Word-of-Mouth Marketing on Social Media. Influence on Buying Decisions, Evolution and Recommendations for Companies


Bachelor Thesis, 2017
81 Pages, Grade: 1,3

Excerpt

Table of contents

Abstract

List of Abbrevations

List of Illustrations

List of Tables

1 Introduction: The Secret Ingredient to Reducing Consumer Risk

2 The Evolution of Traditional Marketing and Advertisement
2.1 Marketing Throughout the Years
2.2 Traditional Word of Mouth Marketing

3 From Paper to Screen – The Web and Its Impact on Marketing
3.1 The Developmental Stages of the Internet
3.2 The Web-Caused Changes to Society and Marketing
3.3 The Development Stages of Modern Marketing Before and After the Web
3.4 Marketing in 2017

4 Social Media – An Overview
4.1 Social Media Platforms Defined and Compared
4.2 Marketing on Social Media

5 E - Word of Mouth Marketing: Status Quo and Success factors
5.1 Electronic Word of Mouth Marketing on Social Media
5.2 Word of Mouth’s Most Promising Trend: Influencer Marketing

6 Key Takeaways, Recommendations and Future Outlook

List of References

Appendix

Expert Interview 1 (Demant, J 2017)

Expert Interview 2 (Hilario, M 2017)

Abstract

The following theoretical bachelor thesis has the aim to specify electronic Word-of-Mouth Marketing’s origins and analyze its status quo. For this purpose, it will give an overview on the evolution of traditional marketing up to today’s social media marketing. Additionally, and in context of the various development stages of marketing, the term Word-of-Mouth will be further analyzed. On the basis of prior elaborated explanation and analysis, the status quo of Word-of-Mouth Marketing will be discussed by reference to literature, statistics and regulations. Summarizing all prior findings, the last part of this thesis will give recommendations for the successful implementation of Word-of-Mouth Social Media Marketing into a company’s marketing strategy. Scientific journal articles, books as well as internet sources build the foundation of this thesis. In addition, two expert interviews were conducted. One with the co-founder of the finish Start-Up SPOT-A-SHOP, the second one with the head of corporate affairs and press of the German fashion brand Marina Hoermanseder

List of Abbrevations

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List of Illustrations

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List of Tables

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1 Introduction: The Secret Ingredient to Reducing Consumer Risk

Imagine yourself standing in front of a shoe store shelf in desperate need of a new pair of sneakers. In a state of sensory overload, caused by the vast number of different offers and models, which ones will be the ones you decide to buy? Will it be those you have seen one or two times in a TV commercial? Or will it be those, which all of your friends are wearing and which they are only telling you good things about?

Now, imagine yourself sitting at a car dealership. Your future car, will it be the one that the salesman desperately wants to sell you? Will you trust this stranger blindly? Or will you do your research and seek for opinions of others before making a purchasing decision?

Most purchasing decisions generate risk. In a journal article from 1999, Singaporean marketing professor Soo Jiuan Tan deduces, that consumers perceive “financial, product performance, psychological, physical, social, and time risks when making purchases” (Tan 1999, p. 165). According to Tan, especially purchasing decisions which are conducted in a way, in which the product cannot be examined before purchase, are perceived as high risk, even higher than linked to in-store shopping (see Tan 1999, p. 165). Also factors, such as a “lack of personal contact with sellers, (…) or the absence of any personal interaction with other buyers” (Camarero, San Martín, San José 2011 p. 46) are to be taken into consideration, when evaluating perceived risk during a purchasing decision. Especially the newly evolved importance of e-commerce incorporates many of the before mentioned risk-increasing factors. Individuals perceive risk in many different ways. Still, most of the time, risk is perceived with a negative connotation and may be compared to a state of tension or anxiety (see Camarero & San Martín & San José 2011 p. 48). It is on the dice, that if a consumer is given an opportunity to lower his/her risk, and thereby eliminate the before mentioned feeling of tension and anxiety, he/she will probably make use of this opportunity.

Word-of-mouth acts as one prime example for reducing consumer’s risk, as it incorporates trust and credibility (see Bughin & Doogan & Vetvik 2010, Web & The Nielsen Company 2013, Web).

According to McKinsey Quarterly, “word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions” (Bughin & Doogan & Vetvik 2010, Web). Within the evolution of marketing, word-of-mouth also became a manageable tool for marketers. Especially through the introduction of the social web, using word-of-mouth in a marketing approach became easy, efficient and powerful.

