Paradigm in Traditional Marketing: Social Media & Gen Y

Paradigm in Marketing: Social Media Applications and Generation Y Toni L. Gardner University of Central Florida Rosen College of Hospitality Management Technology Applications for Management Decision Making Spring 2010 Dr. Khaldoon Nusair Paradigm in Marketing: Social Media Applications and Generation Y Purpose To determine whether the use of social media applications has a positive impact on online consumer relationship management, customer satisfaction, and trust as Generation Y becomes the majority of the consumer base. Design/Methodology/Approach A review of literature to examine the role that social media plays in customer relationship management, customer satisfaction, and trust as they relate to the Gen Y consumer. Data collected from student sample from a southeastern university using a voluntary survey. Research limitations/implications The literature specific to the use of social media technology applications as it relates to consumer relationship management, satisfaction, and trust specifically involving the Generation Y consumer is limited therefore; the intention of this paper is to provide a foundation for future research. Originality/value The literature specific to the use of social media technology applications as it relates to consumer relationship management, satisfaction, and trust specifically involving the Generation Y consumer is limited therefore; the intention of this paper is to provide a foundation for future research. 1. Introduction Throughout the last few years, the overall trend in businesses worldwide has been the adoption of new marketing strategies that utilize the ever-advancing technology applications available today. One of the foremost technology applications used in business promotion has been the use of social media. Boyd & Ellison (2007) define social media as Internet applications that allow users to form connections with companies or other users that would not have been formed otherwise. The rate at which these social connections are being formed is unique and therefore deemed social networking rather than the more basic social interaction that has existed for years on the web (Golbeck, 2007). There are two components that make up the foundation of social media: Web 2.0 and User-Generated Content. The Web 2.0 phrase was coined in 2004 to describe the paradigm in the usage of the World Wide Web. At this time, the web was evolving from a platform in which people added static content to one containing collaborative content that is consistently modified by all participating users. User-generated content refers to the modification and alteration of different social media by end-users and the multiple usage forms of social media that exist (Kaplan & Haenlein, 2009). Studies (Kah, Vogt, & MacKay, 2008; Bonn, Furr, & Susskind, 1999) found that Internet users are likely to have positive attitudes about technological advancements and users are more likely to be college educated and under the age of forty-five. Additionally, Bonn et al (1999) found that Internet users were more likely to stay in commercial lodging and spent more money during their travels. Consequently, the focus of this study will be on Generation Y. Beldona, Nusair, & Demicco (2009) define a generational cohort as a group of individuals sharing similar experiences and common characteristics unique only to them. Gen Y or the “Millennials” refers to the coming of age generation of young adults born between 1977 and 1998. The birth of social media and the significant role it plays in society today is a direct response to the growth and impact of Gen Y. Social media creates a different dimension of business to consumer interaction that allows businesses to interact with many consumers at the same time through the use of technology applications. There are many benefits that are associated with the use of online social media like social consumer relationship management (Social CRM) and the opportunity for businesses to enhance consumer satisfaction and trust. Previous studies indicate a shift in consumer purchase behaviors (Stockdale, 2006). Customer relationship management (CRM) is used by companies to identify, attract, and build loyalty with consumers to a particular brand or product. Traditionally, CRM included attracting new profitable consumers, maximizing the profitability of existing consumers, and retaining each (Goel & Mousavidin, 2007). During the trend away from face-to-face consumer relationship management, it is imperative that companies understand the problems involved with managing consumer relationships online and implement the appropriate strategies to maintain consumer trust and satisfaction. By utilizing social media applications, businesses have the opportunity to enhance customer relationships and maintain a communication channel with past, present, and future customers. It is imperative during these economically troubling times that companies utilize all appropriate distribution channels in the most efficient and appropriate manner in order to earn the highest yield on their advertising investments. Major companies are just now exploring the use of social media in their organization. This study will focus on the advantages of social media applications and the implications that social media has on the lodging industry. Because the number of consumers and businesses already participating in social media applications is extravagant, it is expected that social media applications will become a common inclusive in every company’s marketing plan. Therefore, it is the intent of this paper to conduct a thorough overview of the social media applications and the potential implications for major hotel companies. Specifically, this study will investigate the following questions: ,[object Object]

