Excerpt
Table of Contents
Title Page
Summary
Preface
Glossary
1 Introduction
2 Theoretical Foundations
2.1 Brand Definition
2.2 Functions of a Brand
2.3 Definition of Brand Management
2.4 Definition of Web 2.0
3 The use of Web 2.0
3.1 Private Use
3.2 Web 2.0 in Business
4 Web 2.0 - Friend or Foe?
5 From One-Way to Two-Way Communication
6 Web 2.0 and Brand Management
6.1 The Impact of the Change of the Communication Models on Website Content
6.2 How to Respond to Unjustified Negative Word of Mouth
6.3 Integrating Users into Marketing Processes
6.4 The “Open” Brand
7 Conclusion
8 Recommendation and Critical Appraisal
Bibliography
List of Figures
List of Tables
List of Abbreviations
Appendix: The Frequency of Web 2.0 Visits
Title Page
Title: The Impact of Web 2.0 on Brand Management
Subtitle: How to Use Web 2.0 Efficiently to Create a Higher Brand Value
Name: Sandra Spindler
Institute: Fontys Internationale Hogeschool Economie
Course of Study: International Marketing
Study Phase: 7th Semester
Academic Year: 2010 – 2011
Date of Completion: Tuesday, January 11th, 2011
Place: Venlo, Netherlands
Summary
In the past some incidents of well-known companies led to real economical problems due to the fact that Web 2.0 still is being underestimated by marketing experts. For instance the case of Kryptonite where a user has loaded up a video in which he showed how easily the expensive and alleged secure bike locks can be picked, shortly thereafter the media interest increased more and more. Finally, ten days later Kryptonite was forced to offer a free replacement of this kind of bike locks, which caused costs of ten millions US Dollar and also damage to its image. Those incidents convey the importance to rethink usual marketing strategies and to adopt them to Web 2.0.
The target of this paper is to reveal the potential of using Web 2.0 as a marketing instrument by means of an analysis of the use and the awareness of Web 2.0. Furthermore it will straighten out strategies to increase a brands value that will be rounded off with examples of companies that already implemented those strategies successfully.
Thus the awareness and the private use of Web 2.0 increased. However the decision makers in companies did not yet perceive the chances of Web 2.0 and hence do not tap the full potential of social media marketing. The change of the communication model which results from the change of Web 1.0 turning to Web 2.0 causes a reciprocal exchange of consumer and company. The value of a brand can be increased by adopting the webpage content to the change of the communication model by means of attuning customised messages to interactive communication. Word of mouth in various blogs has to be controlled. In case of negative word of mouth a company should respond to the criticism with a factual and polite comment and depict the companies’ point of view. Integrating consumers actively into marketing processes i.e. offering contests, voting for slogans, product design etc. will help to tie consumers to a company and further reduces research and development costs.
Furthermore the strategy of “opening up” a brand will be explained, by means of which marketing costs can be spend more effectively and which also reduces mass media costs, to gain more access to larger and more diverse audiences more quickly which will increase revenues and reduces inventory risks through collective ideas from users and also improves customer retention. Possible ways to increase the value of a brand according to this strategy are for instance to ease the internet transactions by providing speedy screen loads, reducing clicks, easing the checkout process, implementing recommendations which will reduce purchase risks, increasing the customers dwell time etc.
Another important factor is the quality of products and services. Before starting to take part in Web 2.0 a company has to prove their advertising promises. Consequently a company’s target is to launch products which supply all consumers’ wants to prevent negative word of mouth as there is nothing worth for a consumer than promises which are not being kept by companies and in return they are going to tell the whole world.
Nevertheless classical marketing instruments are not to be neglected as advertising via mass media still is the best way to attract attention and to receive a high profile.
As the subject Web 2.0 is pretty voluminous the limit of the report did not allow going much into detail and hence presents only the most important factors. In addition the factor that social media marketing is in its infancy will cause a caducity of this report and also leads to the lack of surveys that can proof the success by means of business ratios.
Preface
This report “The Impact of Web 2.0 on Brand Management– How to Use Web 2.0 Efficiently to Create a Higher Brand Value-” has been written within the minor International Business Management (MLA7 individual topic) at the economical university of applied science FIHE in Venlo. This module offers students the opportunity to realise theoretic knowledge. Furthermore the student can choose a topic according to his interest and it also serves for preparation of the bachelor thesis. A time limit of three months was given for processing this report and also a limit of 20 pages.
This report will demonstrate the importance of involving Web 2.0 in marketing-strategies. Examples of companies which suffered from Web 2.0 as they did not know how to react properly will be pointed out. Furthermore the change from one-way communication to two-way communication will be described and following possible measurements and strategies will be recommended to increase a company’s brand value.
