Why Should Companies Invest in Social Media Marketing?

Parameters and Means for Performance Measurement

©2015 Academic Paper 65 Pages


Marketing has been greatly impacted by social media and internet developments. In the past decades a massive change within the disclosure landscape and the communication between companies and their stakeholders has taken place. In order to stay competitive on the market, companies have to identify the advantages and opportunities given by social media.
Using various social media platforms, companies can benefit in different corporate areas, like marketing, public relations, human resources or customer services. Since every platform has its own goals and approaches a different target audience, the companies have to choose the most appropriate platforms and then develop a specific strategy.
This book shows the motives for companies to invest in social media and clarifies complicated concepts. Furthermore, it evaluates various social media channels and their effectiveness as well as their return on investment measurements.


Table Of Contents

3.1.2 Google+ ... 36
3.1.3 Snapchat ... 37
3.2 Professional Networks ... 38
3.2.1 XING ... 38
3.2.2 LinkedIn ... 39
3.3 Blogging & Micro Blogging ... 41
3.3.1 Weblogs ... 41
3.3.2 Micro Blogging Twitter ... 42
3.4 Content communities ... 43
3.4.1 YouTube ­ Video Sharing ... 44
3.4.2 SlideShare ­ Presentation Sharing ... 44
4. The Benefits and Challenges of Social Media ... 46
4.1 Brand awareness and customer acquisition ... 46
4.2 Customer Relation Management ... 46
4.3 Public Relations and Human Resources ... 47
5. Limitations and risks of Social Media Marketing ... 48
6. Conclusion & Outlook ... 50
References ... 52
Appendix ... 57

List of Figures
Figure 1: Flow of information in web 1.0 and web 2.0 ... 12
Figure 2: Social Media ... 13
Figure 3: Social Media User Ladder ... 15
Figure 4: Social Media Channels ... 17
Figure 5: 1:1 media ... 18
Figure 6: 1:n media ... 18
Figure 7: n:n media ... 19
Figure 8: Online Marketing Areas ... 21
Figure 9: From a user to a customer ... 22
Figure 10: Bowling-Flipper-Theory ... 23
Figure 11: Conceptual Framework: Traditional versus Online Marketing Mix ... 25
Figure 12: Social Media Iceberg ... 26
Figure 13: Strategy for Social Media ... 27
Figure 14: Social Media Objectives 2011 ... 28
Figure 15: Social Media Objectives 2012 ... 28
Figure 16: ROI of Social Media ... 29
Figure 17: KPI's ... 30
Figure 18: Social Media Response Management Triage ... 33
Figure 19: Perception Gap ... 49

List of Abbreviations
Ibid. ibidem, "in the same place"
UGC User generated content
ROI Return on investment
KPI Key Performance Indicators
SEO Search
CMS Content Management System
Public Relations
HR Human

Marketing has been impacted by social media and the internet developments.
In the past decades there was a massive change within the disclosure
landscape and the communication between the companies and their
stakeholders. In order to stay competitive on the market, companies have to
lighten up and identify advantages and opportunities given by social media.
This paper shows the motives for companies to invest in social media and
clarified complicated concepts. Furthermore, it evaluates various social media
channels and their effectiveness as well as return on investment measurements.
Using various social media platforms, companies benefit in different corporate
areas, Marketing, Public Relations, Human Resource, or Customer Services.
Since every platform has its own goals and approach different target audience,
the companies has to choose the most appropriate platforms and develop a
specific strategy.
To examine whether the objectives are achieved, performance measurement
with its metrics are needed. Companies monitor the social media activities
applying various tools as well as reviewing the Key Performance Indicators.
Since the return on investment of social media is not quantifiable, companies
examine the reach and user engagement and focus on building customer
relations first, rather than selling the product, since a customer with a positive
attitude towards the brand will more likely buy a product or service when
Nowadays, it is essential for companies to be on social media to stay
competitive and reach their target audience.