This thesis has the aim, to explain, analyze and discuss word-of-mouth marketing on social media and to formulate recommendations for its ideal implementation into a company’s marketing strategy. Illustration 1, graphically portrays this thesis’ structure.

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Illustration 1: Graphic Representation of Thesis Structure

Source: Bettinger 2017 (illustration by author)

In order to elaborate the before mentioned recommendations, firstly an overview on traditional marketing and traditional word-of-mouth (WOM), its evolution and fundamentals, is going to be given. Marketing, including word-of-mouth-marketing (WOMM), has undergone changes caused by the introduction of the digital age. The following chapter will deal with the shift from traditional marketing to digital marketing, “from paper to screen”. For this purpose, the introduction of the internet up to web 4.0, and the thereby caused change of communication and community will be illustrated.

Generation Y’s most promising online manifestations of Web 2.0 will be outlined. Their characteristics and how they can be implemented into a company’s marketing strategy will be explained subsequently. Focusing on social media marketing, this chapter will, amongst other channels, emphasize the social media website “Facebook” and the Smartphone application “Instagram”. Chapter 6 of this thesis will combine the prior elaborated knowledge about marketing, the web and WOM, and as a result introduce electronic word-of-mouth (eWOM). Within this chapter, the promising eWOM trend Influencer marketing will be further discussed. Eventually, and based on the before gathered intelligence, recommendations for a successful implementation of eWOMM into a business’ marketing strategy will be given. Illustration 1 pictures the before explained elaboration in graphic representation.

2 The Evolution of Traditional Marketing and Advertisement

According to the Oxford University Press , marketing is defined as “the action or business of promoting and selling products or services, including market research and advertising” (Oxford University Press, N.Y. given, Web). Moreover, in Gary Armstrong and Philip Kotler’s Book The Principles of Marketing”, traditional marketing is described as “telling and selling” (Armstrong & Kotler 2010 p. 29) [highlighting not in the original]. Both definitions have one particular word in common, which is abundant in modern forms of marketing. The US-American economist Peter Drucker, once emphasized that “(…) the aim of marketing is to make selling superfluous” (Drucker, cited in: Armstrong & Kotler 2010, p. 29) [highlighting not in the original]. In the following chapter, the history and evolution of marketing will be outlined. Especially its progress from “telling and selling” to only “telling” will be illustrated.

2.1 Marketing Throughout the Years

Already in early years of human evolution, a species called the homo sapiens conducted trade of goods and services. Almost 140,000 years after human origins, within the years 600-1500 BC, this so called human created the first market places. These were physical areas of “commercial dealings” (see Oxford University Press 2017b, Web). Within the evolution of these market places, the job of barkers evolved. The Cambridge Dictionary defines a barker as “a person who advertises an activity at a public event by calling out to people who are walking past” (Cambridge University Press 2014, Web).

Looking at this activity in a business sense, the first time a barker took up his job, could be defined as the birthplace of early marketing and promotion, which includes advertisement.

Today, the concept of a market is very similar to the traditional physical market place and still includes exchange and relationships. It can be defined as a “set of all actual and potential buyers of a product or service” (Armstrong & Kotler, 2001, p.12). This non-physical area of a market offers space for customers and industries to interact in four flows. On the one hand, and as can be seen in illustration 2, the transactional part of the market cycle is covered by the flow of money in exchange for goods or services. These two flows represent the before-mentioned “selling”-approach in a market. On the other hand, a steady exchange of information and communication is incumbent. These two flows cover the “telling”- approach in a market. Industries receive information from the market (collection of buyers), e.g. through market research. On the other side do these collections of buyers (customers) receive information from the industry, e.g. with the help of advertisement (see Armstrong & Kotler, 2001, p.12).

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Illustration 2: The Four Flows Between Market and Industry

Source: see Armstrong & Kotler 2001, p.12, (adapted by author)

In this concept of markets, marketing tries to identify and subsequently satisfy customer’s needs, wants and demands by promising value and satisfaction through an exchange, transaction or relationship of a product or service (see Armstrong & Kotler, 2001, pp.6-11). Marketing’s direct aim is not necessarily to create sales. Its aim is to create profits by “creating long term costumer relationships based on costumer value and satisfaction. [Consequently] (…) costumer value and satisfaction are paths to sales and profit” (Armstrong & Kotler 2001, p.19).