The Impact of Web 2.0 serves as a guide for companies who are not well versed in this topic but intend to increase their brand value by means of social media marketing measurements. Nevertheless basic knowledge about marketing and e-marketing terms is required. However some terms are listed in the glossary but will not explained within the text as this would go beyond the scope of this report.
I will thank my tutor Mr. Thomas Merz for his advice and helpful suggestions.
Venlo, 11th January 2011
Sandra Spindler
Glossary
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1 Introduction
The popularity of user-driven online services such as Facebook, MySpace, Wikipedia and YouTube, has drawn attention to a group of technological development known as Web 2.0. But this trend can on one hand pose a threat to a company as uncontrolled negative word of mouth can have a negative impact on a company’s success without being aware of it until it is too late. However on the other hand, if a company knows how to react to this kind of word of mouth and also implements Web 2.0 strategies into business activities, Web 2.0 can lead to a higher brand value. Hence the main problems “which impact does Web 2.0 have on brand management” and “how to use Web 2.0 efficiently to create a higher brand value” have been solved in this report. All important factors which have to be considered when starting Web 2.0 campaigns have been explained and rounded off with concise examples.
First an analysis of the use and awareness of Web 2.0 in Germany and additionally in France and Great Britain will show in how far decision maker in companies have realised the trend and the use of private users will show the potential of Web 2.0 as a marketing tool. Examples of companies that suffered from not using Web 2.0 will convey the importance of implementing Web 2.0 in daily business.
Following the main differences of the change from one-way to two-way communication will be pointed out and will give an advice how a company can profit from that change. Closing strategies of how a company has to react to negative word of mouth, how to integrate customers into marketing processes and also an all embracing strategy to “open up” a brand is given.
Due to the fact that the topic Web 2.0 is not fully developed and consequently is not yet incorporated in literature of notable marketing experts an all embracing analysis was not possible.
Moreover the lack of extensive international surveys about the use and the awareness of Web 2.0 constricted the extensiveness of the analysis and thus it is mainly limited to Germany.
As the subject Web 2.0 is pretty voluminous the limit of the report did not allow going much into detail and hence presents only the most important factors.
In addition the factor that social media marketing is in its infancy will cause a caducity of this report.
2 Theoretical Foundations
The second chapter is to explain the main theory on which this report bases. First the brand definition is given, then the function of a brand will be explained and the definition of web 2.0 completes this chapter.
2.1 Brand Definition
Nowadays a brand stands for products, services, characters, companies and even for buildings, landscapes and regions which excel at notably pithiness, attractiveness and performance. Characteristics which describe a brand are just as multifaceted as the angels of faculties that are concerned with the subject brand (cp. Linxweiler 2001, p. 51).
According to Linxweiler (2001, pp. 52-53) four approaches of defining the term brand are given:
Consumer perspective:
This point of view examines the term brand neither from the point of view of the vendor or of jurisdiction nor in relation to the characteristics. This perspective deals with the imagination and the subjective cognition of a consumer. Thus everything that a relevant target group regards as a brand can be described as a brand. This approach implicates the psychological and sociological facts like emotions, motivations, attitudes and consumer behaviour. In short the approach can be explained as follows:
Table 1: Consumer Perspective of a Brand
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Source: own demonstration on the basis of Linxweiler (2001, p. 52).
Brand research perspective:
Here the brand distinguishes as a product or service which can be experienced sensually and has a clear value with an attractive and incisive brand image. Additionally it provides an explicit benefit for the target group, which will generate by means of appropriate marketing actions high values in satisfaction, sympathy, belief and brand loyalty.
Legislation perspective:
Regarding to the German Markengesetzbuch (trade mark act book) the term brand can be defined as follows: “All symbols, especially words including personal names, illustrations, letters, numbers, sound trademarks, three-dimensional figurations including the shape of a product or its packaging as well as other designs including colour and colour combinations, that are able to differentiate companies’ goods or services of other companies, can be protected as a brand.” Concerning H. Eisenmann (1998, p. 114) this definition is not complete; tactile, gustatory and olfactory characteristics are also part of a brand.
Brand in context of the BrandScoreCard
The BrandScoreCard unites all entrepreneurial services into one service bundle (product, price, distribution, communication), which is pointed at the target groups’ perception and preference to distribute these services sustainably and successfully on the market. Based on this contemplation, that adapts to the market, to the consumers and to the company itself, the following four main characteristics of a brand can be emphasised:
A brand has to:
1. possess an independent and meaningful brand image, which has to be clear, vivid, attractive, unique and stereotypical.
2. have impact i.e. it has to have dynamic, tonality and continuity in its life cycle and needs to be geared prematurely to changed social general conditions and consistency in its inner structure.
3. be competitive, relevant and needs benefits and differentiation compared to competitors.
4. build up awareness, credibility, loyalty, sympathy, and trustworthiness.
