In a world where the means and methods of communication are rapidly evolving, and technological advancements influence every aspect of life, businesses will have to use the new technologies to their advantage. Among the emerging technologies that enterprises could leverage to help the operations are the new media of communication; mainly social media. With the ability to connect billions of people at a moment’s notice, social media has revolutionized the way humans communicate, and can now affect the way commerce is carried out. Plenty of studies have shown that the use of social media or lack thereof has particular effects on the operations of business entities. In this dissertation, the emphasis is on the various ways in which social media affects businesses, mainly the profits that the entities using the platforms make. To this end, such aspects as product promotion, customer relationship management, efficiency in sales as well as research and innovation into customer preferences will be considered. Additionally, the dissertation also focuses on why social media affects the profits of businesses; delving into the reasons that companies have to factor in the use of social media when accounting for (or forecasting) their benefits. For this purpose, the management of customer relationships, effects on consumerism, impact on the brand image of business, and security of payments will be highlighted.
Keywords: product promotion, new media, customer relationship management, commerce, customer preferences, brand image, research and innovation, consumerism, efficiency in sales.
Chapter 1: Introduction
With improvements in technology, processes such as communication have been made more efficient and effective. Social media has allowed individuals and businesses to access better ways of presenting and receiving information to targeted recipients from senders. However, at times communication may arise from unintended sources or be directed at unexpected destinations. Social media has had changed how humans interact by helping bridge the time and distance constraints thus making communication instantaneous. Advances in communication technology, which have given rise to social media, have thus affected the operations of business entities. Changing several aspects of business operations from product promotion to customer engagement, the use of social media has had a significant impact on businesses. This dissertation, however, focuses mainly on the sales and revenue of such firms - and thus on the profitability aspect of social media use. Of particular concern will be what social media is and how its use influences the profits of businesses. The research also details the methods used to achieve higher business profits and lends credence to the prediction that social media could be the future marketing strategy that firms should adopt in promoting the brands and products. To populate the research effort, particular attention will be paid to the available literature sources that dwell on whether, how and why social media affects business profits.
Chapter 2: Literature Review
Literature concerned with the relationship between the use of social media and business operations, specifically the revenues earned from business operations, is in plentiful supply. Bingham (2016), in consideration of the trends in consumption in the UK, points out that mobile devices, which have allowed consumers to access social media platforms from any location have led to increased instances of impulse purchases, especially among the younger generations. In this manner, social media has ensured an increase in sales for business and thus an increase in profits. In concurrence with Bingham (2016) on social media and impulse purchases, the connection of users to a seemingly endless source of information would likely influence purchase by enabling instant research and comparison of products, thus encouraging impulse purchase. In the view of Kowatsch and Maass (2010, p. 698), mobile devices have become central in online shopping because they are portable and therefore aid customers on the move in research and comparison of products during the process of shopping. Portability of the tools used to access social media also helps businesses increase the possibility of impulse buying.
Given the central role that social media plays in the lives of many individuals today, businesses have adopted the trend of advertising and selling their products and services online through such sites as Facebook, Twitter, YouTube and other relevant social media platforms. As Bennison, Warnaby, and Pal (2010, p. 847) posit, consumers can access commodities at any time and from any location thus having more choice possibilities and flexibility. As such, the use of social media applications makes shopping more desirable to consumers and thus holds the promise of more purchases and hence higher profits for retail businesses. Social media platforms also influence business operations by making the shopping process more interactive as Andzulis, Panagopoulos, and Rapp (2012, p. 309) note. The interactive ability arises from the fact that consumers who use such platforms for purchase can access better customer services than they might have been offered in the actual physical store (McKay 2012). Essentially, the use of social media enables firms to provide better customer services and to engage in efficient customer relationship management.
As Malthouse, Haenlein, Skiera, Wege and Zhang (2013, p. 272) assert, for business entities the use of social media platforms helps in the interaction with customers in ways that traditional shopping methods could not. Through social media platforms, businesses can gain insights into their customers’ wants and desires and therefore tailor communication processes, products, and other aspects to better suit the tastes and preferences of the clients. As a result, the business entities would be developing and enhancing the loyalty of consumers to their brands (Malthouse et al. 2013, p. 278). Similarly, the use of social media could offer businesses a chance to promote their products more effectively. As Andzulis, Panagopoulos and Rapp (2012, p. 306) suggest, these media would allow companies to run adverts for longer period of time, at cheaper costs and still promise a broader audience than traditional media ever would. Such access to varied audiences at low price would effectively reduce the costs incurred in promoting products while promising better outcomes, hence increasing the efficiency of product promotion, which in turn translates to higher revenues and more profits.
Chapter 3: Research Methodology
To establish how and why social media affects business profits, the research methodology will be divided into four subsections.
Research Questions
Mainly driven by the central concern of establishing how social media can help to improve business profits, the following research questions were considered in informing this dissertation.
What is social media?
Does social media have any effect on businesses?
In what ways does the use of social media affect business operations?
How can businesses gain from the use of social media?
Why does social media affect the profits of businesses?
What techniques are involved in the use of social media?
Could social media be the future for aiding business profits?
What does existing literature reflect on social media use and business performance?
Research Objectives
This dissertation was intended to establish which social media platforms affect the profits that businesses make, and to discern why social media has an impact on business profits. The dissertation was also intended to determine how social media use could help improve business profits and to illuminate further what techniques are involved in the use of social media. Finally, the research effort was meant to query whether social media is the future marketing strategy for businesses to undertake when promoting their brands; and hence aid business profitability.
