Social Media Retailing Applications: Opportunities and Threats
How Has Social Media Developed and What are the Benefits and Downsides of Using Social Media for Retailers Today?
This study examines social business in general, how it developed and the benefits of using social media in particular. Second, this study provides a discussion concerning the potential positive as well as the effects of social business in the retail sector which is followed by a description of optimal business strategies for social media applications, the pros/cons of using these tools in the industry, and some representative case studies concerning companies that succeeded and some that recently failed in their use of social media. Finally, the study provides a summary of the research and important findings is followed by a series of recommendations concerning how retailers should use social media technologies in their own businesses in the concluding chapter.
Social Media Business Applications
The past half century has witnessed a growing recognition among the world’s population that despite sometimes-massive international relief efforts, at least a billon people in the world today remain mired in poverty and another billon-and-a-half lack easy access to clean water. In this environment, it is clear that governments around the world need all of the help they can get from the private sector in addressing local issues that may have international or global origins. Notwithstanding a groundswell of “think globally, act locally initiatives,” the world’s population continues to increase at an alarming rate, and many experts predict that peak oil will occur sooner than later, if it has not already been reached. Further, even as these fossil fuels are being depleted, though, their use continues to contribute to accelerated levels of global warming. Taken together, it is apparent that the world has a multitude of problems that can be addressed through informed applications of public-private partnerships and corporate-sponsored initiatives, and these issues are discussed further below.
Statement of the Problem
Despite the growing recognition that organizations of all types and sizes must pursue business models that take into account the triple-bottom line, the use of social business by retailers has been mixed. In some cases, the efforts by smaller retailers to introduce social business principles and practices were relatively inconsequential (Nee 2011). Furthermore, even larger retailing organizations have been uncertain in developing their social business responses based on a lack of experience in these areas (Nee 2011). According to Nee (2011, p. 4), though, “Lately, however, there has been a groundswell of interest and activity by business leaders seeking creative ways to leverage their core business to do well and do good.” In other words, it is possible to earn a decent profit while giving back to the community in which companies compete, as well as by making efforts to address issues of global importance as they are able to do so.
Because there is no question that retailers are incorporating social media into their business models, it is important to identify best practices to take advantage of the strengths of these tools while minimizing their potential downsides to achieve social business goals. To this end, this paper provides a review of the relevant peer-reviewed, scholarly and commercial literature to better understand the potential downsides of using social media described by Morris (2013) in his article, “2012?s Ten Worst Social Media Disasters.” Using contemporary illustrative examples from academic literature and reputable business publications, this paper provides a discussion concerning the concept of ‘Social Business’ and the resultant opportunities and challenges that are currently being faced by the retail industry globally using the aims and objectives described below.
Aims and Objectives
This study’s overarching aims and objectives were to provide:
1. A comprehensive analysis concerning social business in general, how it developed and the benefits of using social media as well as a discussion concerning the effects of social marketing for businesses in the retail sector;
2. A timely description of optimal strategies for social business in the retail industry; and,
3. A series of recommendations in the concluding chapter concerning how retailers should use social media technologies in their own businesses to achieve their social business goals.
Overview of the Study
This study uses four chapters to achieve the above-stated aims and objectives. Chapter one provides a statement of the problem, the study’s aims and objectives and this overview. Chapter two examines social business in general, how it developed and the benefits of using social media to promote and achieve social business goals. A discussion concerning the effects of social businesses in the retail sector is followed by a description of optimal business strategies for social media applications and the pros/cons of using these tools for social business purposes. Chapter three provides representative case studies concerning companies that succeeded and some that failed in their use of social media for social business applications and chapter four presents a series of recommendations are provided concerning how retailers should use social media technologies in their own businesses to achieve their social business goals. This report will not provide any peer-review feedback and use only academic literature and reputable business publications.
Social Business and Retailing
By any measure, the Internet was a real game-changer for the retail sector. Not only have new opportunities for retailing been introduced, sophisticated multimedia platforms now provide new ways of communicating directly with customers and potential customers. Against this backdrop is the growing recognition by companies of all sizes and types that businesses are being held to higher standards by the general public today compared to the past, and it just makes good business sense to identify best industry practices from industry leaders. Indeed, Schwartz (2010) suggests that the need for integrating social business political and practices into existing business models is truly compelling and urgent on an equal basis as generating a profit. According to Schwartz (2010, p. 18), there is a need for “social business to be at least as well managed as any profit-maximizing business” and cites “the importance of speed, planning regular reevaluation of plans, and understanding one’s market.”