These mentioned costumer relationships create competitive advantage over other market players and thereby create long-term profitability (see Reijonen 2010, p. 281).

Traditionally, and as will be further explained in chapter 3.4, marketing relies on the marketing mix. This mix is built on four columns, which are known as the 4 P’s . It serves as a basic tool set to create customer value and thereby denotes the prior mentioned path to sales and profit. The P’s incorporate promotion next to price, place and product (see Grobler 2007, p.28-34). This thesis will primarily focus on the promotion approach of the four P’s, which denotes communication between company and costumer (see Kartajaya & Kotler & Setiawan 2017, p.45-53).

In mid-1800 AD the industrial revolution began and an offer of goods, which exceeded basic human needs debuted. This very manufacturing and production oriented era evolved into the sales era within time. Competition forced businesses to become more conscious for consumer needs and wants for the first time (see Keith 1960, p.36). Within the years after the industrial revolution, markets moved from being authoritative systems, which were strictly seller’s markets, to integrative systems. The latter describe markets as buyer’s markets, with a high degree of competition and dominant market linkages (see Jermakowicz & Samli 1983, p. 30). Within time only selling a product did not suffice anymore to succeed in continually growing markets. The “art” of telling emerged to be a more and more important part of commerce. Only a company, that did a better job than its competitors could be successful. Today, this art of telling is denoted as marketing promotion and involves advertising. In 1854, Ernst Litfaß invented the very first advertising column in Berlin (see Gunkel 2016, Web), which marked an important event in the emergence of marketing in Germany. As a consequence, in 1855 the very first German institute responsible to place advertisements was established. Almost fifty years later the term “Marketing” was used in US-American Universities for the very first time (see Holzapfel et al. 2015, pp. 10-11).

In the following, an overview about the history of traditional media channels employed for marketing, will be given. For this approach, a few were chosen and divided into three categories. Here, traditional or classical marketing channels describe those, which were in most common use before the emergence of the internet and were additionally characterized by one-way communication.

Posters and Billboards

Outdoor or out-of-house (OOH) advertising can be seen as the mother of advertising as it is one of its oldest manifestation (see Blue Ocean Search nd, Web). Next to others, billboards and posters were most commonly used tools to create OOH-advertisements. In 1967 the rental of billboards in specific for marketing purposes was recorded for the first time (see Blue Ocean Search nd, Web). Exactly 50 years later, in 2017, posters and billboards make up a total number of 368,839 in the United States of America (Outdoor Advertising Association of America 2017a, Web). Despite the rising importance of online marketing and advertising, ad spend on OOH-advertising has been steadily rising in the past years and registers an amount of $7.6 billion in 2016 (Outdoor Advertising Association of America 2017b, Web). The success of OOH-advertising could be explained by the advantages in demographic targeting, its relatively low cost and its reinforcement of other forms of advertising.

Newspapers and Magazines

Newspaper advertising laid the foundation of early marketing communication. According to an article published by the Brent London Borough Council, “written advertisement has existed (…) as long as writing” (Barrès-Baker 2006, p. 6). Still it is supposed, that the first newspaper advertisement was published in the in French Journal Général des Affiches, around 1612. Opposed to today’s custom of paid advertisement, back in 1612, advertisements served self-publicity and spaces were not sold to independent sellers (see Barrès-Baker 2006, pp.6-8). Later on, printed advertisement was enhanced by ads in magazines and periodicals, and evolved to be sold for a price depending on size and location (see Barrès-Baker 2006, pp.6-8). In 2014, a one page black and white advertisement in the German newspaper ZEIT[1] has a price of approximately 10,897.92€[2] (see Die ZEIT 2014, p.13). Newspaper and magazine advertising evolved to be a well employed marketing tool for companies, even though a costly one. Today, many companies take advantage of printed ads not only because of their approach to transfer information, but also to create value for their business and product, and to position themselves.

