Read Chapter 14 - Exploring Social Media & E-Business

Students,

Read Chapter 14 on Exploring Social Media and E-Business.

In just a few short years, social media and e-business have changed the way we communicate with each other, the way we meet people, and the way we shop. In this chapter, we explore how these trends affect both individuals and businesses.

WHY IS SOCIAL MEDIA IMPORTANT? If you are a “digital native” (anyone born after 1980), you know exactly what social media is because you have grown up with technology and are very comfortable sharing information about yourself. If you are anyone else, social media seems like a strange (but exciting) phenomenon.

What Is Social Media and How Popular Is It?

For our purposes, social media represents the online interactions that allow people and businesses to communicate and share ideas, personal information, and information about products and services. It is about a culture of participation, meaning that people can now discuss, vote, create, connect, and advocate much easier than ever before. See Fig. 14-1.

A recent Pew Internet Research study showed that 79 percent of U.S. adults who use the Internet are on Facebook, 29 percent use LinkedIn, 31percent are on Pinterest, 32 percent are on Instagram, and 24 percent are on Twitter.

Why Businesses Use Social Media. Social media has completely changed the business environment. Now many companies, large and small, are using social media to learn about customers’ likes and dislikes, seek public input about products and marketing, create a community feeling, polish brand image, and promote particular products. For more information about why businesses use social media and the benefits for a business, see Figure 14-2.

One reason is that companies want to encourage viral sharing of product or brand messages and images, meaning that a large number of people mention the brand or share the content repeatedly on social media sites. A hashtag is a word or short phrase preceded by the pound sign (#) to identify different topics.

The fact that so many people are actively sharing information about themselves and their likes and dislikes was a driving force behind many companies’ attempts to develop a social media presence. Traditional marketing ads were top down; companies used ads to promote their product without any opportunity for feedback.

With social media, this is no longer the case. If a person has a bad experience with a product or service, they tend to let the world know by writing about it on a blog, mentioning it on Facebook, or tweeting about it. The bottom line: Because of social media, companies no longer have much control over what is said about their products or
services. However, they still often respond to negative comments about the company and its products or services made by customers. Even if the company’s response does not completely resolve the issue, customers appreciate the company’s efforts to improve customer service.

SOCIAL MEDIA TOOLS FOR BUSINESS. For a business, part of what makes social media challenging is the sheer number of ways to interact with other businesses and both existing and potential customers. Companies are using social media because it allows the company to (1) connect with customers, e, (2) provide another means of customer service, (3) provide information that is valuable to customers, and (4) engage customers in product development and formulation.

Social content sites allow companies to create and share information about their products and services via blogs, photos, and podcasts. For businesses selling to other businesses, social media sites can also include webinars and online promotional materials.

Business Use of Blogs. A blog is a website that allows a company to share information in order to increase its customers’ knowledge about its products and services, as well as to build trust.

Once a story or information is posted, customers can provide feedback through comments, which is one of the most important ways of creating a conversation
between business firms and consumers.

Blogs are effective at developing better relationships with customers, attracting new customers, telling stories about the company’s products or services, and providing an active forum for testing new ideas.

Photos, Videos, and Podcasts

In addition to blogs, another tool for social content is media sharing sites, which
allow users to upload photos, videos, and podcasts. Before participating in media sharing, a business should consider the following factors:

Who will create the photos, videos, and podcasts that will be used?

How will the content be distributed to interested businesses and consumers?

How much will it cost to create and distribute the material?

Videos have also gained popularity because of their inherent ability to tell stories. Companies know that YouTube and other sites are useful because they are already recognized by other businesses and consumers as a source of both entertainment and information.

Podcasts are digital audio or video files that people listen to or watch online on
tablets, computers, MP3 players, or smartphones.

Social Media Ratings. Social media enables shoppers to access opinions, recommendations, and referrals from others who have bought a product or service. This type of information is available via a social media site and can include reviews and ratings.

