enhanced word of mouth” to describe the then high innovative marketing strategy of the free email service Hotmail. For other words, such terms as propagation, aggregation or organic marketing are used. Successful viral marketing is characterized as “strategies that allow an easier, accelerated, and cost reduced transmission of messages by creating environments for a self-replicating, exponentially increasing diffusion, spiritualization, and impact of the message”. (Hogan, Lemon and Libai, 2001)

2.4. Forms and Categories of Viral Marketing

2.4.1 Forms

There are many forms of viral marketing; these include images, jokes, reality TV show transcripts, digital video clips, e-cards, interactive microsites, advergames, and alternative reality games (Modzelewski, 2000). The list is continuously growing as the development of viral marketing.

2.4.2 Categories

There are several ways to categorize viral marketing. First, difference between “intentional and unintentional message” delivery and used a “motivational classification”. Secondary, difference is between “service-based and incentive-based”. In the first situation, viral effect was decided by the quality of offer, another one means that company uses monetary incentive to stimulate customers so that they would pass on an advertiser’s message. Base on the differences between private and public recommendation, the categorization between “high (active) and low (passive) integration strategies are varying in the degree of requiring the consumer’s activity in passing on the ‘virus’ ”. (Source from Goldenberg, Libai and Muller, 2001, pp 209-257)

2.5 Viral Marketing in B2B

Beside the explanation of viral marketing base on B2C, many authors get another similar definition for it on B2B side.

In B2B, viral marketing means the rapid spread of a message about a new product or service, in a similar way to the spread of a virus (Yang and Allenby, 2003). Viral marketing can be word of mouth; however, it is particularly common being use on the Internet, where messages can be spread easily and quickly to reach people all over the world. Products can become very famous in this way with very little advertising cost.

Carrabis (2006) has proved that viral marketing rely on social networks in order to function. Linking is also an effective viral marketing tool, as is the provision of free products or services. The Hotmail free e-mail service, for example, grew quickly with little marketing investment (Tafe, 2007).

In B2B area, viral marketing works well in the following circumstances: (a) when a product is genuinely new and different, and it is something that opinion leaders want to associate with;(b) when the benefits of the product are real; (c) when the product is relevant to a large number of people, and the benefits are easy to communicate (Bansal and Voyer, 2000, p26-63).

2.6 Why Viral Marketing

These years, online social networks are increasingly being considered as an important source of information to affect the adoption and use of products and services (Mac, 2006). Viral marketing as the tactic of creating a process where interested people can market to each other, is therefore emerging as an important marketing strategy to spread-the-word and stimulate the trial, adoption, and use of products and services. (Herr, Kardes and Kim, 1999)

What is new about viral marketing is not word of mouth, but the way people are spreading it (Hogan, Lemon and Libai, 2004). Web users have the ears and eyes of hundreds, even thousands of people. They are in contact with an International crowd they would never have met otherwise. Most significantly, they can reach people they do not really know. That is why several weeks after a people sent the first Hotmail message into India; thousands of Indian users had Hotmail accounts (Kuruvilla, 2007).

It is believed that a satisfied customer tells an average of three people about a product or service he likes, and nine people about a product or service which he dislikes (Sudaraman, Mitra and Webster, 1999). Viral marketing is based on this natural human behavior to conduct its campaigns.

Domingos (2006) believed that the purpose of marketers interested in making a successful viral marketing campaign is to identify customers who with high social networking potentials, and then created viral messages that can attract this segment of the customers and have a high likely to keep the message spreading.

Viral marketing has received extensive attention from both academics and practitioners these years (Jurvetson, 2000). Base on the analysis before, many authors form their standpoints about the effect that viral marketing strategy can bring to a company. They argue with other authors’ opinions base on their own standpoints.

2.6.1 Positive Effects of Viral Marketing

Viral marketing facilitates spreading commercial information and content within the desired target group (Hogan, Lemon and Libai, 2001)). Another advantage of it is that advertisers can expand the promotion reach significantly at a very low company expense (Baker, 2005). According a survey of Duhan, Johnson, Wilcox and Harrell (1997), 35% of the 3000 respondents said a friend’s recommendation would convince them to visit a website they do not know before. These results illustrated the huge potential of viral marketing for communication and distribution purposes.

What is great about viral marketing is that it is low cost and works virtually by itself. Once you make an offer and provide the facility, for referrals, viral marketing spreads by itself very faster, just like a virus (Hogan, Lemon and Libai, 2004). Just like Tafe (2007) said that, Hotmail only cost 18 months to get 12 million users by using viral marketing that let users to referral users, it cost nothing to do Ads, only use free email account.