Radio and TV

In 1922 and 1941 this list of traditional marketing tools was completed by adding radio and television advertisement to it (see Blue Ocean Search nd, Web). Radio emerged in the early 1900’s and set one of the first steps towards an “increasingly mobile world” (Brody & Campbell & Weinberger 1994, p.2). Not only was it the first medium to reach large masses on international basis, but also did it offer the opportunity to reach well defined geographical and demographical audiences. Within the years, many radio stations were created and few major ones established themselves. One well established station was the by AT&T operated WEAF channel, which aired the very first infomercial in 1922 (see Brody & Campbell & Weinberger 1994, pp.2-4). The first television advert was broadcasted in the US on July 01, 1941 via the network station WNBT by the watchmaker Bulova Watch Co. This TV commercial served as the groundbreaker for an “industry which has grown to generate tens of billions of dollars a year over the last 75 years” (Rodriguez 2016, Web). Television combined audio, video and text and thereby gained an advantage over prior forms of advertising. Through the synergy of these neural stimuli, advertisement on television reached audiences not only informatively but also emotionally.

In summary, one can say that marketing communication via media channels creates advantages and opportunities for companies and makes building costumer relationship easier. Through newspapers, billboards, radio or television, companies are able to reach high numbers of costumers, nationally or internationally. Additionally, do all prior mentioned media channels offer opportunities to target specific demographic or geographic audiences, which makes marketing more efficient and flexible. Advertising gains emotional reach and thereby a growing impact on consumers through the mix of pictures, videos, text and audio. Moreover, are all traditional marketing tools easy to receive, which makes advertisement accessible for everyone and everywhere. All these features support building a value proposition, as well as creating an image for a company and its products or services.

One can state, that if a company’s marketing communication, next to the other P’s of the marketing mix is carefully elaborated, exactly fits consumer’s needs and wants, and is well executed, costumers are attracted to a product’s or service’s value propositions.

In this case, selling becomes easier or even abundant and a product or service gains a beneficial position towards its competitors (see Kartajaya & Kotler & Setiawan 2017, p.50).

Nevertheless, does traditional media advertising not always offer the best conditions for efficient marketing. Advertising by the use of the before mentioned marketing tools is not only a costly (see Die ZEIT 2014, p.13) but also a time consuming activity for companies. Moreover, are opportunities for appropriate targeting limited and impact is only partly measurable. Caused by the vast and steadily growing number of ads and the absence of trusted relationships between company and costumer, traditional advertisement also gained an intrusive character in the past decades (see Statista 2016e, Web). Consumers feel disturbed by the high number of ads and tend to ignore them (Statista 2016c, Web). In order to overcome these before mentioned obstacles, companies have added or switched to alternative forms of marketing communication. One of these alternatives as well as its success factors will be explained in the following chapter.

2.2 Traditional Word of Mouth Marketing

Traditionally, marketing was understood as follows: Companies advertise products or services, e.g. through television commercials. Consumers see those advertisements and subsequently, “- and only then – (…) buy the products” (Rosen 2002 pp.4-5) [highlighting not in the original] or services. Even though this construct’s basis seemed legit, it did only appear on a one-to-one basis between company and customer and did not leave much space for external influencing factors. Marketers had to understand, that a purchase is not only a rationally made decision but also a social process, which involves more than only company and costumer (see Rosen 2002 p.6).

Various studies conducted in the year 2016 in Sweden, asked Swedish participants about their general attitude and associations with advertisement. 44 percent of the interviewees claimed, that they have a fairly or very negative attitude towards advertisement (see Statista 2016c, Web). A further study states, that especially young individuals up to 49 years of age perceive advertisement as something negative (see Statista 2016d, Web). Moreover, did 21 percent of Swedish respondents of another study indicate, that they associate the word “advertisement” with the adjectives annoying, disturbing, intrusive and vexing (see Statista 2016e, Web).

Consequently, one may state that not-as-advertisement-perceived marketing strategies may have a more positive effect on consumers, than direct advertisement. Connecting the dots, one can derive from the prior sentences, that an ideal form of modern marketing is a combination of subliminal marketing and a social process. One prime example for such a marketing tool is word-of-mouth-marketing.