Social Games. A social game is “a multiplayer, competitive, goal-oriented activity with defined rules of engagement and online connectivity among a community of players.” One of the most important aspects of social media is entertainment, and games like Words with Friends and FarmVille serve that purpose. Games are also popular because people like the competition and social status they can earn through playing social games. For businesses that create games, it can be profitable. While some businesses elect to create their own games, others promote particular brands or products within another firm’s game.

ACHIEVING BUSINESS OBJECTIVES THROUGH SOCIAL MEDIA. Many businesses are already using social media to achieve important objectives. Some of these are long term—such as building brand awareness and brand reputation—while others are more short term—such as increasing website traffic or generating sales leads.

Social Media Communities. For a business, social media can be used to build a community. Social media communities are groups of people who share common interests and who want to engage in conversations about issues they consider important or interesting. These electronic communities (often called networks) provide a method for people to use technology and the Internet to connect with people with similar interests. People that are part of the networks can also share information and even develop profiles. Individuals in a community can be called friends, fans, followers, or connections. Figure 14-3 shows how many businesses use the top seven social media community sites: Facebook, Twitter, LinkedIn, YouTube, Google+, Instagram, and Pinterest. Different types of social communities include forums and wikis.

A forum is an interactive version of a community bulletin board and focuses on threaded discussions. These are particularly popular with people who share a
common interest such as video games.

A wiki is a collaborative online working space that enables members to contribute content that can be shared with other people. Wikipedia, the free online encyclopedia, is the best example of a wiki.

Crisis and Reputation Management. One of the most important reasons for listening to stakeholders is to determine whether there is a crisis brewing. A majority of companies believe that their company is less than a year away from some potential crisis
moment, and they monitor social media for conversations that may predict a crisis. During a crisis, companies can use social media to answer questions, reassure the public, and present positive information to help rebuild their reputations.

Listening to Stakeholders. Listening to people, whether they are customers or not, is always an important aspect of a company’s social media plan. Listening to the conversations unfolding on Facebook or Twitter, for example, can be important to understanding just what people think about a company’s products and services.

Targeting Customers. Many companies are using social media to increase awareness and build their brand among customers. It is especially valuable in targeting the Millennials, tech-savvy digital natives born after 1980.

Social Media Marketing. Social media marketing is the “utilization of social media technologies, channels, and software to create, communicate, deliver and exchange offerings that have value for an organization.” As companies become more comfortable with social media, we can expect more companies to use social media to market products and services to their customers. Research indicates that companies are shifting their advertising money from traditional marketing (like television and magazines) to digital marketing (like Internet search engines and social media), and experts predict that social media will account for over $17 billion of all online advertising expenditure by 2019. The reason is simple: people are spending more time online. Figure 14-4 shows that companies like Snap make using their technology as easy as possible to connect with potential or existing customers.

Inbound marketing is a marketing term that describes new ways of gaining attention and ultimately customers by creating a website that pulls in customers. Tools used for inbound marketing programs include search engine optimization, blogging, videos, and social media.

Companies also use social media to sell goods and services, invite customer feedback, and reinforce a positive brand image.

As important as social media is, it is only one aspect of digital marketing, which is comprised of several areas, including:

Search engine optimization—using key words in the website in order to rank higher in search engine results

Search engine marketing—buying ads like Google’s AdWords to increase traffic to a company’s website

Display advertising—buying banner ads

Email marketing—targeting customers through opt-in e-mail campaigns

Generating New Product Ideas. Companies can use social media to conduct much of their consumer-based research. Crowdsourcing involves outsourcing tasks to a group of people in order to tap into the ideas of the crowd. In some cases, valuable information can be obtained by crowd voting.

Companies can even build communities for specific brands in order to obtain
information and new ideas from consumers.

Recruiting Employees. For years, companies have used current employees to recruit new employees. The concept is simple: Current employees’ friends and family may prove to be good job candidates. Social media takes that concept to a whole new level.

LinkedIn, the largest social network for professionals, has been used quite effectively by large corporations, small businesses, nonprofit organizations, and government agencies that want to recruit new employees.

DEVELOPING A SOCIAL MEDIA PLAN. Before developing a plan to use social media, it is important to determine how social media can improve the organization’s overall performance and how it “fits” with a company’s objectives and other promotional activities.