What potential problems are involved in social media applications? What is important for companies to understand when implementing social media marketing strategies?389509062865002. Literature Review 2.1 Social Media Since the 1970s, national digital information exchanges were in place. Arpanet protocols were developed in the 1980s and web protocols emerged in 1989. However, the average consumer was not introduced to the Internet until 1993 with the introduction of Mosaic. During the growth of the Internet, very few marketing practices existed that utilized this technology as a means of interactive marketing; for example, less than $200 was used for Internet advertising in 1997 (Larsen, Urry, & Axhausen, 2006). Figure 1: Timeline of the launch dates (Source: Loda et al, 2009) Social media can be divided by the application usage and type. Kaplan & Haenlein (2009) suggest that there are six major forms of social media: collaborative projects, blogs, content communities, social networking sites, virtual game worlds, and virtual social words. These six forms identify a more general categorization of the social media applications while Chul, M., Miller, A, & Roberts, R.P. (2009) categorize social media technologies into five categories that are based on more of a managerial perspective. These five categories include broad collaboration, broad communication, collective estimation, metadata creation, and social graphing. For the purpose of this study we will investigate several major social media technologies, identify their categorization, and ascertain the implications each has on customer relationship management, consumer trust, and satisfaction. 2.2 Social Media Performance This study will focus on the following leading social media technologies: Facebook, Twitter, Blogger, YouTube, Flickr, Myspace, Second Life, UStream, LinkedIn, and Trip Advisor. In terms of attracting new users, social media is the fastest form of Internet marketing. Figure 2 Growth of Leading Social Media Sites During 2009. 1. Facebook Social networking sites allow users to create profiles, invite friends, send emails and instant messages, and post video, photo, audio, and blog content (Kaplan & Haenlein, 2009). Founded on February 1, 2004, Facebook is the largest social network with over 350 million users. For the week ending January 30, 2010, visits to Facebook accounted for 49.23% of the overall number of visits to all of the top twenty social networking websites combined (Hitwise 2010). Facebook is the biggest social media technology today. As of February 2010, Facebook had more than 350 million active users and 50% of those users log on to Facebook each day. In the last year Facebook visits have increased by 194%. Even more surprising is that 50 million users joined Facebook between September 2009 and December 2009. More than 700,000 businesses have active Facebook Pages. There are 1.6 million active Pages on Facebook and those pages have created 5.3 billion fans (Facebook). Many hotel brands have Facebook pages, but one of the few companies to have a page for the entire company is Hilton. Hilton had 32,351 fans as of March 14, 2010 (Facebook). Figure 3 Changes in Facebook Usage between December 2008 to December 2009. 2. Twitter Twitter, founded on March 21, 2006, is a form of micro-blogging that limits users to posts with 140 characters or less (Experian Hitwise, 2010). Twitter can also be categorized as a social networking site. Twitter accounted for 1.12% of the overall social networking site visits (Experian Hitwise, 2010). Figure 4 indicates the percent of unique visitors to Twitter by demographic. Unique Visitors between the ages of 17 to 24 grew by 14.1% while Unique Visitors between the ages of 25-65+ declined by 10.3%. Four Seasons has many different properties that are represented on Twitter. The properties “tweet” event updates and other promotional material to followers. 3. Myspace Additionally, like Facebook and Twitter, Myspace is also considered a social networking site. Launched in 2004, Myspace gained one million users in the first month of operation. A recent study by Experian Hitwise stated that Myspace earned 16.36% of the overall visits to social networking sites. 4. YouTube Content communities are social media sites in which users share and collaborate on media content (Kaplan & Haenlein, 2009). YouTube, founded in February 2005, is a video sharing community that allows users to upload original videos and interact with others in the community. According to YouTube, twenty hours of video is uploaded to YouTube every minute. YouTube accounted for 14.65% of the overall social networking site visits during the week of January 30, 2010 (Hitwise, 2010). 5. Flickr Like YouTube, Flickr can also be categorized as a content community in which users do not have to create a profile to view content. “The high popularity of content communities makes them a very attractive contact channel for many firms (Kaplan & Haenlein, 2009). Flickr was developed by Ludicorp in 2004 and later purchased by Yahoo in 2005. Flickr has over two billion pictures stored and over forty million visitors each month (Flickr). 