1. Introduction
1.1 Social Media phenomenon
The rise and wide spread of the internet let companies rethink their strategies
and take into consideration a new ways of communication (Cheong and
Morisson, 2008).
In less than three years the fastest growing online tool social media became the
most popular activity on the web (Qualman, 2012). Social media can be
explained as a new type of media. If Facebook were a country it would be the
largest country in the world, with 1.49 billion monthly active users (Facebook
Newsroom, 2015), followed by the population of China, 1.4 billion, and
population of India, 1.28 billion (Worldometers, 2015). The usage of the internet
became an inherent part in people's everyday life. Therefore, marketers should
become aware of this great opportunity.
According to a BITCOM research an average internet user spend one quarter
of their online time using social network channels like Facebook, Xing or
Google+. Younger users cannot even differentiate between social media and
the internet. An explanation to this could be, that 96 percent of the young internet
users are members of at least one social network page and use internet
generally for social media (Bitkom, 2012).
According to Qualman (2015), 92 percent of all companies state that social
media is important for their business, which is an increase by 6 percent
compared to 2013. A considerable number of companies use Social Media
mostly for PR, HR, Marketing and Communication to drive sales, build traffic or
find employees. However, some companies already took the next step to benefit
from the strength of the online-communities using Open Innovation and
Crowdsourcing to involve the consumer into the value creation process. Due to
direct involvement the consumer establishes a deep emotional bond with the
company which can increase brand awareness, loyalty, satisfaction, and
convert the customer into a brand ambassador (Bitkom, 2013).
As Erik Qualman (2012) stated, "We don't have a choice on whether we do
social media, the question is how well we do it". Companies that are deeply
engaged in social media significantly surpass their competition in both revenues

and profits (ibid.). If a company is not online and acts on the social media
platforms, it gives the impression of being unimportant and not contemporary.
According to Funk (2013), there are four key reason to get involved in social
x Target audience: 91 percent of online adults use social media. This is a
big opportunity for companies to increase their market share and should
not be ignored.
x Customer
gives a unique opportunity to build
a personal connection with companies' brand loyalists.
x Word of mouth: Companies can let fans indirectly sell products by writing
reviews, since 92 percent trust the recommendations of family, friends,
and strangers.
x Competition:
88 percent of all businesses use social media for marketing
purposes. Therefore, it is important to stay on track, since company's
competitors are certainly among them.
Social media becomes an interesting field for investigation and investment. As
Larry Weber (2009, p.283) says: "Social media is a new strategy that has the
capacity of changing public opinion ­ every hour, minute, even a second. And
why not changing customers brand attitude?"
1.2 Problem Statement
Social media has become one of the dominant forms of communication in the
digital world, extremely changing the traditional relationship between a
consumer and a business, since buyer behaviour has changed dramatically. It
is the biggest shift since the industrial revolution. Where TV required 13 years
to reach 50 Mio users, the internet only needed 4 years. An even faster
development can be seen at the social media platform Facebook. With 200
million users in less than 12 months, Facebook make social media the number
one activity on the web (Qualman, 2015).
When it comes to social media marketing, companies have to lighten up and
literally fight for consumers' attention since the
way corporations communicate

and the way customers use the internet altered in the past ten years. Traditional
marketing does not apply any longer, since the old concept of sender, the
company, and receiver, the customer, is not applicable anymore.
Social media is the most influential source in consumer purchase decision. The
majority of viewers, 86 percent, do not trust traditional advertising any longer
and 90 percent do not respond to generic email or direct calls. The biggest drop
can be seen within newspaper advertising which decreased by 18 percent
where 24 out of 25 largest newspapers are experiencing record declines in
circulation. While only 14 percent of customers trust ads, the majority, 76
percent, trust consumer recommendations for purchase decisions (Qualman,
2012). This is why companies have great opportunities in social media because
of the worth of mouth or recommendations by other social media users.
Worth of mouth is common on social media; therefore, companies have to get
customers to spread the message to each other to make it more genuine. There
is no possibility for companies to buy attention, since "pay to play" does not
apply anymore. Huge social media budget does not automatically mean
success, as the marketer has to "play to play" creating authentic content which
attract the customer (Quesenberry, 2015).
This issue is enhanced by the fact that customers are not only better informed
but they are also busy and overworked due to the modern lifestyle and fast-
moving environment. On social media platforms the customers are able to
participate in every process of a product life cycle sharing their way of view with
others in a timely basis.
The development of social media offers companies new opportunities and
challenges to gain additional market share. By using social media companies
can build trust and relationship to the customer. On the other hand, there is no
border anymore and every company becomes transparent entering the world of
social media and have to give a lot without expecting an immediate return. This
is why it is so important for the companies to differentiate themselves from other
companies on the social media if they want to stay competitive.

