Relationship marketing in social media jonsson

Lund University Internet Marketing, Branding and Consumers 2012-‐02-‐28

Relationship Marketing and Loyalty in Social Media

A Comparison Between Three Swedish Membership Clubs

Author Caroline Jonsson 880101

Word Count Excluding References: 2996

2

Table of Contents Introduction ........................................................................................................... 3 1.1 Background ................................................................................................................................................... 3 1.2 Problem Discussion ................................................................................................................................... 3 1.3 Research Question ..................................................................................................................................... 4 1.4 Purpose ........................................................................................................................................................... 4 Theoretical Framework .......................................................................................... 5 2.1 Loyalty and Membership Clubs ............................................................................................................ 5 2.2 Relationships in Social Media ................................................................................................................ 5 2.3 Framework Online Relationship Management .............................................................................. 6 Empirics and Analysis ............................................................................................. 8 3.1 Selection of Empirics ................................................................................................................................. 8 3.2 Activities and Analysis ............................................................................................................................. 8 Conclusion ............................................................................................................ 11 Limitations and Further Research ........................................................................................................... 11

References ........................................................................................................... 12

Appendix 1-‐ Membership Club Activities .............................................................. 14 P1: Links to other Social Medias in Individual Membership Newsletter ................................. 14 P2: KappAhl Real-‐time Chat on Facebook Page .................................................................................. 14 P3: “My Info”-‐ Individual Data Offered by Lindex in Membership Newsletter ..................... 15 Appendix 2-‐ H&M Facebook Activities .................................................................. 16 P1: Standard H&M Collage Presenting Products and Encouraging Interaction ................... 16 P2: Standard H&M Collage Presenting Products and Encouraging Interaction with Numbered Pictures ......................................................................................................................................... 17 P3: H&M Interactive Questions Revealing Customer Preferences ............................................. 18 P4: Discussed H&M Advertisement on their Facebook Page ........................................................ 18 Appendix 3 – Lindex Facebook Activities .............................................................. 19 P1: Standard Lindex Collage Presenting Products Lacking Interaction Possibilities ........ 19 Appendix 4: KappAhl Facebook Activities ............................................................. 20 P1: Standard KappAhl Collage Presenting Products with Limited Interaction Encouragement ................................................................................................................................................. 20

3

1 Introduction _____________________________________________________________________________________________

1.1 Background Market orientation is a widely researched area (Slater and Narver, 1994; Kohli and Jaworski, 1990; Javalgi, Martin and Young, 2006). Existing research suggest different components to be included in order for a business to become market-‐oriented, the importance of being customer-‐oriented is however stressed by several researchers (Slater and Narver, 1994; Kohli and Jaworski, 1990; Javalgi, Martin and Young, 2006). To become customer oriented it is fundamental that companies adapt their activities to customers ever-‐changing expectations. By making continuous data gathering of customer preferences, the company is able to distinguish what aspects that will enhance customer satisfaction (Slater and Narver, 1994). If the company succeeds in meeting these requests, the customer will receive superior value, which increases the chances for that customer to become loyal (Kohli and Jaworski, 1990). To create customer value and thereby prospects for loyal customers, emphasis has traditionally been putted on involving customers before and after sales (Slater and Narver, 1994). This resulted in relationship formation between company and customer and customer relationship management (CRM) has thereafter become a frequently centralized business activity (Javalgi, Martin and Young, 2006). The common idea of a relationship is that it should be built on trust and information sharing and will, if successfully managed, benefit both parties (Dowling, 2002). One way of reaching this type of exchanging relationship in the B2C context has been to create loyalty programmes, which is especially common in the retail industry (Dowling, 2002; Leenheer, Heerde, Bijmolt, Smidts, 2007). Membership or customer clubs are a type of loyalty programme, which according to Liebermann (1999) offers great prospects for creating long lasting customer relationships.