Word-of-mouth has accompanied the human race from year one, nevertheless it has changed as time went by. A recommendation of a trusted friend, or the advice of an acquaintance not to buy a product can be seen as WOM. Literature furthermore, defines WOM as “informal communication between private parties concerning evaluations of goods and services” (Anderson 1998, p.6). WOM can consequently either be positive or negative (see Cobanoglu & Omran & Zhang 2017, p.4). The words of the ancient barker, described in chapter two, could be seen as early WOMM. In order to explain why individuals spread their WOM, one can distinguish between different motives. WOM-messages can be “product-related”, “self-related”, “individual-related”, “message-related” (see Kochmar & Lis, p.8) or caused by an economic incentive by a company. These motives explain that WOM is either related to the product, to self-affirmation, serves as an aid to another person or is related to the public message of a company or product (see Kochmar & Lis, p.8). For the purpose of this thesis, WOM will not be further analyzed towards the first four of the prior mentioned relations, but rather towards whether its incentive is intrinsic or extrinsic. It will be distinguished between earned and paid WOM. This chapter will focus on earned and paid WOM in traditional forms of marketing. Chapter six will give a closer insight on earned and paid WOM in digital marketing.

In chapter two it was outlined, that marketing’s aim is not necessarily to directly create sales, but to create “long term costumer relationships based on costumer value and satisfaction” (Armstrong & Kotler 2001, p.19), which then eventually lead to sales. Overall, this assumption is major to earned WOM. Brand love is created by brand trust, self-expressiveness and hedonic products (see Karjaluoto & Munnukka & Kiuru 2017, p. 527) and leads to long term costumer relationships. Next to loyalty and the willingness to pay price premiums, literature proposes positive WOM as one of the outcomes of brand love (see Karjaluoto & Munnukka & Kiuru 2017, p. 533). Consequently, if a company can develop a strong customer relationship and brand love, earned WOM will follow.

Also it is stated, “that when experience is high or a brand is considered affordable, the relationship between brand love and WOM will be stronger” (Karjaluoto & Munnukka & Kiuru 2017, p. 534). According to a by The Nielsen Company conducted study, 84 percent of respondents across 58 countries claimed, that for them, WOM recommendation from friends and family, is the most trustworthy advertisement form (see The Nielsen Company 2013, Web). Furthermore, a study by McKinsey indicates, that WOM is “the primary factor behind 20 to 50 percent of all purchasing decisions” (Bughin & Doogan & Vetvik 2010 Web). This is especially proven for first time purchases and higher priced products (see Bughin & Doogan & Vetvik 2010 Web). Thus, especially for first time purchases, consumers like to conduct more research. WOM messages incorporate a high degree of trustworthiness and are therefore major influencing factors to “if” and “how” purchases are conducted.

As was already addressed before, people are “social shoppers”. Individuals do not only make purchasing decisions because of an initial need, but also adjust their shopping behavior to their social surrounding (see Rosen 2002 p.4-6). Consequently, customer behavior is, among other factors, influenced by physical appearance, values, WOM of social groups and society, as well as status (see Kartajaya & Kotler & Setiawan 2017, pp.12-14 & Dandaneau 2008 in: Lawan & Zanna 2013). According to a study by Dandaneau, “societal norms are the major cultural factor that [regulates] the kind of clothes we buy and not adhering to it, often result in significant consequences, because an underlying social value or moral standard is violated” (Dandaneau 2008 in Lawan & Zanna 2013). This paradigm does not only apply to clothes but also to many other things, from tech-products to food. Consequently, the social pressure to adhering societal norms intensifies the effect of WOM-messages. Additionally, can brand love of a community or group not only promote purchasing decisions, but also create new needs (see Bucklin & Pauwels & Trusov 2008, p. 6).

Nevertheless, gaining brand love and creating a strong customer relationship within traditional channels of marketing in order to receive earned WOM, seems to be a time and money consuming process. Therefore, marketers developed new forms of paid WOMM, which are more controllable and measurable. In order to give an example of such a traditional WOMM strategy, costumer referral programs will be further explained.

Within costumer referral programs, a company offers extrinsic motivation to an already existing costumer in exchange for a referral to their business and thereby a new costumer (see De Pechpeyrou nd,Web). Traditionally, word-of-mouth messages are defined as referrals without direct incentive from a company. Referral programs consequently employ WOM messages for their benefit. An example for a possible referral program, could be a newspaper offering its subscribers a 10$ voucher in exchange for the recruitment of one new subscriber. When conducting referral campaigns within a business, some metrics have to be carefully considered. Participation as well as reward reception have to be simple and should not be linked to a lot of effort. Incentives should moreover be wanted and deliberate (see Krüger & Stumpf 2009, p.150).

Not only WOMM, but the general conduction of marketing has changed a lot within the past years. The internet and especially Web 2.0 re-shaped the marketing-landscape. In order to elaborate how this happened, the following chapter will deal with the origins and evolution of the internet, just as with its effects on society and marketing.

