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Amsterdam Center for Social Media

This week’s harvest of social media research: Social media may be no longer cute but it helps intensify the customer-firm relationship

By Nicoleta Bălău

To paraphrase what Mitchell Kapor, the founder of the Lotus Development Corporation, said about getting information of the internet, harvesting publications on social media from the Web of Knowledge (the database of peer-reviewed journals) is like taking a drink from a fire hydrant[1]. There is without doubt an increasing body of research done on social media but the drink (i.e., the publication) I enjoyed ‘reading’ this week has been on how to positively intensify the customer-firm relationship. We all believe it’s possible but Rishika, Kumar, Janakiraman, and Bezawada (2013) bring research evidence for us to turn this belief into certainty. Their article is about “The Effect of Customers’ Social Media Participation on Customer Visit Frequency and Profitability: An Empirical Investigation”, published in Information Systems Research.

For firms, there has been always a challenge to ensure the effectiveness of the social media strategy.  The doubts about the effectiveness of social media arise because the link between firms’ social media efforts and the return on their investment has not been established.

Knowing that your firm adopts and applies the ‘right’ strategy is what most of the firms want. The firms need to actually take knowledgeable steps to accomplish this purpose and this will help them go over the stage where they may come to say that “social media is no longer the adorable baby everyone wants to hold but the angst-filled adolescent—still immature yet no longer cute—who inspires mixed feelings.”(IBM, 2011).

Rishika et al. (2013) focus on examining how social media effort by the firm (i.e., the level of activity on the social media site in terms of number of messages and comments posted by the firm and customers) help transform the intensity of customer-firm relationships. Their focal variable is customers’ shopping visit frequency because, as they claim, it captures the intensity of relationship between a firm and a focal customer and serves as a key driver of customer lifetime value.

The data set for this study comes from a large specialty firm that owns multiple stores and sells wine and like products in the northeastern United States. Rishika et al. (2013) used a quasi-experimental setup, the data collected was from January 2008 to March 2011 and a total of 394 customers who actively participated the firm’s social media site (e.g., Facebook) entered the final analyses. A key notable contribution of this study is that it combines data related to customers’ participation in the focal firm’s social media site with their actual purchases.

What are the most important factors the authors studied in their research?

1)      Customers’ intensity of relationship with the firm is measured by the visit frequency (i.e., the number of times a customer visits the store in a given time period).

2)      Customers’ participation in social media refers to whether the customer becomes a “fan” of the firm’s Facebook page at a given time period or not.

3)      Social media activity relevant to a focal customer is measured by the number of messages posted by the firm and all other customers.

4)      Purchase amount is the spending incurred by the customer across all products in a given time period.

5)      Buying focus represents how broad or narrow the buying pattern is for a particular customer and (because wine purchases are considered in this particular study, the authors use wine) colour type to capture this variable.

6)      The share of premium products bought by a focal customer is obtained as the ratio of the number of premium to the total number of products purchased by the customer.

7)      Deal sensitivity designates how sensitive a customer is toward deals and is defined as the proportion of products the customer buys on promotion (i.e., the number of products bought on promotion divided by the total number of products purchased in a given time period). 

What are the most important findings the authors presented in their research?

1)      Results showed that customer engagement through social media increases customers’ shopping visits.

2)      Results also suggested that this effect is larger for a greater level of activity in the firm hosted social media site.

3)      Results showed that the effect is larger for customers who have higher levels of spending and share of premium products and lower levels of buying focus and deal sensitivity. These results hold for customer profitability as well.

To conclude, authors formulate certain managerial implications:

1)      For business executives, it is important to know on which customer segments they must spend greater resources in order to build and strengthen relationships. An understanding of how the impact of social media participation differs across customer segments can enable firms to develop better customer relationship management initiatives.

2)      Managers must be cautious and not interpret this result to imply that simply creating, say, a Facebook page and inviting customers to become fans will lead to positive customer outcomes. They must carefully manage and devise opportunities to create and nurture relationships with customers through the social medium. For example, maintaining a user-friendly social media site interface, providing regular updates about events, sending personalized messages to individual customers, and encouraging member contributions can create interactive communication that can enhance firm equity.

3)      Results suggest that managers need to understand that not all customers will have a similar response to the firm’s social media efforts. It is vital that managers integrate their knowledge about customers from both offline transactions and online social media sources in order to better serve them.

4)      Managers can increase the response to social media participation by creating product based social media forums or specialized subcommunities for customers looking for premium and unique products.

Customers out there are (becoming) tireless seekers of information and research on social media will hopefully be a helping hand for firms by speeding up the ‘growing process/pains’ until social media (the angst-filled adolescent, sill immature yet no longer cute) will reach the stage of legal adulthood.

For those who still wonder whether Facebook is the social media to use in order to intensify the customer-firm relationship, ‘Yes’ is the answer to this concern. To ‘quench my thirst’ for research evidence I opened again the fire hydrant (i.e., Web of Knowledge) and my attention was caught by the article that Grieve, Indian, Witteveen, Tolan, and Marrington (2013) recently published in Computers in Human Behaviour.  The drop of knowledge they provide is that there is such thing as Facebook social connectedness. Based on self-reports, these authors revealed that Facebook social connectedness is a distinct construct from offline social connectedness. Moreover, Facebook connectedness is associated with lower depression and anxiety and greater satisfaction with life. I’m sure that there is more evidence in research on the how firms can reap the benefits of using social media platforms (and Facebook in particular) and create sustainable value.

Today communication never ends. Nothing is really switched off and we are therefore permanently online (Vorderer & Kohring, 2013). I hope you enjoyed reading this piece and, when ‘taking steps’ online, I invite you to also keep an eye on this website and take advantage of our social media participation.

 

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Grieve, Rachel, Indian, Michaelle, Witteveen, Kate, Tolan, G. Anne, & Marrington, Jessica. (2013). Face-to-face or Facebook: Can social connectedness be derived online? Computers in Human Behavior, 29(3), 604-609. doi: 10.1016/j.chb.2012.11.017

IBM, Report. (2011). 11 Key Marketing Trends for 2011. Unica/IBM, New York, NY.

Rishika, Rishika, Kumar, Ashish, Janakiraman, Ramkumar, & Bezawada, Ram. (2013). The Effect of Customers’ Social Media Participation on Customer Visit Frequency and Profitability: An Empirical Investigation. Information Systems Research, 24(1), 108-127. doi: 10.1287/isre.1120.0460

Vorderer, Peter, & Kohring, Matthias. (2013). Permanently Online: A Challenge for Media and Communication Research. International Journal of Communication, 7, 188-196.


 

[1] The original saying is “getting information off the Internet is like taking a drink from a fire hydrant” (Mitchell Kapor).

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