Social business principles and practices are redefining business success today. Rather than having a single source of motivation to earn a profit, a growing number of businesses are currently subscribing to the concept that they have two fundamental motivations; the first to earn a profit in order to stay in business and provide a return on investment to their shareholders, but also a second that requires giving back to the communities and world in which they compete (Ghalib & Hossain 2009). According to Ghalib and Hossain (2009, p. 2), “Each type of motivation will lead to a separate kind of business: The first type of business a profit-maximizing business, and the second type of business as a social business which are created to do good to people, rather than operating with the sole intent of making private gains.” This point is also made by Nicholls (2006, p. 42) who advises, “Young people must learn that they have a choice to make about which kind of entrepreneur they would like to be. If we broaden the interpretation of capitalism even more, they will have a wider choice of mixing these two basic types in proportions that are just right for their own personal objectives.” This broadened definition of capitalism may appear to be a watered-down version for struggling companies that are already being forced to operate on razor-thin profit margins. In this regard, Kreitzer (2012, p. 103) emphasizes that, “Social business is designed and operated as a business enterprise, with products, services, customers, markets, expenses, and revenues — but with the profit-maximization principle replaced by the social-benefit principle. Rather than seeking to amass the highest possible level of financial profit to be enjoyed by the investors, the social business seeks to achieve a social objective.”
For start-ups in an increasingly competitive and globalized marketplace, social business goals may be a hard sell. With the overwhelming majority of new businesses failing each year, there must be some compelling reasons for businesses of any type to elect to forego a purely profit-making business model in favor of a more a ltruistic model that may place them at a competitive disadvantage. In reality, though, businesses do not have to forego their profit-making agendas, but they must change their way of thinking to accommodate this new direction in social business. In this regard, Nicholls (2006, p. 42) emphasizes that, “Making profit will not disqualify an enterprise from being a social business enterprise. The basic deciding factor for this will be whether the social goal remains the enterprise’s overarching goal, and it is clearly reflected in its decision-making.” Indeed, a growing number of companies are finding the right balance between social business and their conventional business models using social media resources which are discussed further below.
Social Media and Retailing
Despite a growing body of evidence that social media sites are valuable additions to the marketing mix, a number of corporate executives remained mired in the past and believe that anything taking place on the Internet is just a passing fad without real business value (Keifer 2010). For instance, social media sites Facebook, Twitter, YouTube, and others are wrongly regarded by marketing executives as being mere “chat rooms” for adolescent socializing and nothing more (Keifer 2010). In reality, though, business is booming on social media networks. Indeed, since 2003, the number of social media site users has nearly doubled, and the time spent visiting and navigating these sites has grown by a staggering 883%! (Kunz & Hackworth 2011). According to Kunz and Hackworth (2011, p. 2), “In 2008 alone, the amount of time spent on social networking sites increased 73%. A large percentage (85%) of social media networking users want companies to interact with them using social media applications.”
Today, sixty times a minute, every hour, 24 hours a day, social media site users visit at least one of the leading social networking sites and around 50 social networking sites each have more than one million registered users each (Kunz & Hackworth 2011). In 2007, 37% of the adult population and 70% of adolescents used online social networking at least once per month and the global social networking audience is expected to reach a half billion by 2014 (Kunz & Hackworth 2011).
Taken together, the number of consumers using social media sites has grown exponentially in recent years, and growing numbers of retailers are taking advantage of this enormous consumer base to promote their products and services. In this regard, Kunz and Hackworth (2011, p. 3) conclude that, “Based upon the usage rate and statistics, there is no question that retailers are quickly incorporating the use of social networking sites into their marketing communication strategy.” As a result, retailers are jumping on the social media bandwagon in growing numbers, and for good reason. According to Qin (2011, p. 188), “Such social media are perceived to be transparent, inclusive, authentic, grassroots and consumer-driven. The unprecedented openness, velocity (speed) and volume of conversations produced by social media have made them become a vital avenue for transmitting word of mouth.”
These are vitally important issues for retailing executives searching for cost-effective solutions to their marketing goals, and there is a growing body of evidence that not only does social media contribute to the achievement of marketing goals today, achieving these goals may not even be possible with it. In this regard, Tenno (2004, p. 9) emphasizes that, “The retail outlet is the most important arena for public choice. It is intense in its range of decisions, and numbing in its range of (similar) products. Inside this arena there are limited opportunities within frameworks.”
These retailing frameworks per se are certainly not new, but the manner in which they are being applied to social media networks has changed the playing field in major ways. According to Scott (2008, p. 37), the main challenge for marketing executives “is to harness the amazing power of . . . whatever you call it – viral, buzz, word-of-mouse, or word-of-blog – having other people tell your story drives action. One person sends it to another, then that person sends it to yet another, and on.” In order to generate this level of interest and consumer loyalty, though, retailers must have a product or service worthy of generating and sustaining this interest and loyalty, but they also need some way to communicate effectively with their target market and social media networks provide a viable solution. In addition, as discussed further below, companies must also build a trusting relationship with their followers on their social media networks. The opportunities for retailers to capitalize on social media networks include social network giants such as Facebook and Twitter, but extend to retailer blogs as well as shown in Figure 1 below.
Figure 1. How Consumers Interact with Retailers through Social Media Networks
One of the biggest advantages of using social media networks for retailing promotions is their low cost and their ease of use. According to Kunz and Hackworth (2011, p. 3), sponsored promotions on social media networks “do not cost a great deal of money; rather it is simple and quick to post a promotion on Facebook, Twitter, YouTube, etc. The key is to then monitor not just the ‘buzz’ of pass-along messages, but to analyze the content of the discussion: what consumers liked, disliked, etc.” While most authorities agree that it is important to monitor and respond to online feedback to ensure that pranksters are not allowed to flood the social media network with profanities and false accusations, the point made by Kunz and Hackworth concerning the need to analyze the legitimate feedback, both positive and negative, is especially noteworthy. This strategy is congruent with Davidow’s (2003, p. 67) finding that “not only did handling complaints lead to an increased intention to repurchase but it decreased negative word of mouth and increased positive word of mouth, thus increasing the overall benefit to the firm.”