1.2 Problem Discussion Today, when the majority of customers are found online, the prospects for being customer-‐oriented and building relationships has changed. Customers increasingly have access to online information and thereby they come across more value propositions than before. Pires, Stanton and Rita (2006) argue that this makes customers empowered, since they easily can switch to the supplier who offers the best value proposition. This implies that the value creational process is becoming increasingly fundamental, since it is harder to maintain customer relationships in an online climate. (Pires, Stanton and Rita, 2006)

4

Considering that a main focus in a traditional customer-‐oriented approach has been to collect consumer input for creating value, social media platforms seem to offer facilitating opportunities for companies (Slater and Narver, 1994). Since both consumer and seller are present at the same platforms, interaction is eased and can be done in real-‐ time (Scott, 2011:3-‐13). This accelerates the process of receiving customer complaints and ideas, which in turn facilitates value creation (Gupta, Armstrong and Clayton, 2011). Gupta, et al., (2011) argues that companies cannot overlook the impact that social media has today and that it is vital to engage customers online. This argumentation, combined with the increased emphasis putted on customer value creation, implies that traditional offline relationship building is no longer enough. On this note it seems interesting to study company efforts that previously has been sufficient for creating relationships and loyalty, but that need to embrace the new rules of marketing to survive today. In the context of loyalty programmes and membership clubs, the discussion above implies that traditional offerings such as discounts and bonuses are no longer sufficient to stimulate customers’ value preferences (Liebermann, 1999; Chernatony, 2001). It seems preferable to study how a previously offline operating membership club are grasping the opportunities, which are offered through social media, to create on-‐going superior customer value (Armelini and Villanueva 2011; Keitzmann, Hermkens, McCarthy and Silvestre, 2011; Chernatony 2001; Bernoff and Li, 2008). Due to the discussion above, it is reasonable that companies, who are not using social media platforms to enhance club member relationships, are facing a risk of being left behind in competition.

1.3 Research Question The discussion leads to the following question: What membership club offerings and activities, made by a company that previously has been using an offline loyalty programme, seems more efficient when trying to create customer relationships through social media?

1.4 Purpose The purpose of this paper is to compare membership club activities performed by three companies in the clothing industry and analyse how they manage to integrate usage of social media platforms in their loyalty programme. By doing that an understanding for which activities that seem most efficient for managing customer relationships online will be gained. The findings offer a possible contribution to online relationship marketing theory, which can be used by marketing strategists that aim to create long lasting relationships through an online membership club.

5

2 Theoretical Framework _____________________________________________________________________________________________

2.1 Loyalty and Membership Clubs A strategic way to foster relationships with customers, in order to build loyalty, is to implement membership clubs where both customer and company benefit from interacting with each other (Stauss, Chojnacki, Decker and Hoffmann, 2001). A membership club usually operates by issuing membership cards, sending out newsletters and offering discounts and gifts (Liebermann, 1999). Liebermann (1999) states that the purpose of membership clubs is to enhance loyalty and he finds 3 effects to have a particularly positive effect on loyalty: if the customer are a member in a single membership club, if he or she is joining by own incentive, and if the customer is participating in club activities. Leenheer, et al., (2007) are agreeing that the effect of a loyalty program diminishes the more competitive loyalty programs a customer is a member of. To create a successful loyalty program it is suggested that the design, customer profile and “soft benefits” should be focused upon. The loyalty program design includes consideration of direct or delayed rewards and how these should be balanced (Leenheer, et al., 2007). Another important aspect to nurture loyalty is to create benefits that are not financial related, which is done by continuously creating original ideas to amuse and entertain members. These ideas should be cost effective but at the same time benefit non-‐economic customer value (Leenheer, et al., 2007). Stauss, et al., (2001) distinguishes a correlation between interaction and knowledge, implying that the more interaction there is, the more customer knowledge the company receives. To use the membership club as an interactive platform, during the entire customer life cycle, will therefore deliver valuable input regarding preferences, which enhances the chances to create customer relationship satisfaction (Stauss, et al., 2001).