All in all a brand is a product or service that is publicly distinguished form other products or services, so that it can be easily communicated and generally marketed. A brand name is the name of the distinctive product or service. Usually brands are registered with regulatory authority and so cannot be used freely by other parties. For many products and companies, branding is an essential part of marketing.
2.2 Functions of a Brand
According to C. Baumgarth (2008, p. 23) a brand has three main functions:
Information efficiency
Brands facilitate the information process by providing information regarding the manufacturer and the origin of a product or service. Furthermore the recognition effect helps consumers to repeatedly find trusted brands quickly and easily. In that way, brands increase the efficiency of information processes in early stages of the purchase decision process (cp. markenlexikon.com 2010).
Risk reduction
The second function of a brand is to help reducing the consumer’s risk of making a wrong purchase decision. The monetary risk (a product or service could be cheaper in another store), the functional risk (product or services with a qualitative insufficiency), the physical risk (e.g. allergies resulting from the use of the product or service), the social risk (e.g. lacking acceptance in social groups due to the choice of a wrong product) and the psychological risk (dissatisfaction with the purchased product or service or potentially negative consequences for a person’s self image). A brand grants assurance concerning possible negative effects of the purchase decision (cp. markenlexikon.com 2010).
Image benefits
Moreover a brand provides emotional and self-expressive benefits. The image benefit serves for the purpose of self-realisation or identification with personal values and ideals. That means that a consumer of a brand has a certain feeling when purchasing and using a brand product, for instance the way a customer feels safe driving a BMW or a customer wearing a Chanel coat feels rich and famous. Brands point up a consumer’s personality, support his self-esteem and/ or alleviate the self-expression, especially in terms of the membership of a social group (cp. markenlexikon.com 2010).
2.3 Definition of Brand Management
Brand Management embraces the process of maintaining, improving and upholding a brand, thus consumers associate the name with positive results. It also involves a number of important aspects such as cost, customer satisfaction, in-store presentation and competition. Brand Management is built on a marketing foundation but focuses directly on the brand and how that brand can remain favourable to customers. The central target of brand management is to accentuate one’s own company or rather a product from those of the competitors or to make them distinguishable for the consumers (cp. Businessdictionary.com 2010).
2.4 Definition of Web 2.0
The term Web 2.0 was created by Tim O‘Reilly (founder and boss of the O’Reilly publishing company as well as author and software engineer). Web 2.0 distinguishes generally the changes of the internet. Thereby this term refers less to new technologies than to the changed use and perception of the internet. It stands for interactive and collaborative elements of the internet (cp. knol.google.com 2010).
According to Kelly Mooney et al. (2008, p. 41) “Web 2.0 is a real sea change, not just a clever marketing moniker used to peg media stories, promote trade conferences and excite investors. It marks the arrival of fast loading, media-rich, feed-driven sites that are virally communal, Application Programming Interface (API)-enabled, cross-platform-built and disseminated across multiple channels and devices.”
In comparison Web 1.0 is a term describing the digital dimension of a push marketing era that has currently giving way to the more dynamic pull marketing-focused Web 2.0. It is a world of blogs, user generated content and social networks, and these are for example: YouTube, flickr, eBay, amazon.com, facebook etc. The result is that the online population does not read or watch content anymore; they create their own and react energetically to what others have created (cp. Mooney et al. 2008, pp. 41).
There are also other terms for Web 2.0 like “the vivid web”, “the hyper net”, “the join in web” etc. They all mean the same; everybody can take part developing a global, omnipresent platform for a cooperation with networked computers that revolutionises human sharing of experiences, knowledge, opinions and it also transmutes users into producers. It is all about communities and participation. Today the “new” web links more than one billion people directly worldwide (cp. Tapscott et al. 2009, pp. 18).
3 The Use of Web 2.0
After having defined the main terms which are relevant, this chapter will outline various studies about the use and the common awareness about Web 2.0 clearly and also point out the potential of integrating consumers in brand building measurements.
3.1 Private Use
According to a study of GfK (a German association for consumer research) about “Web 2.0 Applications”, every fifth internet user in Germany uses Web 2.0. The following figure
Figure 1: Internet Applications and its Overlaps
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shows which applications are used mostly and in how far they overlap. It becomes apparent that private internet users most frequently take part in discussion forums and news-groups (11,7 %). This application is directly followed by visiting social networks and online communities (11,1 %). Reading and composing blogs bring up the rear with only 4,7 %. These figures refer to an at least one time use in a month and are given
Source: own demonstration according to GfK “Web 2.0 Applications”, 2007
on a basis of 7,2 million private internet users. Another outcome is that with 33 % the majority of Web 2.0 users are the population group of young adults between 20 and 29 years (cp. gfk.com).
Likewise the awareness of various Web 2.0 services has been analysed. The next figure shows 14 networks and their popularity in Germany, Great Britain and France. You Tube nearly ranks first in all three countries. Only in Germany Wikipedia has a higher popularity. In France and Great Britain Facebook comes in second.