Steps to Build a Social Media Plan. Once it is determined how social media links to the company’s other activities, several steps should be considered.

Step 1: Listen to Determine Opportunities. Often, social media is used to “listen” to what customers like and don’t like about a company’s products or services.

Monitoring social media sites also allows managers and employees to enter the conversation and tell the company’s side of the story.

In addition, companies can monitor social media sites to gather information about competitors as well as what is being said about the industry.

After the listening phase, it is important to analyze the information to identify the company’s strengths, weaknesses, opportunities, and threats before taking the next step—setting objectives.

Step 2: Establish Social Media Objectives. After listening to and analyzing the information obtained from social media sites, it is important to use that information to develop specific objectives. For social media, an objective is a statement about what a social media plan should accomplish.

For many companies, the most popular objectives are increasing brand awareness, acquiring new customers, introducing new products, retaining current customers, and gaining customer insight.

Other objectives that are often important include improving search engine ranking, showcasing public relations activities, increasing website traffic, and generating sales leads.

Step 3: Segment and Target the Social Customer. Ideally, a company will have developed a customer profile that describes a typical customer in terms of age, income, gender, ethnicity, etc. It also helps to know how they think, how they spend their time, how much they buy, and how often they buy.

Additionally, it is important to really understand how customers use social media.

A business should consider all available and relevant information about potential and existing customers when creating a social media plan. Some of the
information that can help you target just the “right” social media customer is
illustrated in Figure 14-5.

Step 4: Select Social Media Tools. The search for the right social media tool(s) usually begins with the company’s social media objectives, outlined in Step 2.

It also helps to review the target customer or segment the company is trying to reach (Step 3).

With this information, the next step is to choose the right social media tools to reach the right customers.

It is also possible for a business to build a social media community—especially when the objective is to fund local community projects or charities.

Often money for worthwhile projects is obtained through crowdfunding. Crowdfunding is a method of raising money from a large group of people who donate small amounts of money using the Internet and social media.

Step 5: Implement and Integrate the Plan. Once social media tools have been identified, a company can implement and integrate the social media plan.

Because a social media plan doesn’t necessarily have a start and stop date, it is different from traditional advertising campaigns. Some social media activities continue and have a life of their own.

To increase the effectiveness of social media, companies will often integrate online promotions with more traditional or offline promotions.

As companies increase the amount of money spent on digital marketing and social media, they will attempt to tie online and offline promotions together in order to get “more bang for the buck.”

Measuring and Adapting a Social Media Plan. Because social media is a relatively new method of reaching customers, many companies struggle when attempting to measure social media. Generally, there are two types of social media measurement. While both measurements can be used, most companies tend to use quantitative measurements.

Quantitative Social Media Measurement. Quantitative social media measurement consists of using numerical measurements, such as counting the number of website visitors, number of fans and followers, number of leads generated, and the number of new customers. Table 14-1 shows a few popular quantitative ways to measure social media.

A number of companies are using key performance indicators (KPIs), measurements that define and measure the progress of an organization toward achieving its objectives. Generally, KPIs are quantitative (based on numbers).

If measuring the success or failure of social media activities with KPIs, the first step is to connect KPIs with objectives.

The second step is to set a benchmark—a number that shows what
success should look like.

Qualitative Social Media Measurement. Qualitative social media measurement is the process of accessing opinions and beliefs about a brand. This process primarily uses sentiment analysis to categorize what is being said about a company. Sentiment analysis is a measurement that uses technology to detect the mood, attitudes, or emotions of people who experience a social media activity. Other measurements for determining customer sentiment include:

Customer satisfaction score—the relative satisfaction of customers.

Issue resolution time—the percentage of customer service inquiries resolved satisfactorily using social media.

Resolution time—the amount of time taken to resolve customer service issues.

When compared to quantitative measurements, it should be noted that many of these qualitative social media measurements are more subjective in nature.