2.2 Relationships in Social Media Social media platforms have changed the culture of customer behaviour and have resulted in enhanced customer power (Bernoff and Li, 2008). Customers are no longer passively absorbing value propositions from a brand manager rather they are actively forming own brand values online (Bernoff and Li, 2008; Chernatony, 2001; Keitzmann, et al., 2011). This increase pressure on companies ability to absorb and adapt to meet customer demand (Bernoff and Li, 2008). It seems like the old marketing procedures cannot be directly translated to online medias and Chernatony (2001) for example, argue that maintenance of loyalty online is not the same as offline. In online loyalty schemes the manager has to acknowledge that a customer interacts with both a brand and a

6

community and that brand connection and repeated visits, are usually a result derived from the customer bond with the community rather than the brand (Chernatony, 2001). Therefor offline incentives in loyalty programmes are not enough as value propositions, when it comes to creating loyalty online (Chernatony, 2001). To be able to create relationships online Keitzmann, et al., (2011) states that the online community has to encourage it. Relationships online are distinguished by conversation and interaction between users and different content is needed depending on the relationship objective (Keitzmann, et. al., 2011). If the purpose is to maintain customer relationships less effort is needed than if the company aims to enhance the relationship (Keitzmann, et. al., 2011). Overall, a strong relationship is characterized by being long-‐term and involving, which implies that companies have to devote time and commitment to be successful in social media (Armelini and Villanueva, 2011). Armelini and Villanueva (2011) mean that a corporate Facebook page is not a place to communicate one-‐way communication, but rather a place to practice interaction with customers. Keitzmann, et al., (2011), are agreeing that Facebook is a social media platform well-‐fitted for nurturing and creating relationships.

2.3 Framework Online Relationship Management Social media is a relationship-‐oriented media that offer great prospect for building mutual value through relationships (Rowley, 2004). Due to the vide variety of suggestions available, regarding how to manage online strategies to meet customer expectations and build online relationships, Figure 1 was made. The figure is based on suggestions from existing research regarding how to use social media to maintain customer oriented during changed power between customer and company (Armelini and Villanueva 2011; Keitzmann, et al., 2011; Chernatony 2001; Bernoff and Li, 2008; Weinberg and Pehlivan, 2011). Even though there is no particular order among the relationship managing activities compiled in Figure 1, “Make Room for Conversation” is recognized to be an overall inception in this framework since consumers need to be informed about different communities in order to find them (Keitzmann, et al., 2011). By creating communities where interaction is encouraged, conversations are more likely to arise (Chernatony, 2001). If the company continuously track and listens to what customers are saying, managers can learn and get ideas on how to improve business and offerings (Bernoff and Li, 2008; Chernatony, 2001). By making changes that is preferred by customers, the company will enhance its value offering (Bernoff and Li, 2008; Chernatony, 2001). That both customer and company are engaged is therefore fundamental for relationship building (Weinberg and Pehlivan, 2011). It might also result in consumers recommending products to others, and thereby carry a company brand message (Bernoff and Li, 2008; Armelini and Villanueva, 2011). It is however important that companies learn when it is beneficial to join customer conversation online since both advantages and risks are associated with intruding a conversation (Keitzmann, et al., 2011). To have a support system, that partly consist of a place for consumers to turn for help and information and partly where employees track their communities and reaches out for help without customers having to call e.g.

7

a support centre, is a preferable act to facilitate for the customers (Bernoff and Li, 2008).

Learn/ Get Ideas

Respond

Engage

Support

Track/ Listen

Make Room for Con-‐

versation

RELATIONSHIP

Figure 1-‐ How to use social media to create or maintain customer relationship

8

3

Empirics and Analysis _____________________________________________________________________________________________

3.1 Selection of Empirics To conduct this research three Swedish clothing companies who has established membership clubs was chosen (H&M Webpage, KappAhl Webpage, Lindex Webpage). To only chose Swedish companies are based on the idea that all companies’ origin from the same culture and therefore have somewhat similar prerequisites for conducting membership clubs toward a Swedish target audience. Due to the length of the study, Facebook activity and email offerings are focused upon in the analysis. Facebook seem as an appropriate media to investigate, due the relationship possibilities that are offered through the media (Armelini and Villanueva, 2011; Keitzmann, et al., 2011). Email offerings seem relevant to investigate since they might distinguish individual relationship building activities that are only accessed by club members. The chosen companies are: H&M, Lindex and KappAhl. Corporate Facebook page activity and email communication performed by these companies has been mapped for two weeks between 2012-‐02-‐10 and 2012-‐02-‐23. To receive the best apprehension possible, regarding relationship management with members, a membership in all three clubs has been started. The most relevant, diverse and/ or interesting aspects, which distinguishes differences in social media integration of a loyalty programme and relationship building in social media, will be presented in the analysis below.