One of the more interesting aspects of social media is that it capitalizes on some age-old marketing concepts, but expands them in ways never before possible that introduce new opportunities for marketers but which present some new challenges as well. For instance, Qin (2011, p. 188) reports that, “Social media has become an important avenue of word-of-mouth and a recent study has found blogging to be an important lead-generation source among social media options.” The vast body of marketing research over the past half century confirms that most consumers regard word-of-mouth has a credible source of information for making a purchase decision (Qin 2011).
Given the ability of social media networks to facilitate back-and-forth communications in an online venue, it is not surprising that retailers are increasingly recognizing the advantages of word of mouth referrals and testimonials for their marketing applications. In this regard, Saastamoinen (2009) emphasizes that the World Wide Web and online communities of consumers with like interests has created a word-of-mouth framework that is unprecedented in marketing history. Likewise, Qin (2011, p. 189) points out that, “The Internet and online communities have brought word of mouth to an even wider reach at a faster speed. For instance, online word of mouth can influence people’s online purchase via buyers’ subjective norm or via seller reputation.”
Positive word of mouth can be generated in a number of ways, including:
1. Online reviews;
2. Discussion boards;
3. Video sites;
5. Microblogs; and,
6. Social networks (Qin 2011, p. 188).
The foregoing word-of-mouth opportunities are far more than just a laundry list of online content, they represent the vanguard of the future for retail marketing using social media resources. In this regard, Qin (2011, p. 189) emphasizes that, “With the rapid increase in popularity of Web 2.0 technologies and the explosive growth of online social communities, social media, i.e. consumer-generated media and content, have emerged as new channels in which consumers interact and influence each other, as well as channels in which businesses and consumers interact and influence each other.”
Indeed, since the dawn of mankind, all of the printed material published does not equal the amount of user-generated content being published in social media networks each month. Therefore, another noteworthy point of special interest to retailers is the fact that consumers are not only socializing on social media sites and playing games such as Farmville, they are actually actively discussing — sometimes in passionate ways — the products and services they use or do not use. As Qin (2011, p. 189) points out, “Not only are a huge percentage of consumers and businesses online engaged in social media, but also a very large percentage of consumers discuss the brands and products they love or hate.” Clearly, these issues represent an important opportunity for retailers, but there are some downsides to using social media networks that must be taken into account when formulating social media network retailing strategies and these issues are discussed further below.
Retailing Downsides and Dangers Associated with Social Media Networks
Using social media resources responsibly and effectively turns out to be far more challenging that many consumers might believe. For instance, in his essay, “2012?s Ten Worst Social Media Disasters,” Alex Morris (2013) provides a summary of some of the worst recent outcomes various organizations (many of them retailers), experienced in their use of social media networks, including McDonalds, Celeb Boutique, the NRA, Snickers, American Apparel, Urban Outfitters and Gap, Susan Boyle, KitchenAid, Waitrose, and even Starbucks, thereby providing that even marketing gurus with a proven track record of success can get things wrong when it comes to social media networks.
These glaring examples of what can go wrong when companies deploy social media strategies without taking into account the full range of consequences that can result make it clear that organizations of all sizes and types have much to consider when implementing and administering their social media strategies. For instance, Klie (2013, p. 24) emphasizes that, “Companies that are focused only on promoting their brands and deals or only servicing existing customers are excluding major groups of their online community, negatively impacting their satisfaction, and influencing their future purchasing decisions.” In other words, even when companies use social media resources, it is easy to do so in inappropriate or incomplete ways that will adversely effect the desired outcomes. Despite the numerous challenges that are associated with doing it right, there are some recent examples of retailers succeeding where others have failed, due in part to the recent and current trends discussed below.
Recent and Current Trends in Retailers’ Use of Social Media
For millennia, retailing took place in physical stores of varying sizes and purposes, or through caravans and like means of trade. These patterns of retailing have created a basic framework in which humankind buys and sells what they need. This point is made by Tenno (2004) who cites the fundamental transformation of the retail environment from its traditional brick-and-mortar setting to a digital environment that exists only in the cloud. In this regard, Tenno (2004, p. 9) advises that, “Frameworks put in place by the non-digital, non-organic world of cardboard and floor space. Digital transcends the limitations of the shop infrastructure, serving communications through personal devices controlled by the digital brain in the ‘cloud.’” In recent years, more and more consumers have come to rely on online resources for their retail shopping to the extent that a clear majority does so today. As a result, the World Wide Web has become the primary platform for retailers in recent years (McGriff 2012).