6. Trip Advisor Collaborative projects are the creation of many end-users who can add, remove, and change content. Companies should be aware of the impact that collaborative projects can have on their businesses because of the increasing trend toward becoming a main source of information for end-users (Kaplan & Haenlein, 2009). Trip Advisor is the world’s largest travel information and advice site with over five million unbiased reviews covering 220,000 hotels and attractions worldwide. Trip Advisor has over twenty million unique visitors each month (ComScore, 2010). 7. Blogger Blogs represent the earliest form of social media, are typically managed by one person, and many companies utilize blogs to update, employees, customers, and shareholders on organizational developments (Kaplan & Haenlein, 2009). Developed in 1999, Blogger is a social media application that allows users to post their thoughts in blog form. Blogs range from all different topics and are less interactive in the sense that end-users can only read and leave a comment, but cannot share additional information unless it is done so in their own blog. Blogger was purchased in 2002 by Google and has grown rapidly since that time. In January 2010, Blogger had 34,896,993 unique visitors (Compete, Inc.). 8. Second Life Virtual social worlds allow users to “essentially live virtual lives” and offer countless opportunities for companies to conduct marketing, sell products online, and in human resource management (Kaplan & Haenlein, 2009). Second Life was launched in 1999 by Linden Lab and is a 3D world that essentially allows its three million residents to live a second life (Linden Lab). In January 2010, Second Life saw a 13.32% increase in unique visitors and a 15.88% increase in monthly visits (Compete, Inc.). Starwood utilized Second Life to get feedback on their Aloft design and concept. Consumers were able to walk through the virtual hotel and leave comments throughout the property. Starwood utilized this consumer feedback to create the Aloft product. Allowing consumers to aid in the creation of the finished product creates ownership on the side of the consumer and increases brand loyalty. 9. UStream UStream, much like YouTube and Flickr, is also a content community except that the content shared is a live stream. Launched in 2007, UStream is an upcoming social media application that enables companies and users to post live streams as well as poll end-users about the stream. UStream can be linked with other social networking applications like Facebook and Twitter. UStream has 40 million monthly viewers (UStream). 10. LinkedIn -571505414645Formed in 2003, LinkedIn is a social networking site that is directed at a specific target market, the working professionals. There are currently 60 million working professionals representing all of the Fortune 500 companies on LinkedIn (LinkedIn, 2010). Unique visits to LinkedIn have increased 23.84% from December 2009 to January 2010 (Compete, Inc). Because social networking sites are a great source of consumer behavioral data, profile and link data from these sites can be accumulated and used to explore potential target markets. Customer data is a vital part to maintaining customer relationships because it allows the collecting company to understand each market segment (Stockdale, 2006). 2.3 Generation Y While Gen Y refers to the individuals born between 1977 and 1998, there are unique characteristics that can be attributed to those born between the years of 1981 and 1994 (Hahm, Upchurch, & Wang, 2008). For the purpose of this study, we will research the impact of these characteristics and the implications of the consumers born during 1981 and 1994. Exposure to a rich media environment has resulted in a reflective and cautious nature of the millennial generation who often challenge the traditional value systems. Media gadgets and technology have been a primary focus of this generation. Millennials use technologies like cell phones, podcasts, blogs, and personal webpages to engage in social networking, studying, and for personal entertainment (Hahm et al, 2008). According to Deloitte Consulting, Millennials have never experienced life without computers, reverse accumulation of knowledge meaning the younger you are, the more you know, and all information and the competition is a click away. Gen Y is the largest generation after the Baby Boomers with 80 million “Millennials”. Gen X, the generation before Gen Y, consisted of 40 million individuals (Deloitte Consulting, 2005). Loda, Coleman, & Backman (2010) state that the Millennials are one of today’s most coveted markets not only because it numbers 80 million, but because this generation has a greater spending power than previous generations. Likewise, the spending power of the 18.3 million Millennials who are enrolled in college was calculated to reach $5.3 billion in 2008. Of that $1 billion is spent on spring break trips alone (Loda et al, 2010). In regards to the absorption and integration of information related to tourism products and services, Gen Y prefers to explore electronic mediums to conduct research and consume services (Hahm et al, 2008). As Gen Y enters the consumer market, it is imperative that hotel companies understand the characteristics of this generation and develop and implement marketing techniques that will attract and retain these future consumers. Loda et al (2010) found that web sites are an essential component in influencing consumer’s attitudes and intent to visit. Studies (Beldona et al, 2009; Loda et al, 2010) suggest that travel marketers need to utilize their understanding of generational cohorts to institute distinguishable features that tailor their webpages specifically to each generation. Not only will including these distinguishable features increase responsiveness, they will also aid in the consumer’s purchase decision process (Beldona et al, 2009). 