The Cost of Maintaining a Social Media Plan. Because social media costs both time and money, it is important to measure the success of a social media plan and make adjustments and changes if needed. Based on quantitative and qualitative measurements, the company may also try to determine if it is getting a positive return on its investment in social media.

After reviewing results for social media activities against pre-established benchmarks, it may be necessary to make changes and update the plan to increase the effectiveness of the social media plan. It is also important to create future social media plans based on what worked and what didn’t work in previous plans.

DEFINING E-BUSINESS. e-Business, or electronic business, can be defined as the organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society’s needs through the facilities available on the Internet.

In a strict sense, e-business is used when talking about all business activities and practices conducted on the Internet by an individual firm or industry. On the other hand, e-commerce is a part of e-business and usually refers only to buying and selling activities conducted online.

With the popularity of smartphones and tablet computers capable of functions such as Internet access and e-mail, many companies are using mobile marketing, communicating with and selling to customers through mobile devices. A growing number of companies have apps to make mobile transactions faster and more convenient for customers.

Organizing e-Business Resources. To be organized, a business must combine human, material, informational, and financial resources, but the resources in an e-business may be more specialized than in a typical business. (See Figure 14-6.)

People who design, create, and maintain websites are only a fraction of the specialized human resources required by e-businesses.

Material resources must include specialized computers, sophisticated equipment and software, and high-speed Internet connections.

Computer programs that track the number of customers who view a firm’s website are generally among the specialized informational resources required.

Financial resources usually reflect greater participation by individual entrepreneurs, venture capitalists, and investors willing to invest in a high-tech firm instead of conventional financial sources such as banks.

In an effort to reduce the cost of specialized resources that are used in e-business, many firms have turned to outsourcing, the process of finding outside vendors and suppliers that provide professional help, parts, or materials at a lower cost

Satisfying Needs Online

Today, more and more people are using computers, the Internet, and social media as a way to connect with people. The Internet can also be used to purchase products or services.

The Internet has created some new customer needs that did not exist before the creation of the Internet.

e-Businesses can satisfy those needs, as well as more traditional ones.

In addition to purchasing products, the Internet can be used by both individuals and business firms to obtain information.

Internet users can access newspapers, magazines, radio, and television programming at a time and place convenient to them.

The Internet provides the opportunity for two-way interaction between an
Internet firm and the viewer.

Customers can respond to information on the Internet by requesting more
information or posing specific questions, which may lead to purchasing a product or service.

The Internet allows customers to choose the content they are offered. Knowing the interests of a customer allows an Internet firm to direct appropriate, smart advertising to a specific customer.

Creating e-Business Profit. Business firms can increase profits either by increasing sales revenue or by reducing expenses through a variety of e-business activities.

Increasing Sales Revenue. Each source of sales revenue flowing into a firm is
referred to as a revenue stream.

One way to increase revenues is to sell merchandise on the Internet. Because the opportunity to shop on the Internet is virtually unrestricted, traditional
retailers can obtain additional revenue by selling to a global customer base 24 hours a day, seven days a week.

Intelligent information systems also help to generate sales for Internet firms. Such systems store information about each customer’s purchases, along with a variety of other information. Using this information, the system can assist the customer the next time he or she visits the website.

Although some customers may not make a purchase online, the existence of the firm’s website and the services and information it provides may lead to increased sales in the firm’s physical stores.

e-Business revenue streams are also created by advertising placed on Web pages and subscription fees charged for access to online services and content.

Many Internet firms that distribute news, magazine and newspaper articles, and similar content generate revenue from commissions earned from sellers of products linked to the site.

Reducing Expenses. Reducing expenses is the second major way in which
e-business can help to increase profitability. Providing online access to information that customers want can reduce the cost of dealing with customers.

FUNDAMENTAL MODELS OF E-BUSINESS. One way to get a better sense of how businesses are adapting to the opportunities available on the Internet is to identify e-business models. A business model represents a group of common characteristics and methods of doing business to generate sales revenues and reduce expenses. Regardless of the type of business model, planning often depends on if the e-business is a new firm or an existing firm
adding an online presence. (See Figure 14-7.)