Although some marketing executives may retain some Old School ideas about the World Wide Web and social media networks, the handwriting is on the wall that these venues are invaluable additions to the marketing mix during a period when marketing resources are scarce and the need for cost effective solutions are great. In this regard, McGriff (2012, p. 51) emphasizes that, “Marketers are increasingly grappling with leveraging social media to positively affect their brands and their related value propositions. Some managers have fully embraced the two-way media, while others are slowly coming to grips with the necessity of using social media as an instrument of communicating with consumers.” For the few marketing executive holdout that remain, they had better “come to grips” with the reality of the importance of social media networks or risk being left behind in the race to gain market share. According to McGriff (2012, p. 52), “The Internet continues to grow as a channel for retail sales in a wide variety of merchandise categories. A study by Forrester Research suggests that 7% of overall U.S. retail sales occurred online in 2010.”
Furthermore, several retail categories experienced even greater growth in the percentage of online sales. For instance, more than half of all personal computer purchases are currently made online (McGriff 2012). Likewise, McGriff (2012, p. 52) notes that, “There are numerous merchandise categories in which the percentage of sales occurring online is significantly higher than 7%. For example, over 50% of personal computers and software are now purchased online. Apparel, consumer electronics, toys, video games, movies, and music enjoy above-average online sales as well.” Furthermore, nearly half (46%) of all retail sales in 2010 were “Web-influenced,” even if consumer research in social media networks did not result in a direct purchase decision, and this percentage continues to increase (McGriff 2012).
Likewise, Miller (2012) cites the following salient results of the Forrester study with respect to their implications for retailers and their social media efforts. An interesting point in the Forrester study was that although a majority of U.S. online retailers did not believe their social media-related marketing provided substantive additions to their revenues, they did identify a number of other benefits including the following:
Building brand awareness and improving customer service;
90% said search-engine marketing was the most effective source used to acquire customers and see social marketing strategies as experimental and needing further exploration;
82% said they are pursuing social networking simply to learn more about what it can do;
62% said their return on investment was either unaffected by social media or that the benefits remain unclear;
61% said they see the primary return on investment from social marketing as “listening to and better understanding our customers”;
52% reported that they are participating because “they don’t want to be left behind”:
45% cited the tremendous buzz about social networking as reason to participate; and,
37% said they are participating because it is inexpensive to do so (Miller 2012).
Consequently, in an attempt to avoid being left behind, many retailers are launched social media initiatives despite the potential of failing to realize any substantive return on their investments in hopes of doing better over time. In this regard, Miller (2012, p. 2) concludes that, “So, while online retailers say social-commerce marketing has been less than successful for their businesses, many claim they will continue to place more of their marketing dollars into social networking, citing the potential for improvements from those channels in the future” (emphasis added).
Furthermore, there is a growing consensus among researchers that consumers will continue to use social media networks such as Facebook and MySpace in increasing numbers and more will use these sites more frequently, and the track record of performance to date confirms that social media sites have consistently contributed heavily to brand awareness in ways that influence purchase decisions and will continue to do so in the future (Brooks 2008; Kunz & Hackworth 2011). Some real-world examples of retailers that have achieved significant results using social media networks include Staples and Honda, as well as a discussion concerning how Virgin America failed in this area are provided below.
Case Study Analysis and Discussion
Case Study No. 1: Staples
Massachusetts-based Staples, Inc. (hereinafter alternatively “the company” or “Staples) is a good candidate for a case study of social media applications for retailers because it is the world’s largest office products company as well as the second largest internet retailer (Corporate profile 2013). According to Staples’ corporate profile (2013, p. 1), the company has become the world’s largest office product company by over the past quarter century by identifying and responding to the needs of its consumers. In this regard, the corporate profile boasts (2013, p. 2), “Through its world-class retail, online and delivery capabilities, Staples offers office supplies, technology products and services, facilities and breakroom supplies, furniture, copy and print services and a wide range of other product categories.” The company’s operations are global in scope, and Staples extend throughout North and South America, Europe, Asia, Australia and New Zealand (Corporate profile 2013).
A comparison of Staples’ stock performance compared to its main competitors, Office Depot, OfficeMax, and United Stationers, over the past 23 years to date is provided in Figure 1 below.
Figure 1. Staples’ Stock Performance vs. Main Competitors: 1990 to Date
Source: Yahoo! Finance at http://chart.finance.yahoo.com/
As can be seen from Figure 1 above, Staples has consistently outperformed its competitors over the past 23 years with the exception of United Stationers which recently outpaced it slightly in growth. It is reasonable to conclude that this sustained performance is attributable at least in part to the company’s innovative use of its social media networks. Taken together, it is clear that visitors to Staples’ Facebook page are having a good time, but some are also taking the opportunity to voice their complaints about the company’s business practices. The above-cited examples of user feedback and the company’s response to complaints and consumer issues are timely, considerate, cordial, polite and effective. There are also some unique features on Staples’ Facebook page as well that help make it a popular destination for social media users in search of office supplies and furniture. According to Kunz and Hackworth (2011, p. 4), “Staples’ Facebook page includes many unique tabs that can be accessed by Staples’ fans. These tabs include an application called ‘I Shred U!,’ where fans can upload pictures and virtually shred them.”
Some of the other user-friendly interfaces provided on the Staples’ Facebook page include:
1. A “News” tab that informs all fans of their newest products and offers links to videos that shows the consumer how these products work.