2.4 Using Social Media Applications Social media strategies can be utilized in several different company departments. A study conducted by Forrester Research published by MIT suggested the following: ,[object Object],Source: MIT Sloan Management Review Spring 2008 “The potential benefits of direct and intimate customer relationships that social applications can provide are just too compelling for companies to deny” (Bernoff & Li, 2008). At different levels of the organization, there are different needs and therefore, different uses of social media applications. At the senior level, executives will have accumulated much knowledge throughout their career and in order to raise awareness of their company, they can create a blog to share knowledge and opinion with consumers. Additionally, sales and human resources can utilize applications like LinkedIn and Facebook to locate potential employees are suppliers. Currently, Generation Y accounts for 26% of the adult population making Gen Y the second to the Baby Boomer generation that accounts for 33% of the total adult population (Pew Research Center). It is expected that within five to ten years, Generation Y will make up the majority of the total adult population. Because Generation Y has significantly different characteristics than previous generations, businesses are beginning to evaluate the changes that must be made in order to maintain a competitive advantage or gain a competitive advantage as this “new” type of consumer enters and becomes the majority of the consumer base. Because technology plays a significant role in the activities and daily life of Gen Y, social media marketing strategies must be designed and implemented in order to maintain customer relationship management, consumer satisfaction, and trust. 2.5 Social CRM Traditional CRM focuses on campaigns that generate leads that are converted into accounts, opportunities, and contacts. The presence of social media applications has resulted in a paradigm from traditional CRM strategies to what has been dubbed Social CRM. Social CRM focuses on content that generates conversations which are converted into friends, partners, and collaborative experiences which feeds into the construction of meaningful relationships. Goel & Mousavidin (2007) suggest that consumers want experiences that are built around their wired, networked, and ‘neomillenial’ lifestyle. Additionally, value can be enhanced when the consumer has an active role in the manufacturing of the product or experience. Previous studies (Goel & Mousavidin, 2007; Fournier & Mick, 1999; Keiningham, Goddard, Vavra, & Source, 1999) also show that there is an increase in satisfaction and retention when consumers are invited to participate at every step of the value chain. “Copresent interaction is fundamental to social interaction within institutions, families, and friendships, for producing trust, sustaining intimacy…this theory and research indicates that the geographical ‘stretching out’ of social networks makes tourism desirable and indeed necessary, because social networks so far do not only function through phone calls, texting, and email” (Larsen, Urry, & Axhausen, 2006). Stockdale (2006) explores the shift in consumer purchase behavior stating that lower levels of loyalty exist between today’s consumers and specific brands. The trend in consumer purchase behavior has been toward bargain shopping and getting the most out of the money spent. Chen & Chiu (2009) furthered research conducted by Berry (1995) relating to customer relationship management practiced at the financial, social, and structural bond levels. The results suggest that CRM is furthered through financial and structural bonds. Stockdale (2006) identified the constructs of customer relationship development in the online environment as identifying the online customer, website design, information gathering and handling, communication with customers, and loyalty and trust. The most important factor in CRM is trust. Trust can be enhanced by branding, community sites, and customer loyalty programs. The key to using social media applications to enhance CRM is to be actively participating in them. It is one thing for a company to develop applications to interact with consumers and think that their work is done than it is to be actively interacting with consumers on a daily sometimes hourly basis. Many companies are realizing that in order to add social media strategies to their agenda, they must have the human resources to manage them as well. 2.6 Customer Satisfaction In order to increase satisfaction levels, companies should offer pricing incentives, information, and friendship to consumers (Chen & Chiu, 2010). Stockdale (2006) suggests the following to support the management of customer relationships in an online environment: ,[object Object]