The results in Great Britain and France are pretty similar concerning the ranking; however in Great Britain the level of popularity is a bit higher. Hence You Tube and Facebook are followed by My Space and Wikipedia. Those platforms are known by more than 80 %. StudiVZ and 43things bring up the rear. In contrast in Germany Wikipedia and You Tube are followed by Clipfish and My Space which are known by more than 60 %. Digg and 43things bring up the rear in Germany (cp. Dialego 2008, pp. 15).
Figure 2: Notoriety of Web 2.0 Services
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Source: Dialego (2008, pp. 15)
Appendix 1 illustrates how regularly these services are being used. Here it becomes apparent that especially Facebook and Wikipedia are being used most frequently. Thus every third British internet user logs in on Facebook every day and 20 % several times within a week. In Germany 12 % of the users uses Wikepedia daily and nearly every third user several times in a week. With 17 % the majority of French users visit Facebook daily as well. In all three countries You Tube is being used analogical frequently (daily: D – 7 %, GB – 9 %, F – 5 %; several times in a week: D – 21 %, GB – 21 %, F – 26 %). Special sites like Flickr, Blogger and last.fm are rarely used in all three countries (cp. Dialego 2008, pp. 19).
3.2 Web 2.0 in Business
Another survey of Brain Injection (a German institution for communication and justice at the internet) of 2009 corresponds to Web 2.0 in business. At this juncture 350 executive directors and executive employees have been interviewed concerning their knowledge and activities in Web 2.0. The target of this survey was to find out if the change of the communication model (chapter 5) through social media has already affected management decisions and if so which impact do they have (brain injection 2009, p. 4).
The question “which of the following terms would you assign to Web 2.0?” revealed that 59 % know the definition of Web 2.0. More than half of the interviewed persons associate communities and social networks with Web 2.0. With 47 % the word blog is also seen in relation to Web 2.0. 30 % to 40 % know that user generated content, wikis and Xing are part of Web 2.0. Social bookmarking and affiliate marketing are two terms which are not well-established hence 22 % of the interviewed persons know what social bookmarking is and only 14 % associated affiliate marketing with Web 2.0. According to that 11 % would not associate any of the given terms with Web 2.0 (cp. brain injection 2009, p. 5).
Furthermore the interviewees have been interrogated in how far they would use social media for business issues. The subsequent figure demonstrates that most of them would use social media by far for public relation purposes, following by market research, boosting sales, brand management and customer retention. The fewest would use Web 2.0 in terms of customer service, for intern communication, for research and development or search engine optimisation purposes (cp. brain injection 2009, p. 10).
Figure 3: Future Possible Use of Social Media for Business Issues
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Source: own demonstration according to brain injection (2009, p. 10).
Concerning future planning of social media activities 51 % indicated that they do not plan any social media campaigns in the foreseeable future. Most of the respondents who are planning activities in that area intend to implement an own community profile (21 %). Each with 12 % plan to participate in groups and communities, implement an employee community and intend to participate in video platforms. The fewest interviewees (8 %) plan to implement an own brand community (cp. brain injection 2009, p. 8).
The question about already successfully implemented social media campaigns revealed that 15 % of the companies by now increased their sales by means of social media marketing successfully. 15 % use Web 2.0 in favour of public relations, customer retention and boosting sales, 13 % for intern communication, 12 % for brand management and 10 % for knowledge management. The fewest interviewees (7 %) use social media marketing to reduce costs or for research and development purposes (cp. brain injection 2009, p. 10).
The following results apply to a survey which was executed in 2006 and 2008 by Dialego (a German institution for market research) that focuses on an international comparison of the private use of Web 2.0 in Germany, Great Britain and France. In each country 1.000 internet users have been interviewed. Comparing 2006 to 2008 Dialego found out that the awareness of Web 2.0 is with 64 % highest in Germany, followed by France with 55 % and lowest in Great Britain with 47 %. The awareness increased least in France (19 %) and most in Germany (45 %) followed by Great Britain with 45 %. Notably within the segment of 14 to 29 years old people Web 2.0 has the highest notoriety (cp. Dialego 2008, p. 8).
Summing up the awareness of Web 2.0 and also the private use increased more and more whereat the decision maker in companies did not yet perceive the chances of Web 2.0 and hence do not tap the full potential of social media marketing. The increasing importance of social media marketing modifies the general conditions for communication from scratch (cp. brain injection 2009, p. 11).
The following chapter discloses the advantages and disadvantages of Web 2.0.
4 Web 2.0 – Friend or Foe?
This chapter will straighten out the potential problem of not using Web 2.0 efficiently by means of examples of cases which led in the past to real economical problems for some companies. The following examples clarify the importance of including Web 2.0 in marketing strategies.
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