2. Users can also download their own “Easy Button” (a trademark of Staples) that will appear on users’ computers’ desktops.
3. The “Extras” tab of the Staples Facebook page educates fans about Staples programs, including EcoEasy (Staples effort to be environmentally friendly by offering consumers a variety of ecopreferable products and services – www.staples.com/ecoeasy) and Staples Foundation for Learning (a program that provides job skills and educational opportunities for everyone, especially disadvantaged youth – www.Staples Foundation.org) (Kunz & Hackworth 2011, p. 6).
A careful review of the company’s colorful Facebook page makes it clear that the social media managers at Staples have put a lot of thought into their social media promotional efforts. Not only does the company use this social media network to promote current special deals for its fans, it also uses it to highlight its corporate social responsibility efforts and to provide a centralized point for donations for its customers who may not know how to make a difference. For instance, Kunz and Hackworth (2011, p. 7) conclude that, “These exclusive tabs give Staples an advantage on Facebook and provide fans much more than the typical retailer. This appears to be an effective means of segmenting and targeting Facebook applications to be more relevant for consumers.”
Some recent representative social business achievements and goals by Staples include those set forth in Table 1 below.
Staples’ Sustainability Achievements and Goals
Recent efforts to reduce or eliminate all unnecessary packaging throughout Staples supply chain include the following:
1. Eliminating PVC plastic from all Staples brand products packaging in North America at the end of 2009;
2. Reducing the basis weight of the company’s brand case paper packaging, saving more than $8 million and reducing cardboard use by 880,000 pounds without impacting product damage rates;
3. Installing automated box-scoring and sizing technology to help minimize packaging material use, improving the way boxes are packed into shipping containers or delivery trucks, and reducing or eliminating the need for material to fill empty air space in the package; and,
4. Pilot testing reusable tote programs for the company’s delivery customers, as well as reusable shipping sleeves to replace shrink-wrap.
The company also encourages its supply chain partners to follow its environmental lead by adopting its sustainability practices.
Electric Delivery Trucks
Following testing an all-electric battery powered truck, Staples ordered 53 trucks for delivery in the fourth quarter of 2010 into 2011. At present, 10 of these trucks are in use in Ohio, six in Georgia, three in Texas and Oregon each and one in Missouri; in addition, all of the remaining 30 are deployed in California. The company also tested a prototype of a hybrid diesel-electric component in two delivery trucks. When this technology is available in actual production models, the company reports that it will consider purchasing it for potential wider-scale deployment in its entire fleet of delivery vehicles.
Although time is of the essence in making Staples’ deliveries, the company has made fuel efficiency a higher priority by limiting the top speed of its delivery fleet trucks to 60 miles per hour and implemented idle management technologies to shut off engines after three minutes of idle time. These initiatives have improved fleet fuel economy by more than 20% since 2007. As a result of these fuel-efficiency initiatives, the company saves almost one million gallons of diesel fuel annually in the United States alone.
Source: Adapted from Staples Green Initiatives (2013)
Finally, some recent examples of Staples’ use of their social media resources for social business applications include the following:
1. Printer ink jet and copier toner cartridges recycling program. Staples offers its Rewards Club members the opportunity to recycle any ink or toner (up to 10 per calendar month) to receive $2 back per cartridge. Rewards Clubs customers also receive a 5% discount towards any merchandise offered at Staples; however, in order to qualify for this offer, customers must purchase at least $30 worth of these products each month (initiative ongoing) (Recycle and Save 2013).
2. A “Thank you to the brave men and women who have served our country” on Veterans Day (November 11, 2013).
3. On September 1, 2013, the company announced an opportunity on its Facebook page for Rewards Club members to “Team up with Jake T. Austin, Staples for Students, and Boys & Girls Club of America to provide students in need with essential school supplies.” Just over two weeks later (!) on September 16, 2013, the company was able to announce that, “Mission accomplished! Thank YOU for making a difference and helping us raise $10,000 toward school supplies for students in need!” (Staples for Students 2013, p. 3). As part of this initiative, the company included links to relevant nonprofit and for-profit organizations including the (a) GRAMMY Foundation, (b) Boys & Girls Clubs of America, and (c) the Children’s Miracle Network Hospitals (Staples for Students 2013).
4. Four years of free attendance of Microsoft Office 365 University. This academic offer is available free with the purchase of selected laptops for eligible students, faculty, and staff. The offer requires verification of eligibility prior to purchase and is subject to limitations, including the number of laptops that each customer can purchase but can active a second account three years following the initial activation (Free Microsoft Office 365 University with Select Touch Laptops 2013). Eligible students, faculty and staff who purchase one of the selected laptops receive a free subscription to Microsoft Office 365 University that includes 60 minutes of free calling on Skype each month (Free Microsoft Office 365 University 2013).
5. Finally, an “Our thoughts go out to everyone affected by the devastating tornadoes in Oklahoma and throughout the region” on May 21, 2013 (Staples main Facebook page 2013).
Another retailer that is modeling the way for others is Honda which is discussed further below.