Loyalty: Loyalty programs enhance the customer relationship because they enhance brand loyalty.

Communication: Communication is the most important element in the online environment. If information is not presented coherently or webpages are not easily navigated, consumers will become dissatisfied and will search for information elsewhere. Law & Bai (2007) found that in order for companies to convert website browsers into buyers is to offer products or services that are priced more competitively online than they are in other distribution channels and also stating that prices found online differ from other distribution channels and are only applicable to purchases made online. Studies (Loda et al, 2010; Beldona et al, 2009) have noted that marketers, specifically travel marketers, need to use their knowledge of generational cohorts to design features that tailor their webpages specifically to each generation because doing so will aid in the consumer’s purchase decision process. 2.7 Trust in an Online Environment Privacy is defined as “the quality or condition of being secluded from the presence or view of others” (Merriam Webster). Privacy within social networking refers to the interaction between public and private users, changing information that is viewed by the public, and giving restricted access to users that have different capabilities within the sites. Preibusch, Hoser, Gurses, & Berendt (2007) acknowledge that “privacy” is not only about protecting user data or restricting access to areas, but also about who can change information about individuals and groups, how people can interact with other users and the site, different shared spaces that can be created, and how identities can be shared between pages. More than half of social networking users reflect on what information they post on social media applications and consider the consequences that may result from posting such material (Beresford Research, 2009). It is vital that companies that are developing and implementing marketing strategies that include social media applications have thorough knowledge on the privacy implications that exist. A successful online marketing campaign coincides with a well-planned privacy strategy. Beresford Research (2009) found that 65% of Generation Y social media users have integrated social networks into their lives so much that the social media applications have become a trusted and significantly important resource for decision making. 2.8 Focus of Study According to this body of scholarly research, it appears that social media applications have increased tremendously over the last few years and play a significant role in the marketing strategies of many businesses. Additionally, it appears that academic researchers have acknowledged the paradigm in traditional marketing. However, what remains to be studied is the extent to which major lodging companies are using social media applications and whether these companies are ready to embrace the growth of Generation Y into the consumer base. More specifically, the impact of social media applications on customer relationship management and consumer satisfaction and trust in the online environment in regards to lodging firms remains unseen. The purpose of this study is to determine whether lodging companies are utilizing social media applications to the fullest extent, who the biggest users of social media applications are, and how the use of social media applications result in better customer relationship management, satisfaction, and trust in the online environment. Previous studies (Goel & Mousavidin, 2007; Fournier & Mick, 1999; Keiningham, et al, 1999) have shown that there is an increase in satisfaction and retention when consumers are invited to participate at every step of the value chain or production process. Accordingly, this study proposes that: H1: The use of social media applications has a positive impact on consumer relationship management in online marketing. Stockdale (2006) noted that trust is the most important factor in establishing online relationships with consumers. However, trust hinges on the firm’s ability to deliver on promises and to build on their brand online as well as offline. Consequently, this study suggests that: H2: If employed correctly, social media applications have a positive effect on consumer trust in online purchases. Studies (Kah et al, 2008; Alvarez, Martin, & Casielles, 2007) have shown that the accessibility, time and cost saving factors, availability, purchasing ability, and interactivity of the Internet has increased the satisfaction of consumers. Therefore, this study proposes: H3: Social media applications significantly increase consumer satisfaction and decisions to purchase travel products/services online. 3. METHOD 3.1 Survey Instrument The questionnaire used for this survey consisted of three sections. The first section included questions about respondents’ use of social media applications. Respondents were questioned about the type of online social media use, frequency of social media application use, history of use, use of social media for specific activities, and the respondents’ primary use of social media applications. The second section questioned the customer relationship between respondents and companies using online social media applications, satisfaction in communicating with companies through online social media applications, and the trust respondents have in sharing personal information with companies by means of online social media applications. The second section was measured on a 7 point Likert scale from 1 “strongly disagree” to 7 “strongly agree”. The final section collected the respondents’ demographic information such as age, ethnicity, education, and annual household income. 3.2 Sample Characteristics The subjects for the study are undergraduate students at a southeastern university. The student sample is a segment of Internet users and has been widely used in previous studies (Hahm et al, 2008; Loda et al, 2010). The student sample is the ideal segment for this study because the average full-time undergraduate student is part of the Millennial generation and an avid Internet as well as social media user. Extra credit points are given upon completion of the survey, but participation in the study is voluntary. 