3.2 Activities and Analysis To provide linkages between different platforms and communities are a way to create interaction and conversation (Keitzmann et al, 2011). All three companies are trying to increase interaction by integrating Facebook, YouTube and Blog links, in the end of every membership club newsletter (Appendix 1-‐P1). To provide a link to other medias are facilitating for the customer to reach the company and develop a bond with the community, which is beneficial when trying to achieve loyalty online (Chernatony, 2001). To offer real-‐time chat with KappAhl’s collection chief on Facebook is another attempt to create interaction (Appendix 1-‐P2). This is regarded as an engaging online activity where two-‐way conversations can be performed. To use Facebook in this manner is, according to Armelini and Villanueva (2011), promising for creating relationships online. It can also benefit both customer (who receives answers to its questions) and company (who discover what trends or aspects of business that customers are interested in).

9

An activity to inform and facilitate customer efforts is the column “My Info” which is present in all KappAhls membership newsletter dispatches (Appendix 1-‐P3). Here, individual membership data, how many credits one have collected and how many credits you need to receive a bonus check, is presented. This is an offering that informs customers without the customer having to make an effort, and therefore it can be perceived as a type of support system (Bernoff and Li, 2008). Focusing on online relationship management through Facebook, interesting and diverse interaction styles performed by the three companies have been discovered. Starting with H&M, almost every day a post following the same structure is uploaded (Appendix 2-‐P1). Firstly a trend is defined e.g. “Bright Colour”, “Pink” or “Blouses”. After the trend a question similar to “Which one is your favourite this spring?” is stated referring to pictures incorporated below the text. This type of post is engaging since it encourages Facebook followers to give their opinion. It is an easy way for customers to express their preferences and occasionally the different pictures are numbered which is increasingly facilitating (Appendix 2-‐P2). By allowing customers to share their thoughts, H&M discovers what is popular and what to focus on for satisfying customers. If H&M succeeds in embracing customer comments and ideas, they will increase customer value, which is beneficial for creating relationships (Bernoff and Li, 2008; Chernatony, 2001). In that case, their interaction style will create mutual benefits and it can be implied that social media opportunities are used efficiently (Rowley, 2004). Another example illustrating H&M’s effort to create mutual exchange is posted questions such as “What is the first sign of spring?” By mapping the answers H&M distinguishes what customers want and what they should focus on promoting in early spring. On the other hand, customers will find that the items they preferred are available in stores at the right time (Appendix 2-‐P3). Continuing, Lindex are creating posts such as “Get the Friday Look” which is a picture montage usually containing four clothing pieces. First a trend e.g. “Colour” is stated followed by some informative sentences about the garments presented in the collage (Appendix 3-‐P1). Lindex does not end with a question, which in comparison to H&M, implies that there are interacting opportunities that are not used efficiently. Even though customers have the freedom of commenting and deliver opinions about the clothes in the comment field, consumers might only respond to the post if they are distinctively influenced positive or negative by the post. Engagement from the masses is not encouraged through this interaction style and opinions about customer preferences between different garments are not revealed. Since the more interaction implies the better customer knowledge, Lindex might be missing out on information leading to better customer understanding (Stauss, et al., 2001). To upload posts that are not inviting customers to participate might be compared to sending out one-‐way communication messages, which is not the right type of activity to perform on Facebook (Armelini and Villanueva, 2011). This implies that opportunity for creating superior value is not efficiently used, which in that case result in missed prospects for enhancing customer relationships.