Case Study No. 2: Honda
Today, Honda Motor Co., Ltd. (hereinafter “Honda”) is a leading manufacturer and retailer of a wide range of vehicles and machine-powered products for consumers and businesses. The company currently maintains four business segments as follows:
1. Motorcycle Business: This business segment provides business and commuter models, sports models (including trial and moto-cross racing motorcycles), all-terrain vehicles and multi-utility vehicles.
2. Automobile Business: This business segment manufactures various automobile products, including passenger cars, light trucks, and mini vehicles.
3. Financial Services Business: This business segment offers a range of financial services (including retail lending), leasing, and other financial services, such as wholesale financing to dealers and customers.
4. Power Product and Other Businesses: This business segment manufactures various power products, including tillers, portable generators, general-purpose engines, grass cutters, outboard marine engines, water pumps, snow throwers, power carriers, power sprayers, lawn mowers, and lawn tractors; in addition, this segment also offers compact home-use cogeneration units, as well as sells thin film solar cells made of crystalline silicon for home, public, and industrial usage (Honda business summary 2013).
The company was established in 1946 and is headquartered in Tokyo (Honda business summary 2013). The company markets its products and services through a global network of independent retail dealers, outlets, and authorized dealerships situated in Japan, North America, Europe, and Asia (Honda business summary 2013)onda . For more than a half century, then, Honda has succeeded where others have failed and the company has done so while maintaining a commitment to social business. For instance, according to Honda’s Web site (About Honda 2013, p. 2), “Since its establishment, Honda has also been committed to giving back to the community. All Honda activities, including philanthropy, stem from a corporate philosophy built on the basic principle of respect for the individual and sharing joy with our customers, associates (employees) and society.”
Some recent representative social business initiatives that have been promoted using its social media resources by this retailer include the following:
In addition, Honda also maintains links to the following nonprofit and for-profit organizations on its Facebook page: (a) Tournament of Roses (Rose Parade) (Non-Profit Organization); IndyCar Series (Sports League); (c) Honda Racing/HPD (Product/Service) and American Red Cross (Non-Profit Organization).
As with Staples, people are coming to Honda’s Facebook page and socializing with family members and friends about special promotions, favorite products, fond memories of shopping experiences and a whole range of positive feedback about the company that is powerful word of mouth evidence for users to follow in formulating their purchase decisions. In 2012, Honda also created a media campaign on Pinterest. According to Clawson (2012, p. 4), “Honda’s activity, which it has dubbed ‘Pintermission,’ promoted its CR-V model and included a dollars 500 incentive for users to get out and visit some of the places they were ‘pinning’ about.”
A comparison of Honda’s stock performance since January 2009 to date vs. its major competitors, General Motors, Toyota Motors and Ford Motor Company, is provided in Figure 2 below.
Figure 2. Stock Performance for Honda vs. Main Competitors — Past 5 Years to Date
Source: Yahoo! Finance (2013)
Honda Motor Company, Ltd.
As can be seen in Figure 2 above, Honda’s stock performance has mirrored its main competitors, Toyota Motors and General Motors, closely for the past 5 years. All of these companies, though, are being outpaced by Ford Motor. This sustained performance level can reasonably be attributed, at least in part, to the company’s informed use of its social media resources that include a social business component. For instance, the highlighted features on the company’s Facebook page related to its social business goals include the following:
1. Streaming video of the top 8 marching bands from Historically Black Colleges and Universities will show off their skills at Honda Battle of the Bands on January 25, 2014.
2. Honda sponsors a “save the drive-in movies” initiative. This recent (September 26, 2013) post on Honda’s Facebook page boasts: “The forecast this Thursday in McHenry, IL Cloudy With A Chance Of Meatballs 2! Visit McHenry Outdoor Theater – Golden Age Cinemas on 9/26 at dusk to see the movie play on the brand-new digital projector that they won from Project Drive-In. Screening admission on a first come, first served basis.”
3. On June 13, 2013, the company posted the following announcement on its main Facebook page: “Honda is proud to honor the nation’s top collegiate female student athletes for its 27th year at the Collegiate Women Sports Awards. More than $2.7 million in grants has been awarded to universities since 1986 so women student athletes can keep reaching their goals.”
4. On June 6, 2013, Honda announced the award to 5th grade student “Rachel K.” with a $1,000 first prize as part of a nation-wide student essay-writing competition on its main Facebook page. The winning entry emphasized why Rachel “thinks Honda is a wise stock investment. Citing Honda’s environmental commitment and diverse range of products, Rachel earned 1st place in the competition! So we decided to get her bright investing future off on the right foot. Congrats, Rachel, and good luck!”
5. On World Environment Day (June 5, 2013), Honda posted an announcement on its main Facebook page that its Honda Civic Natural Gas, FCX Clarity Fuel Cell Electric Vehicle, Honda Fit/Fit EV, and Honda Accord Plug-In! were all eco-conscious vehicular alternatives that can help reduce carbon emissions and mitigate global warming.
6. On May 24, 2013, Honda posted the following announcement on its main Facebook page: “To help Midwest Tornado Response Efforts, Honda has pledged $100,000 to the American Red Cross – Disaster Relief Fund, as well as donated portable generators to aid recovery and rebuilding.” In addition, the company made the following limited statement concerning this natural disaster that was completely unrelated to any promotional effort except a link to the American Red Cross: “Our thoughts are with those impacted by the tragedy and we are happy to lend a helping hand. Join us in donating, visit: http://www. redcross.org/charitable-donations.”