3 From Paper to Screen – The Web and Its Impact on Marketing

Especially in the 21st century, the daily use of computers and the Internet seems essential to one’s personal and professional daily routine. Approximately 70 percent of the literature this thesis is based on, was found on the world wide web, by consulting google scholar, university library systems or online book retailers. For the modern student it seems unthinkable to not have these resources. Still, the internet is an innovation, that has not been existent for too long. In the following paragraph, the origins of the internet are going to be illustrated in a chronological order.

3.1 The Developmental Stages of the Internet

In the late 1960’s, a first version of the Internet emerged through an experiment by the Advanced Research Projects Agency of the US Department of Defense, (then ARPA, today DARPA). It had the aim to connect computer networks. The resulting system called “ARPANET” went online in 1969, but was only limited to certain academic, governmental and research organizations, that had contracts with the Defense Department (see Cisco Systems Inc. nd, Web).

Via ARPANET, the first E-Mail was sent in 1972 by the Cambridge computer scientist Ray Tomlinson (The Centre for Computing History nd, Web). Between 1973 and 1983 TCP/IP (Transfer Control Protocol/Internetwork Protocol), a new communications protocol was developed. Its launch on January first 1983 marked the official birth of the internet (see Cisco Systems Inc. nd, Web).

In 1975 the American technology company IBM launched the IBM5100, “the first computer to look like the modern desktop model complete with a QWERTY keyboard, display and mass storage on tape all found within a single case” (Thompson Reuters 2009, Web). This launch provided the basis for the emergence of today’s private use of the Internet and entailed many more historic events related to today’s modern computing. In the very same year, Bill Gates and Paul Allen founded Microsoft just one year prior to the foundation of Apple Inc. by Steve Jobs, Steve Wozniak and Ronald Wayne. Fourteen years later, the British computer scientist Sir Tim Berners-Lee invented the World-Wide-Web. By the end of the year 1990, Berners-Lee wrote the first web page editor, today known as browser, as well as the first web server. The Web as we use it today, was introduced by the launch of the very first webpage in 1990 (see World Wide Web Foundation nd, Web). Here, it has to be kept in mind, that the term Internet does not equal the term Web. “A web service is a software system designed to support computer-to-computer interaction over the Internet” (Naik & Shivalingaiah 2008). Consequently, does the Internet just provide a basis for the Web. The World Wide Web changed constantly within time, these changes have been subdivided in different periods, which range from Web 1.0 to Web 4.0. In the following paragraphs, four evolutionary forms of the web will be outlined.

Web 1.0

The Web 1.0, also called the WWW denotes the first implementation of the web and according to Berners-Lee can be seen as the read-only web. Websites back then, had a rather static design and were little interactive. Companies launched websites with the aim, to make information available for everyone, at any place and time (see Getting 2007, Web).

Web 2.0

Through the read-write web, interactive web, or social web, which evolved around 2003, users were able to interact and to contribute content. Online video hosting, file sharing, blogs, free-web based mail and online banking were just a few of the new offers of the Web 2.0. Until today, Wikipedia and YouTube may be the best known websites, that emerged through the early stages of this specific web movement, but also social networking websites like Facebook and Twitter evolved out of Web 2.0 (see Chodhury 2014, p.8097). Additionally, Web 2.0 gave consumers the opportunity to rate and review purchased products or services openly and visible for everyone.

Web 3.0

The term Web 3.0, also known as “semantic web” or “portable personal web”, defines the shift from the browser based web, to an intelligent databased web that offers intelligent search, data based advertisement and machine generated content. Web 3.0 is led by the thought, that data should rather be shared than owned, and that websites should make room for non-browser based and highly personalized applications (see Chodhury 2014, pp.8097-8099). Amazon could be seen as an ambassador for Web 3.0 applications, as it offers a high degree of personalization and intelligence based on data based algorithms.

Web 4.0

Web 4.0 is a manifestation of the web, which is currently evolving out of Web 3.0. Adopting many of Web 3.0’s key characteristics, it enhances the idea of an intelligent databased web up to artificial intelligence. Additionally, is web 4.0 often described as “the internet of things”. This expression describes the interconnectivity and intelligence of nearly every article of daily use. This can be illustrated on the fact, that today, in 2017, a smartphone can not only make calls, but regulate the temperature of a house, shut the blinds or turn of the lights as well. Furthermore, does a smartphone, computer or tablet not only communicate to the object, but the object (e.g. a thermostat) can send back information, which can be evaluated and visualized by the smartphone (see Wagner 2016 Web).