10

KappAhl seem to use a combination between H&M’s and Lindex’s way of communicate on Facebook. Similar to the other two companies they state a trend such as “Pastels” and then they occasionally end with a question such as: “How do you feel about it?” (Appendix 4-‐P1). To end a Facebook post with a question can be, as discussed above, encouraging and inviting to customer conversation. KappAhl’s question however, in comparison to H&M’s, is more diffuse and might therefore be harder for the customer to answer. To state a general question, might also be a sign of efficiency waste, since the question will not reveal customer preferences and what customers need to become satisfied. In line with the argument about Lindex, KappAhl can be considered to not use the relationship building opportunities, which are offered by Facebook, to its fullest (Armelini and Villanueva 2011; Keitzmann, et al., 2011). All companies illustrated inability to respond to questions or discussions on the Facebook page. This finding is interesting and can at first thought be considered as an obvious mistake made by the companies. It is suggested that companies should listen and respond to what customers are saying at online communities and that they should provide a support system that tracks and help customers in need (Bernoff and Li, 2008; Chernatony, 2001). This implies that customer questions or problems should be answered to. Companies must however decide when it is beneficial, and not risky, to join an online discussion (Keitzmann, et al., 2011). One example when H&M did not intrude a conversation was when a model in an underwear advertisement is claimed for being retouched by a customer (Appendix 2-‐P4). It is debatable whether this had positive or negative impact on H&M’s customer relationships. To engage in the conversation might have prevented some customers to loose trust in H&M it might also have led to H&M interrupting customers at the wrong time. It seems hard to determine when it is right to join a customer conversation, but to give answers to direct questions will most definitely enhance long-‐term relationships, since it is fundamental to commit to customers online (Armelini and Villanueva, 2011).

11

4 Conclusion _____________________________________________________________________________________________ This study finds that loyalty programme efforts, up until today are not dramatically different from offerings and activities promoted offline (Liebermann, 1999). Overall, the three companies were performing similar membership club activities where online loyalty programs are incorporating social media to an extent that Facebook pages, events, YouTube and blog posts are presented in the newsletter received by email. Therefore the online loyalty programme in itself is not regarded as relationship building, but rather it seems like relationships are created through other social media platforms. To link and refer to e.g. the corporate Facebook page in individual membership newsletters is therefor seen as a way to guide the members to online platforms that are more successful for creating or maintaining relationships. Having generated club members e.g. to a Facebook page, this study suggests that some activities are more efficient for maintaining customer relationships. Engagement is considered to be a relationship building block that is fundamental to strive for in all relational managing activities. The company that achieves to create engagement at an online community will also have a better chance for maintaining loyal customer relationships (Chernatony, 2001). Different interaction styles, e.g. how Facebook posts are formatted, is suggested to result in different levels of engagement. Posts that encourage interaction and that makes it easy for customers to reply and participate, seem to be beneficial for creating engagement and thereby online relationships. By tracking what customers are saying online, the increased customer power can be used as a tool for gaining insights to enhance customer value (Bernoff and Li, 2008; Chernatony, 2001).

Limitations and Further Research It is important to recognize that this has been a preliminary study that has been based on three limited case studies. Customer insights, regarding customers’ interpretation and perception of company membership offerings and relationship building activities, have not been included. Evidence supporting that these different activities have enhanced relationships and created loyalty is therefore missing which results in low reliability for the study. Future research should aim to explore membership clubs online more extensively and which prospects the membership club in itself, offer in terms of relationship building online.

12

References Armelini, G., and Villanueva, J., (2011). ”Adding social media to the marketing mix”, IESE insight. HBR library on-‐line Bernoff, J., and Li, C., (2008). “Harnessing the power of the Oh-‐So-‐Social Web”, MIT Sloan Management Review, 49(3), pp. 36-‐42. De Chernatony. L., (2001). “Succeeding with brands on the internet”, Journal of Brand Management, 8(3), pp. 186-‐95. Dowling, G., (2002) “Customer Relationship Management: In B2C Markets, Often Less is More”, California Management Review, 44(3), pp. 87-‐104 Gupta, S., Armstrong, K., and Clayton, Z., (2011). “Social Media”, HBR library on-‐line H&M Webpage. H&M in brief. [Online] Available at: < http://about.hm.com/content/hm/AboutSection/en/About/Facts-‐About-‐HM.html#cm-‐footer> [Accessed 8 February 2012] Javalgi, R.G., Martin, C.L., and Young, R.B., (2006) “Marketing research, market orientation and customer relationship management: a framework and implications for service providers”, Journal of Services Marketing, 20(1), pp. 12-‐23. KappAhl Webpage. 60 år av mode. [Online] Available at: <http://www.kappahl.com/corp/Om-‐KappAhl1/Om-‐KappAhl/Historik/> [Accessed 8 February 2012] Keitzmann, J.H., Hermkens, K., McCarthy, I.P., and Silvestre, B.S., (2011). “Social media? Get serious! Understanding the functional building blocks of social media”, Business Horizons, 54, pp. 241-‐251. Kohli, A.K., and Jaworski B.J., (1990). “Market Orientation: The Construct, Research Propositions, and Managerial Implications”, The Journal of Marketing, 54(2), pp. 1-‐18. Leenheer, J., Heerde, H., Bijmolt, T., and Smidts, A., (2007). “Do loyalty programs really enhance behavioral loyalty? An empirical analysis accounting for self-‐selecting members”, International Journal of Research in Marketing, 24(1), pp.31-‐47. Liebermann, Y. (1999). “Membership clubs as a tool for enhancing buyers' Patronage”, Journal of Business Research, 45, pp. 291−297. Lindex Webpage. Lindex Story. [online] Available at: <http://www.lindex.com/se/om-‐lindex/lindex-‐story/> [Accessed 8 February 2012]