The use of social media for social business applications by Staples and Honda has been consistent with the best practices employed by Virgin America which is discussed in case study no. 3 below.
Case Study No. 3: Virgin America
Launched in 2007, California-based Virgin America has consistently received awards for top customer service and airline performance (Liyakasa 2012), including: (a) “Best Domestic Airline” in Conde Nast Traveler’s Reader’s Choice Awards for five consecutive years; (b) “Best Business/First Class” in Conde Nast Traveler’s Business Travel Poll for five consecutive years; (c) “Best Domestic Airline” in Travel + Leisure’s World’s Best Awards for six consecutive years; and, (d) #1 in Class in Zagat’s Global Airlines Survey in 2008, 2009 and 2010 (About Virgin 2013). Virgin America founder Richard Branson says the environment in which the company operates is characterized by poor service and inflated prices, for which he is thankful: “Getting on an American airline for most people is just about the worst experience of their lives. Thank God. Otherwise we wouldn’t exist today” (cited in Levy 2008, p. 6). In fact, Branson argues that the very best company in any industry will always thrive, even during periods of economic downturn. According to Branson, “We started Virgin Atlantic 25 years ago, with one plane, and of the 13 American competitors we competed with across the Atlantic, every single one of them has gone bankrupt. If you can create a really good-quality product, even in difficult times you’re likely to do well” (cited in Levy 2008, p. 6).
From its humble beginnings with just aircraft, the Virgin America has expanded its operations with a base in San Francisco International Airport new Terminal 2. According to the company’s fact sheet, Virgin America flies to Boston (BOS), Dallas-Fort Worth (DFW), Fort Lauderdale (FLL), Las Vegas (LAS), Los Angeles (LAX), Los Cabos (SJD), New York (JFK), Orlando (MCO), San Diego (SAN), San Francisco (SFO), Seattle (SEA), Washington D.C. (IAD and DCA), Cancun (CUN), Chicago (ORD), Puerto Vallarta (PVR), Palm Springs (PSP), Philadelphia (PHL), Portland (PDX), Newark (EWR), San Jose (SJC), Austin (AUS) and Anchorage (ANC). The fact sheet also notes that, “In five years of flying, Virgin America has created 2,600 new jobs and has swept the major travel awards for the quality of its service. The airline’s no blackout date frequent flyer program — Elevate — has grown to 2.6 million members” (Virgin America Fact Sheet 2013, p. 2).
In addition, Virgin America was formed with a social business mission, and the company has consistently provided corporate support for organizations such as Stand Up to Cancer, California State Parks Foundation and KIPP schools (Virgin America Fact Sheet 2013). Moreover, with California being one of the states with some of the toughest environmental regulations in the country, Virgin Airlines has made its position on its social business responsibilities clear. According to its corporate fact sheet (2013, p. 2), “As the only California based airline, the carrier is committed to finding new ways to lead the industry on climate issues.” The company’s current President and CEO, David Cush (2013, p. 1), emphasizes that, “Investment in new aircraft and engines, the latest navigational systems, and consistent use of best practices on the ground and in the air, have made our fleet up to 25% more fuel efficient than the U.S. industry average.” The company’s top executive also stresses that Virgin America is not content to rest on its corporate laurels but is rather aggressively pursuing other environmental initiatives that will save money and reduce carbon emissions even further in the future (Cush 2013).
Some of the company’s other recent social business initiatives include the following:
Brand-new fleet is up to 25% more fuel and carbon efficient than the average fleet in the U.S.;
Most Eco-Friendly Airline, SmarterTravel Editor’s Choice, 2010;
Virgin America is the only U.S. airline to document its carbon footprint via the Climate Registry’s accepted standards;
Virgin Group’s profits are reinvested in renewable fuels research LEED Silver certified headquarters, LEED Gold certified home at Terminal 2;
Virgin America is investing in its T2 office spaces and “Virgin Village” teammate lounge to ultimately achieve the highest possible LEED Platinum-certification; and,
First domestic airline to offer carbon offset option in flight, via the Red system Sustainable practices built into training and operations since launch.
Despite the assertions by some industry analysts that Virgin America may experience the limits of its existing business model in the near future (current projected estimates indicate Virgin America will triple in size by 2019!), the company’s founder responds by insisting that the company’s approach to growth has always been in a thoughtful and sustainable fashion, and has always taken its social business responsibilities into account. In this regard, the company’s stated sustainability achievements and goals include those set forth in Table 2 below.
Virgin America Sustainability Achievements and Goals
Aviation industry leader is reducing carbon emissions and improving the fuel efficiency of its aircraft. Virgin America’s current Airbus A320 Family fleet is already up to 25% more fuel efficient than other domestic fleets. In 2011, the airline committed to even more efficient operations by becoming the launch customer for both the Airbus A320neo aircraft and the GE/CFM LEAP engine — which together will deliver one of the world’s most fuel-efficient commercial aircraft as of 2016. The new aircraft will yield a more than 15% improvement in fuel efficiency, corresponding improvements in carbon efficiency and double-digit reductions in NOx emissions. The A320neo also offers reduced engine noise, lower operating costs and up to 500 nautical miles in additional range.