3.2 The Web-Caused Changes to Society and Marketing

From the read-only, over the social and semantic web to the currently emerging Web 4.0, all development stages of the web brought significant changes to the world’s society. Amongst others, these changes include how “consumers socialize; manage their money, purchase goods and services and how they gather information” (Bitner et. al 2009).

According to Philip Kotler’s book “Marketing 4.0”, these changes can be broadly illustrated with the help of three models of power structure. These indicate changes from exclusive to inclusive power structure, from vertical to horizontal power structure, as well as a power shift from individuals to social groups (Kartajaya & Kotler & Setiawan 2017 pp. 5-14). It can be stated, that when approaching the theory of a shift from exclusive power to inclusive power on a micro level, the social web denotes one of its main influencing factors. Humans “embrace social inclusivity (…) [, additionally] social media has redefined the way people interact (…) enabling people to build relationships without geographic and demographic barriers.” (Kartajaya & Kotler & Setiawan 2017 pp. 9-10). One has to take into account, that moreover various other factors are influencing the progress toward a more inclusive and multilateral power structure, whether it is in politics, economics or on a micro level. Nevertheless, the social web is a compelling influencing factor leading to a more interconnected, transparent and open minded world.

Traditionally, the world’s society relied on vertical power structures. Recalling illustration 2, the graphic shows the flowing process of communication and information between company and market. In this traditional market system, this process was one-sided and companies believed that “innovation should come from within” (Kartajaya & Kotler & Setiawan 2017 pp. 11). Information or innovation was sent out to costumers and costumers solely reacted. Today, with instant communication and connectivity, this process evolved to be two-sided and horizontal. The market supplies ideas, whereupon companies commercialize these. Furthermore, did this shift of power structure influence costumer trust heavily. Nowadays, costumers find more trust in the f-factor (“family, Facebook fans, twitter followers) than in marketing campaigns (see Kartajaya & Kotler & Setiawan 2017 pp. 11).

As was already outlined in chapter 2.2, all along individuals have strived for social conformity to some degree (see Rosen 2002 p.4-6). Through the evolution of the web, this aspire has grown.

In 2017, power lies within social groups rather than individuals (see Kartajaya & Kotler & Setiawan 2017 & Rosen 2002 p.4-6), which is strengthened by the ability to easily form social groups via social media and stay connected. Individuals seek for advice of their social surrounding and moreover seek to share their experiences (see Erkan & Evans 2016). This makes them content contributors, social connectors as well as expressive evangelists, especially via social media platforms. Regarding these preferences in an economic approach, purchasing decisions are actively influenced by social references. A product feedback can be instantly received via smartphone or tablet, a complaint can promptly be posted on social media and be seen by a whole community. This makes the modern costumer more vocal and gives him/her an elevated status towards a company.

In conclusion, the web created a more connected, instant and transparent space for a vocal, social and active consumer. As a quote from the American Journal of Marketing Research cites, did the web (especially web 2.0) create a “shift in focus from companies to consumers, individuals to communities, nodes to networks, publishing to participation, and intrusion to invitation” (Khajeheian & Mirahmadi 2015). For companies, it is major to fully understand the shift from the costumer as a passive target to the costumer as an active medium of communication (see Kartajaya & Kotler & Setiawan 2017 pp. 13-15).

3.3 The Development Stages of Modern Marketing Before and After the Web

Within the years, marketing used many different approaches to successfully “tell” and “sell”. As the web’s different manifestations were categorized as web 1.0 to 4.0, likewise marketing’s evolutionary stages are classified as marketing 1.0 to marketing 4.0. These will be explained in more detail hereafter.

Marketing 1.0

As was already mentioned in the second chapter of this thesis, marketing is rooted in the industrial revolution. This stage is referred to marketing 1.0 or product driven marketing. In this stage of marketing evolution, marketing was mainly conducted by product specifications and had a mainly functional value proposition. Additionally, was it conducted in a one-to-many approach, e.g. via newspapers, billboards or radio (see Herbes & Friege 2016).