Viral marketing has been studied both as an input into consumer decision-making, and as an outcome of the purchase process (Holmes and Lett, 1997). In the pre-purchase stage, as a risk reducing strategy, consumers seek product information by participating in the viral marketing process. Positive and negative messages are examples of exit behaviors exhibited by consumers at the conclusion of a service encounter ((Hogan, Lemon and Libai, 2004) or usage of a product (Naylor and Kleiser, 2000).

Anderson (1998) pointed out that viral marketing could “influence consumers’ choices and purchase decisions, and shape consumers’ expectations, pre-usage attitudes, even post-usage perceptions of a product or service”. It is believed that the influence of viral marketing is much greater than that of classic advertising media (Gremler, Gwinner and Brown, 2001).BMW is a good example, it supply 5 video clips to watch and download for free, and then get over 11 million visitor in 4 months. The sales of BMW car are increase 12.5% in the next year (Hespos, 2002). It seems that video clips and internet can make viral marketing working effectively.

Viral marketing has been referred to as product-related conversation, personal recommendations, informal communication, and interpersonal communication (Jacob, Barak and Muller, 2001). There are one big distinction between viral marketing activities and commercial mass communication. As viral marketing is a consumer-dominated channel of information, the communicator is thought to be independent of the marketer (Lau and NG, 2001). As a result, it is recognized by customers as a more reliable, credible, and trustworthy source of information. It provides information concerning product performance and the social and psychological consequences of a purchase decision (Naylor and Kleiser, 2000). For example, Myspace use viral marketing to make the users to referral itself and make a big success (Dwyer, 2007).

Viral marketing can convert lower order cognition and affect to higher order cognition and affect, which in turn can lead to committed behaviors of receivers (Baker, 2005). The credibility of viral marketing, coupled with the probability that a receiver will be more highly involved in a viral marketing message than an advertisement, lends itself to the formation of such higher order beliefs and cognition. Through multiple dyads and retransmission, one message can reach and potentially influence many receivers (Henning-Thurau, Gwinner, Walsh and Gremler, 2004). Make good use of the customers’ internet social networks, like using free email referrals and internet chat rooms, the information can spread sharply (Domingos, 2006).

The effectiveness of viral marketing can also be explained by the accessibility-diagnosticity model (Hogan, Lemon and Libai, 2004). Some findings suggest that vividly (face-to-face) presented information is more memorable to customers and is weighed more heavily in their judgments (Henning-Thurau, Gwinner, Walsh and Gremler, 2004).such as Myspace, it use the chat rooms that users can talk to each other, even face-to-face through PC camera, and then its information become more reliable and memorable for users (Boyd, 2006). Because of internet, information accessibility increases, it is high likely that this information is used by customers as an input for their judgments and choices also increases (Hogan, Lemon and Libai, 2004).

2.6.2 Negative Effects of Viral Marketing

For all its advantages, viral marketing also has many unexpected pitfalls. Most important, companies have almost no control over the viral spread since it was send out, and therefore they can do little if the viral turns to against them and their products (Jurvetson, 2000).

“The action most frequently reported by consumers who are dissatisfied with a purchase or who have rejected or discontinued using a product is telling friends about the experience and urging them to avoid it” (Weinberger and Lepkowska-White, 2000 ). Many researchers have suggested that negative information tends to cause many attention to and weighting of that information (Bristor, 1990). For example, Naylor and Kleiser (2000) found that negative messages destroy the image of a brand are more than twice as strongly as positive WOM promoted sales of that product. Negative message has also led to the failure of many companies’ promotion. Wilson (2000) argues that negative messages would be communicated to more people than positive messages. According to much previous evidence about the spread of marketing information, it is suggested that a negative message may travel farther than a positive message through retransmission. In previous research; the influencer was often considering to be an opinion leader. However, a dissatisfied customer who initiates negative message need not be an opinion leader, and yet his opinions can have adverse effects on the marketer (Richins, 1999). For example, Sony try to use Youtube to promote its Playstation consoles, it created an imaginary character called Peter and tried to make the character as a hip -hop shark. However, some clever users soon discovered the wile, and tell many others. Many people then angary with what SONY done, and refuse to buy the playstation consoles. In the end, Sony had to make a public apology to delighted and hold the customers. (Source from Kuruvilla, 2007)

2.6.3 Viral Marketing Effects in B2B

For business-to-business companies, it makes sense to begin with a product or service offer that has real, free value to prospects. Examples: an e-mailed newsletter that can easily be forwarded to colleagues, or a product that comes with an incentive, such as gift certificates or coupons, sent via e-mail, which can be passed along to more than one person.