13

Pires, G.D., Stanton, J., and Rita, P., (2006). “The internet, consumer empowerment and marketing strategies”, European Journal of Marketing, 40(9/10), pp. 936-‐949. Rowley, J., (2004). “Just another communication channel? Marketing communications in e-‐business”, Marketing Intelligence and Planning, 22(1), pp. 24-‐41. Scott, D.M (2011). The New Rules of Marketing and PR: How to Use Social Media, Blogs, News Releases, Online Video, and Viral Marketing to Reach Buyers Directly. 3rd ed. New Jersey: John Wiley& Sons, Inc. Slater, S.F., and Narver, J.C., (1994). “Market orientation, customer value, and superior performance”, Business Horizons, 37, pp. 22-‐8. Stauss, B., Chojnacki, K., Decker, A., and Hoffmann, F., (2001). “Retention effects of a customer club”, International Journal of Service Industry Management, 12(1), pp. 7-‐19. Weinberg, B.D., and Pehlivan, E., (2011). “Social spending: managing the social media mix”, Business Horizons, 54, pp. 275-‐282.

14

Appendix 1-‐ Membership Club Activities

P1: Links to other Social Medias in Individual Membership Newsletter Source: Private email account, H&M 2012-‐02-‐17, KappAhl 2012-‐02-‐15, Lindex 2012-‐02-‐23

P2: KappAhl Real-‐time Chat on Facebook Page

H&M

KappAhl

Lindex

15

Source: KappAhl Facebook page accessed 2012-‐02-‐16 (http://www.facebook.com/KappAhl)

P3: “My Info”-‐ Individual Data Offered by KappAhl in Membership Newsletter Source: Private email account, KappAhl 2012-‐02-‐15

16

Appendix 2-‐ H&M Facebook Activities

P1: Standard H&M Collage Presenting Products and Encouraging Interaction Source: H&M Facebook page accessed 2012-‐02-‐16 (http://www.facebook.com/hm) Source: H&M Facebook page accessed 2012-‐02-‐15 (http://www.facebook.com/hm)

17

Source: H&M Facebook page accessed 2012-‐02-‐13 (http://www.facebook.com/hm)

P2: Standard H&M Collage Presenting Products and Encouraging Interaction with Numbered Pictures Source: H&M Facebook page accessed 2012-‐02-‐15 (http://www.facebook.com/hm)

18

P3: H&M Interactive Questions Revealing Customer Preferences Source: H&M Facebook page accessed 2012-‐02-‐14 (http://www.facebook.com/hm)

P4: Discussed H&M Advertisement on their Facebook Page Source: H&M Facebook page accessed 2012-‐02-‐13 (http://www.facebook.com/hm)

19

Appendix 3 – Lindex Facebook Activities

P1: Standard Lindex Collage Presenting Products Lacking Interaction Possibilities Source: Lindex Facebook page accessed 2012-‐02-‐10 (http://www.facebook.com/Lindex)

20

Appendix 4: KappAhl Facebook Activities

P1: Standard KappAhl Collage Presenting Products with Limited Interaction Encouragement Source: KappAhl Facebook page accessed 2012-‐02-‐22 (http://www.facebook.com/KappAhl)