Business-to-Business (B2B) Model. Some firms use the Internet mainly to conduct business with other businesses. These firms are generally referred to as having a business-to-business (or B2B) model. When examining B2B firms, two clear types emerge.

In the first type, the focus is simply on facilitating sales transactions between businesses.

A second, more complex type of B2B model involves a company and its suppliers. Today, suppliers use the Internet to bid on products and services they wish to sell to a customer and learn about the customer’s rules and procedures that must be
followed.

Business-to-Consumer (B2C) Model. Companies that have a business-to-consumer (or B2C) model are focused on individual consumers. See Table 14-2.

Typically, a business firm that uses a B2C model must answer the following
questions:

Will consumers use websites merely to simplify and speed up comparison shopping?

Will consumers purchase services and products online or end up buying at a traditional retail store?

What sorts of products and services are best suited for online shopping?

Are consumers willing to wait for purchases to be delivered, will they pay for next-day delivery, or will they collect online purchases from a convenient pickup site?

B2C firms also attempt to build long-term relationships with their customers by making a special effort to make sure that the customer is satisfied and that problems, if any, are solved quickly.

Specialized software also can help build good customer relationships. Tracking
decisions and buying preferences as customers navigate a website, for instance, helps management make well-informed decisions about how best to serve online customers.

THE FUTURE OF THE INTERNET, SOCIAL MEDIA, AND E-BUSINESS. Since the beginning of commercial activity on the Internet, developments in computer technology and
e-business have been rapid and formidable. However, success is not guaranteed. Today, most firms involved in the Internet, social media, and e-business use a more intelligent approach to development. Fortunately, the long-term view held by the majority of analysts is that the Internet, social media, and e-business will expand along with related computer technologies.

Internet Growth Potential

o date, only a small percentage of the global population uses the Internet. In June 2017, estimates suggest that about 3.7 billion of the 7.5 billion people in the world use the Web.

Americans comprise approximately 8 r percent of all users. Approximately 89 percent of the American population uses the Internet, indicating that future growth in the United States is limited.

Primary reasons for using the Internet include the ability to connect with other
people, to obtain information, or to purchase a firm’s products or services.

Of particular interest to business firms is the growth of social media.

Experts also predict that the number of companies using e-business to increase sales and reduce expenses will continue to rise. Firms that adapt existing business models to an online environment will continue to dominate development.

Ethical and Legal Concerns. The social and legal concerns for the Internet, social
media, and e-business extend beyond those shared by all businesses. Essentially, the
Internet is a new “frontier” without borders and without much control by government or other organizations.

Ethics and Social Responsibility

Social responsibility and ethical behavior by individuals and businesses on the Internet are major concerns.

An ethically questionable practice is the unauthorized access and use of information discovered through computerized tracking of users once they are connected to the Internet.

A user may visit a website and unknowingly receive a small piece of software code called a cookie, which can track where the user goes on the Internet and measure how long the user stays at any particular website.

Although it can produce valuable customer information, it can also be viewed as an invasion of privacy, especially since users may not even be aware that their movements are being monitored.

There are several other threats to users’ privacy and confidentiality.

Monitoring an employee’s computer usage may be intended to help employers police unauthorized Internet use on company time, but the same records can also give the firm an opportunity to observe what otherwise might be considered private and confidential information.

Experts suggest that, at the very least, employers need to disclose the level of surveillance to their employees and consider the corporate motivation for monitoring employees’ behavior.

Some firms also practice data mining, the practice of searching through data records looking for useful information. Based on an individual’s information, data mining analysis can provide what might be considered private and confidential information about individuals.

Internet Crime

Because the Internet is often regarded as an unregulated frontier, both individuals and business users must be aware of online risks and dangers. A general term that describes software designed to infiltrate a computer system without the user’s consent is It is often based on criminal or malicious intent and can include computer viruses, spyware, deceptive adware, and other software capable of criminal activities.

In addition to the risk of computer viruses, identity theft is one of the most common computer crimes that affect both individuals and business users. A recent study determined that over 15 million Americans were victims of identity theft in just one year.