Viral marketing can work effective for B2B providers, since the following is true. One very significant effort of viral marketing is to allow others to post articles that you have authored on their Web sites (Lau and NG, 2001). Another way to encourage visitors to spread the word about your product or service is to provide a link or button on each Web page that they can click on to forward your wed site (Goldenberg, Libai and Muller, 2001).

While some people may use “viral marketing” only as buzzwords, there is another significance for B2B marketers. Companies can encourage satisfied customers and referral sources in a credible way and persuade them to spread the positive words for their products. Keep the reward combined with your business and appropriate for the size and type of referral. Ensure that your offer adds value or reward for the referrer and for those people that are referred to you, and then you will have a cost-effective marketing tool to grow your business (Herr, Kardes and Kim, 1999).

2.6.4 Factors Motivating Viral Marketing

According to Chen, Iyer and Padmanabhan (2002), viral marketing involves two parties: the communicator and the receiver. Viral marketing will only start when the communicator is motivated to speak and the receiver is motivated to listen. Therefore, in order to understand how the process works, it is very important that understand the inherent motives.

In the case of the receiver, motivation to listen may be affected by: (a) source reliability (Blodgett, Granbois and Walters, 1998); (b) interpersonal ties between the sender and receiver (Goldenberg, Libai and Muller, 2001); (c)product and purchasing situation characteristics such as high perceived risk (Bristor, 1990), newness, .and intangibility associated with services (Weinberger and Lepkowska-White, 2000); and (d) situational factors such as conditions where product information may be hard or impossible to get from the marketer, or where there is a shortage of time.

In the case of the communicator, motivation to speak may be influenced by: (a) the personality of the communicator, for example, self-confidence (Bristor, 1990) and sociability (Richins, 1999); (b) the attitudes of the communicator, for example, a desire to help others (Lau and NG, 2001) and attitude towards complaining (Singh, 1990); (c) involvement with the product and with the purchase decision (Henning-Thurau, Gwinner, Walsh and Gremler, 2004); and (d) situational factors like “proximity of others during dissatisfaction” (Lau and NG, 2001).

Viral marketing has quickly been recognized by many companies because of many successful examples: Marketers proved that a little budget they could motivate millions customers. They did so by encourage customer-to-customer communication to increase sales, brand awareness, and market share. Seth Godi uploads his ebook on the internet and the people can download for free and has the right to send to their friends. If they like, they can buy a print copy. Only three months, nearly one million people download the e-book. (Source from Tafe, 2007)

Receivers getting a marketing message from familiar communicators participate more frequently in a campaign as initial contacts. Because the personal message which come from friends or people you know would be more credible than that coming directly from the self-interest advertiser (Goldenberg, Libai and Muller, 2001). Taking advantage of the inherent nature of internet as communication vehicles viral marketing enables consumers to share information and content within their social network easier and faster, there are without time and location limitation for internet communications (Naylor and Kleiser, 2000).

Money incentive can works very effective when a viral marketing not clever and attractive enough for customers. Give referrers a reward can encourage fast spread of the marketing information. Those people who pass on your information can get something in return can encourage their passion to pass on the information. That something may be a gift or service related to your business or simply the knowledge that they have added value for others.

2.7 Measuring Success and Effective

Many authors argue that what is a successful campaign? Can it based on the amount of number of people who positively interact with the campaign’s content or the sales created by the campaign?

Although no a single measurement system has build up for viral marketing, measurement tools do exist, allow the markers use to tracking the process and effects of viral marketing. It is hard to know whether audiences care about the contents behind the campaigns, what ensure about the marketers maybe how many people see the campaign (Goldenberg, Libai and Muller, 2001).

Shirky (2000) believed that viral marketing not always effective as it also have many disadvantages, and many situations would make it fail. The difference between a successful and unsuccessful viral marketing campaign is the campaign’s ability to connect with audiences and persuade them to pass on the message and ultimately the product or service (Kirby, 2006, p.92).

Kirby (2006) recognizes that in order to increase the chances of a successful viral campaign many companies are starting to invest more into the planning and implementation of it. Freedma

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