3.3 Data Analysis Structural Equation Modeling (SEM) will be used to analyze the data collected. SEM consists of two main model components: the structural model and the measurement model. Potential causal dependencies between endogenous and exogenous variables are shown in the structural model. Relations between latent variables and indicators are shown by the measurement model (Garson, 2009). 4. IMPLICATIONS Because studies (Kah, Vogt, & MacKay, 2008; Bonn, Furr, & Susskind, 1999; Bonn et al, 1999) have found that Internet users are likely to have positive attitudes about technological advancements and users are more likely to be college educated and under the age of forty-five. Additionally, Internet users are more likely to stay in commercial lodging and spend more money during travel. Consequently, because Generation Y is the largest user of technology and the Internet and within five to ten years this generation will account for majority of the consumer market, there are several implications for businesses as well as consumers. 18.3 million “Millennials” are enrolled in college and the spending power of those 18.3 million students was calculated to be $5.3 billion in 2008 with $1 billion spent on spring break trips alone (Loda et al, 2010). This generation is always connected to social media applications by means of laptops, netbooks, and smartphones, yet many businesses are not taking advantage of a direct distribution channel to these consumers. This study is important because it is important to understand the impact of social media on customer relationship management, satisfaction, and trust. Literature suggests that social media plays a significant role in customer relationship management; so much that devolution from traditional marketing has now been dubbed Social CRM. Because technology plays a significant role in the activities and daily life of Gen Y, social media marketing strategies must be designed and implemented in order to maintain customer relationship management, consumer satisfaction, and trust. Stockdale (2006) explores the shift in consumer purchase behavior stating that lower levels of loyalty exist between today’s consumers and specific brands. The trend in consumer purchase behavior has been toward bargain shopping and getting the most out of the money spent. When businesses utilize the forms of communication that their target market uses, more brand loyalty is built. Social media strategies should be employed in such a way that they make the most out of the data and communication channel that is available. Businesses should tread lightly in the gray areas concerning consumer privacy and personal information. A recent report by the Mintel Group noted that there is a rising trend in annoyance level of consumers toward businesses invasive marketing on the Internet. If used correctly, social media applications have the potential to further the relationship between the business and the consumer, increase satisfaction, and increase trust. While not every channel will work for every business, there are numerous forms of social media and as the trend of consumers “connected” continues to rise, so should the more specialized and targeted marketing strategies of businesses as well. Future studies can explore a more thorough cohort segmentation of Generation Y to establish which forms of social media applications would be most efficient in marketing to these markets. Additionally, little information is available on the generation to follow Generation Y, Generation Z. This information is limited by the age and supply of individuals to be included in a sample because parental permissions must be attained before such research can begin. This study provides a broad foundation of information for more thorough research to be conducted specifically within the area of Social CRM and the appropriate amount of presence that companies should have on social media applications. Research on guerilla marketing techniques and how companies may gain exposure through social media applications without becoming too much of a nuisance for Generation Y and their ever increasing speed used to surf the Internet. Studies that investigate how Generation Y views and reacts to companies currently participating in social media application will also be extremely beneficial for future research. Additionally, as more and more Millennials progress through the consumer life-cycle, research that studies the purchase behavior of Millennials as they begin families and start making purchases for their Generation Alpha children. Each stage in the Millennial consumer life-cycle will have different implications on businesses and research focusing on this will build a strong foundation for future study. Paradigm in Traditional Marketing: Social Media Applications and Gen Y Participation in this survey is voluntary. You may decline to participate at any time. SECTION I: Online Social Media Applications ,[object Object]

Examples of Social Media Applications: (Facebook, Twitter, LinkedIn, TripAdvisor, YouTube, Flickr, MySpace, Blogger, UStream, Second Life, etc…)1. Which of the following social media applications do you use? Check all that apply. ,[object Object]

Trip Advisor2. Do you use social media applications for personal use only, business use only, or both? ,[object Object]

Both personal and business use3. Which of the following activities, if any, have you done in the past month on the online social media applications you use? Check all that apply. ,[object Object]

Posted links to other web sites (including links to videos)

Linked to a company, product, or service

Told people about music/movies/games/TV shows I like

Participated in a promotion or contest

Searched for information for travel purposes

Updated activities/posted thoughts

Included a podcast4. How frequently do you typically check your online social media applications? ,[object Object]

Paradigm in Traditional Marketing: Social Media & Gen Y

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