1.3 Purpose
The main purpose of this study is to obtain knowledge and emphasize the
importance for companies to invest in social media marketing, as well as to
investigate how they use it.
The research questions are:
1. Why is it important for companies to invest in social media?
2. How do companies use social media in their marketing communication?
1.4 Structure
paper consists of two main parts ­ the theoretical part, using secondary
data, and the case study, using primary and secondary data. It is subdivided
into seven chapters with the following structure;
Chapter one introduces the topic and describes the social media phenomenon,
followed by the problem statement, which declares the fast-moving issue
marketers should be aware of. Next Chapter reflect the literature review. It
introduces the concept of social media and all its' components, including the
critically analysed relevant theories.
The Third chapter focuses on all significant social media channels, their use,
advantages and disadvantages, as well as the performance measurements.
Fourth chapter concentrate on the benefits and challenges of social media on
special fields of application, followed by the limitations and risks the new media
involve in chapter five.
Finally, chapter six concludes by summarizing the
paper and providing an
outlook on how social media will progress in the future.

2. Social Media and Marketing
2.1 Social Media
2.1.1 Definition
To understand the term Social media, it is essential to deal with the term web
1.0 and web 2.0 initially. While web 1.0 only focused on one-way
communication, for example source of information, e-mail communication or e-
commerce, web 2.0 integrate the user into the communication, Figure 1 (Bruhn,
2014, p.1036).
Figure 1: Flow of information in web 1.0 and web 2.0 (Bruhn, 2014, p.1036)
With web 2.0 users start to use the internet as a platform with user-generated
content (UGC). It offers the user a possibility to create and share content on
various platforms. Social media goes even further, since the users create, like,
share and communicate the content to other users they have any kind of
connection with, be it common friends, hobbies, shared interests. Therefore, the
content gains social components (Grabs and Bannour, 2012). This UGC can be
published as text, pictures, videos or audios (Hettler, 2010, p.14). Overall, users
are able to build entirely new relationships online (Friedrichsen and Mühl-
Benninghaus, 2013).

Kaplan and Haenlein (2010) describe social media as a group of web and mobile
applications that build on the ideological and technological foundations of web
2.0 and it is used to turn interpersonal communication into interactive dialogue
between organizations, communities, and individuals worldwide. This allows the
creation and exchange of UGC to achieve social interaction and support idea
sharing. Users are in control ­ as content consumers, as publishers and as
influencers (Jordan Edmiston Group Inc., 2012).
There is a broad range of applications that can be used both by consumers and
enterprises as shown in Figure 2. The implementation of these applications
within a corporate environment is referred to as Enterprise 2.0 (Friedrichsen and
Mühl-Benninghaus, 2013).
Figure 2: Social Media (Friedrichsen and Mühl-Benninghaus, 2013)
Mayfield (2008) defines social media as a new type of media which includes the
sharing of opinions through blogging, microblogging, social networks, photo and
video sharing websites, rating sites or company specific applications. It also
includes characteristics, such as participation, openness, conversation,
community and connectedness.
Social media covers many areas within a company, for example Marketing, PR,
Sales, Customer Service or HR. The complexity, unknown area and all the
possible fields of applications of social media lead to a new profession, Social