Ethical Concerns
Considering that the research effort herein mainly focuses on the use of existing sources of literature, the essential ethical concern would be that of the use of intellectual property rights. To address such matter, the dissertation endeavored to highlight, through citation and referencing, each instance where a secondary source was consulted or used. As Singh (2012, p. 411) advises, proper permission of the publishers, where possible, was sought in instances when considerable amounts of secondary data were required for consideration in the process of informing the dissertation.
Chapter 4: Findings
Social media use, as was determined during the data collection process and as shall be indicated hereafter, affects business profits for different reasons and in several ways.
Social Media and Business Profits
The use of social media, as Kumar et al. (2016, p. 13) observe, is essential in drawing customer’s attention to the products and services that a business has to offer. In this manner, the use of such media drives up demand for business entities and in the process leads to higher revenues and profits. On a similar note, the use of social media can affect the benefits of a business by helping in the execution of a customer relationship management program, which would allow organizations to build and to manage relationships with their customers. Social media use also affects business profits because it helps organizations realize greater efficiency in their operations. Specifically, the use of social media by businesses assists in the management of the relationships that subsist between an organization and its customers; it enables the company to respond to customer queries and complaints with swiftness and to take into consideration the suggestions of customers. In these ways, the use of social media as Malthouse et al. (2013, p. 272) portend, allows businesses to be more responsive to customers and therefore ensure a good rapport in-between. Through such relationship, organizations can build and enhance consumer loyalty thereby enjoying its attendant benefits of repeat purchases as well as the creation of a positive brand image.
Further, through social media platforms such as Yelp, customers have been able to voice their feedback and thus influence the purchase decision of other consumers. In instances where such feedback is negative and of a dissuading nature, the business entity subject to such criticism is prone to suffer losses as consumers opt to stay away. In essence, as Jones, Borgman, and Ulusoy (2015, p. 619) illustrate, social media has given consumers a voice they previously did not have, and hence greater say in the operations of many business organizations. Other platforms such as Facebook and Twitter have also conferred similar abilities upon consumers.
Social Media as the Future Marketing Strategy
Social media platforms can allow business entities to access the necessary information to determine the preferences and tastes of customers and thus tailor products and services to meet such needs and spur impulse purchase (Tifferet and Herstein 2012, p. 178). In this manner, by determining the demand for products and services offered by entities, the use of social media would directly affect the profits of such businesses. Similarly, through positive feedback spread by existing customers on social media, companies can gain more customers, realize more sales and post higher profits (Jones, Borgman and Ulusoy 2013, p. 631). Still, companies can employ the use of social media platforms to communicate with customers and maintain connections with them and in the process build on the trust created through such interactions to enhance brand loyalty.
Secondly, the use of social media has also enabled business entities to not only take note of consumer decisions and choices (as indicated through purchase decisions made) but also utilize such metrics to the advantage of the business. Mostly viewed as a concern of online-based firms or firms with a strong presence in e-commerce, this practice of data storage and utilization enables the company to pre-empt and anticipate the needs of consumers and thus sufficiently serve such needs (Holmes 2015). In this manner, the use of social media, by allowing the firm to help such requirements (and hence create a feeling of connection and loyalty with the customers while building relationships) enables firms to increase their sales and thus realize higher profits (Holmes 2015).
Achieving Higher Profits
Firms and businesses can ensure higher profits from their operations in many ways. For instance, social media use could be applied to leverage connections that already exist. Essentially, firms can utilize social media platforms to create desirable consumer traffic in the sense that they can source clients from the links by their already existing clients, creating a sort of chain marketing scheme. Such approach also helps the firm to develop a targeted marketing scheme in which products are offered to consumers based on the connections they have on such social media sites. In the view of McKay (2012), as concerns development of marketing strategies, business would be well served in using social media platforms as it would ensure the audience that the business entity has, works to market the firm’s product to others.
Many business entities emphasize greatly on their brand as higher brand value helps in achieving higher profits. In the present world, the building of a desirable brand image often takes into account the social media aspect which involves constant and instant communication with clients, promotion of products and researching the market trends (Kumar et al. 2016, p. 18). As such, social media platforms are linked to the profits that business entities post in the sense that the process of building a brand image dramatically involves the utilization of such media. Mostly, it is essential for companies seeking to develop or strengthen their images or brands to be not only present but also active on social media and to engage potential customers while seeking relevant information that would be pertinent to its operations, as Venkatesh, Thong and Xu (2012, p. 163) suppose.
Chapter 5: Conclusion
A trend that is increasingly replacing traditional commerce, as it moves to become e-commerce, namely the use of social media in business operations, cannot be stressed enough due to the immense advantages it confers upon businesses, especially when applied optimally. As indicated above, there are various reasons for and numerous manners in which social media affects the profits of firms including the enabling of appropriate advertising through the targeted promotion of products. The increase in efficiency realized in the process of product promotion, leverages existing social connections, interactive marketing, and management of customer relationships, as well as the building of a desirable brand image. Social media can also be utilized as a future marketing strategy to help businesses realize higher profits. Overall, depending on the approach that the management of enterprises applies in dealing with the use of social media, such platforms could either elevate or slash the profits realized from operations.
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