Marketing 2.0

Marketing 2.0 or customer centric marketing, was fueled by the emergence of information technology and followed a one-to-one approach. It had a focus on targeting costumers not only functionally but also emotionally and served as a guide to position a company or a product in a market. Media like telecommunication or early forms of the internet acted as tools for marketing 2.0.’s execution (see Herbes & Friege 2016).

Marketing 3.0

Marketing 3.0 or human centric marketing, was predominantly influenced by the emergence of Web 2.0. It had a many-to-many approach and was not only conducted to differentiate product or company but also to impart values, corporate mission and vision. This evolutionary stage of marketing served the approach of creating value proposition functionally, emotionally as well as spiritually (see Herbes & Friege 2016).

3.4 Marketing in 2017

As of April 2017, 3.811 billion people worldwide were active internet users (see Statista 2017a, Web). Considering a current global population of 7.509 billion (see Worldometers 2017, Web), the internet is actively used by almost half of the world’s population. According to marketing professor Philipp Kotler, this peak of internet population, and the connectivity and transparency it offers, have changed marketing forever (see Wendeler Marketing Consulting nd, Web). Marketing 4.0 targets the before mentioned new structures, in a very specific way. Companies need to gain costumer trust. The modern, smart and well informed costumer as well as the transparency offered through open two-way communication between company and costumer, makes gaining trust and authenticity harder than before. Earning credibility and being authentic requires consistent and honest communication of brand identity, spread through all fields or company operations (see Kartajaya & Kotler & Setiawan 2017). Here customer feedback shall not be seen as obstacle but as opportunity to seize authenticity through communication and support. Costumer relationship marketing, permission marketing, content marketing and influencer marketing have, next to others, evolved to be major tools to reach high levels of authenticity and trust. Social groups of costumers gain major importance within Marketing 4.0. Marketing segmentation in modern forms does not start with geographical or demographical segmentation anymore, but with a segmentation into social groups and communities. In order to target these, permission marketing builds credibility through “asking for customers” consent prior to delivering a marketing message” (Kartajaya & Kotler & Setiawan 2017, p.48). Taking a closer look at the example of permission marketing, it proves, that the customer is an active influencing part of marketing decisions more than ever before. Through this matter of fact, word-of-mouth-marketing gains further importance in the age of marketing 4.0. Social communities often gather around a specific aim, vision or person (see Kartajaya & Kotler & Setiawan 2017, p.45-53). Every active member of the social group, especially the leading character can easily be instrumented to spread certain marketing messages.

As was mentioned in chapter 2, traditional marketing builds on a theoretical approach of the “four P’s”, which are denoted as price, place, promotion and product (see Grobler 2007, p. 29). Marketing 4.0 takes a new position towards these. Many approaches to redefine the four P’s have been given by various people and organizations. This thesis will use the approach Philip Kotler uses in his book “Marketing 4.0” as an aide. Here, the “four P’s” advanced to be the “four C’s” including co-creation, currency, communal activation and communication. Co-creation substitutes the “P” of product and describes the aim of involving costumers in product creation and making products easily customizable and personalizable. Currency engages with the thought of dynamic pricing, integrating the idea of fluctuating currency. Communal activation targets the need of today’s internet users to have instant access to products and services. It substitutes the “P” of place. Last but not least, is the promotion “P” replaced by communication, as costumer communication is no longer one-sided information spreading but two-sided communication (see Kartajaya & Kotler & Setiawan 2017, p.45-53).

[...]


[1] Weekly published newspaper in Germany with a reach of 1.6 Mio readers and 507,731 copies sold in 2013 (see: Die ZEIT 2014).

[2] (Basic rate per mm: 1,6 x ad height) 12,90€ x 1.6 x 528mm (see: Die ZEIT 2014).

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Details

Title
Word-of-Mouth Marketing on Social Media. Influence on Buying Decisions, Evolution and Recommendations for Companies
College
University of Applied Sciences Saarbrücken
Grade
1,3
Author
Year
2017
Pages
81
Catalog Number
V386928
ISBN (eBook)
9783960952466
ISBN (Book)
9783960952473
File size
3171 KB
Language
English
Tags
Social Media, Marketing, Influencer, WOM, Word-of-Mouth, Facebook, Instagram
Quote paper
Jennifer Bettinger (Author), 2017, Word-of-Mouth Marketing on Social Media. Influence on Buying Decisions, Evolution and Recommendations for Companies, Munich, GRIN Verlag, https://www.grin.com/document/386928

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