Media Manager. This person is responsible for monitoring and organization of
the social media corporate performance (Düweke and Rabsch, 2012, p.155).
Through the use of social media companies are able to do businesses more
effective at a very reasonable price with a higher range of coverage (Berthon,
Pitt and Campbell, 2008). However, even it is effective, it does not mean that it
has affected the consumer in the way company want. Consumers not only use
social media for research or to share their content, however, they increasingly
use it to engage with companies, by providing feedback and their own opinions
(Garretson, 2008).
Corcoran (2009) complements an additional characteristic to social media and
divides it into three types, owned media, paid media and earned media. Owned
media is controlled by the company, for example the website. Paid media is
bought by the company and includes online advertising, where earned media is
not controlled by the company and includes word-of-mouth. Earned media is the
media where social media marketing plays an important role, which will be
discussed in 2.3.

2.1.2 Users
According to Grabs and Bannour (2012), there are five different types of users
emerged from social media, Digital Natives, Digital Visitors, Digital Residents,
Opinion Leaders, and Early Adaptors.
However, Forrester Research Inc. grouped consumers into six different
categories of participation, visualized by a ladder, Figure 3.
Figure 3: Social Media User Ladder (Forrester Research Inc., 2009)
The Inactives are not involved in any Social media activities. The major
category, Spectators only observe, read, and watch the content on Social
media. The second biggest category, Joiners, possess social networking profile,
followed by Collectors, who organize the content for others. An important
category for companies are the Critics, who respond to the content of others.
Hence companies obtain direct feedback and benefit from it, since this feedback
can be used for product developments. In the next category, Conversationalists,
users actively share own opinions on Social media networking sites. The group

with the highest participation rate, Creators, publish the social content
consumed by others. It is here essential for a company to understand where the
customers are located on the ladder, since the company can determine which
strategy to use in order to reach those customers (Bernoff, 2010).
Recently, social media also gained in relevance for seniors. Therefore, almost
all target groups exist on social media channels and can be reached by all kind
of companies. At the moment 41 percent of people 65 years old and older are
using social media applications (Bitkom, 2012). If this trend continuous,
companies are able to approach an enormous target group, which is not online
2.1.3 Channels
In current times, social media channels already have reached an enormous
extent, as it can be seen in Appendix `Social Media Conversations'. There are
hundreds of applications and platforms with diverse characteristics that differ
from each other in terms of functionality and scope (Kietzmann et al., 2011).
It is a significant challenge for companies to choose the most appropriate and
effective application, where companies target audience is located, to be able to
achieve the defined objectives. The use of social media requires careful
analysis, planning, implementing and monitoring. If there is no proper
application, the company should consider to establish its own platform, for
example Fujifilm launched ZSpotNow.com (Kaplan and Haenlein, 2010).
To be successful companies should be present on more than one application
and exploit the strengths of the different platforms. The advantages of
application combinations go from cost saving to broader brand awareness.
Should there be no possibility to maintain more than one channel, Funk (2013)
recommend to be active on Facebook, as this platform captures 63 percent of
all social media visits. Agreeing with this suggestion, Qualman (2015) adds
another important application for marketers, LinkedIn, additional to Facebook.
Appendix `Active User', shows the main platforms with the most active users.

According to Grabs and Bannour (2012), "Friends, fans, and followers are the
new term for virtual relationships between people. For companies it is important,
therefore, to position themselves among their potential customers."
This work presents the most common and the most-used channels for
businesses, Figure 4, which will be explained in detail in Chapter 3.
Figure 4: Social Media Channels (Own illustration)
Social Media
Blogging &
Micro Blogging
Sharing Sites


Type of Edition
ISBN (Softcover)
File size
2.5 MB
Institution / College
University of applied Sciences Regensburg – Faculty of Business Studies
Publication date
2016 (March)
Company Public Relations Customer Relation Management Social Media Markting Performance Measurement Social Network Brand awareness Human resources Investment measurement

Title: Why Should Companies Invest in Social Media Marketing?
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