The company continues to expand by adding over 200-500 new teammates per year, the airline is investing in sustainable facilities and the implementation of best practices. The airline’s Burlingame, California headquarters has been upgraded to a LEED-certified Silver standard and has an Energy Star Rating of 87 out of 100, with features including dual-flush toilets that reduce water use by as much as 243,000 gallons annually.
In April 2011, Virgin America opened its sleek and sustainable new home at San Francisco International Airport’s Terminal 2 (T2). As the only airline headquartered at SFO and as an anchor tenant, the airline had the opportunity to inform the T2 design from the earliest stages. The Terminal has since achieved LEED Gold — certification. Additionally, Virgin America is investing in its T2 office spaces and “Virgin Village” teammate lounge to ultimately achieve the highest possible LEED Platinum — certification. The LEED Gold and Platinum certifications are the first such certifications given to a major commercial airport in the U.S.
Improved Operational Technologies and Practices
In April 2011, Virgin America opened its ultra-modern and sustainable new home at San Francisco International Airport’s Terminal 2 (T2). As the only airline headquartered at SFO and as an anchor tenant, the airline had the opportunity to inform the T2 design from the earliest stages. The Terminal has since achieved LEED Gold — certification. Additionally, Virgin America is investing in its T2 office spaces and “Virgin Village” teammate lounge to ultimately achieve the highest possible LEED Platinum — certification. The LEED Gold and Platinum certifications are the first such certifications given to a major commercial airport in the U.S.
Waste Reduction and Recycling
The airline is focused on furthering waste minimization and recycling efforts at Virgin America’s headquarters, onboard aircraft and AT airport facilities.
Source: Adapted from Sustainable Growth at Virgin America (2013, p. 1) and Virgin America Fact Sheet (2013)
Clearly, Virgin America is one company that has modeled the way for others seeking to find a good balance between the social business responsibilities and the need to deliver a healthy return on investment to their shareholders. One way the company has achieved this healthy balance is through the use of social media resources. The majority of businesses today use social media resources in ways that are in sharp contrast to ordinary consumers who may prefer to socialize, interact with family and friends or people of similar interests. Indeed, social media networks are being used in innovative ways by companies such as Virgin America to effectively promote their brand and platforms for communicating with the general public and their loyal customers in particular (Gallo 2011). In fact, Virgin Airlines was in the vanguard of companies using Twitter to promote its brand. According to Baumann (2010), companies such as Virgin Airlines, Red Bull and Starbucks were among the first to use a new marketing feature that generates profits for Twitter while allowing companies to fine-tune their advertising to specific target markets in unobtrusive ways when searches are executed (Baumann 2010). The company currently maintains accounts with YouTube, Twitter and Facebook (Virgin America Fact Sheet 2013).
Moreover, Virgin America has managed its social media resources in a highly efficient fashion, with social media managers being assigned to the company’s social media offerings (Gallo 2011). A good example of how important this type of ongoing oversight is to successful social business applications can be found in Virgin America’s response to a problem the company encountered with a new reservation system that caused a number of problems for their flying customers (Gallo 2011).
In late 2011, Virgin America upgraded to a new Sabre reservation system; however, this IT initiative did not go completely as planned and some passengers vented their frustration on the company’s Twitter and Facebook pages (Gallo 2011). The following are representative examples of Virgin America (@virginamerica) timely and thoughtful responses:
@Maradine. Very sorry to hear you had a bad experience. Can you please follow back and DM if we can help out? Thanks
@JeffkLow. Very sorry. Appreciate your patience. Hope to provide a more seamless experience in the wks ahead.
Moreover, based on Virgin America’s stated social media mission to actively engage the company’s customers, the weeks that followed found more than 12,000 of such exchanges between two full-time employees and dozens of volunteers concerning the reservation system foul-up, thereby generating an enormous amount of public goodwill from an event that would otherwise have been a public image nightmare (Gallo 2011). This outcome was the direct result of the company’s top leadership making the use of social media resources a high priority with ongoing commitment and support (Gallo 2011). Indeed, Virgin America has always modeled the way for others in the aviation industry by providing their passengers with the latest in technological advances, and was the first airline to provide its entire fleet with WiFi capability (Gallo 2011). In this regard, Gallo (2011) suggests that the company’s innovation and approach to the of social media resources is also modeling the way for others. Citing a Virgin America executives, Gallo (2011, p. 3) reports that, “We were new and had to be different. We knew that once people experienced the airline they would stick with us so we reached out on social media. But our approach to social media has been to see it as an open forum. That means we take the good with the bad and we do not delete posts on Twitter, Facebook, or YouTube.” This is a noteworthy policy because it assures visitors to these sites that the company is transparent and forthcoming in its customer service function.
Today, Virgin America uses its social media resources to generate profits and promote special social business events, including a Twitter-based campaign for Stand Up To Cancer that raised $50,000 (Gallo 2011). Just as significantly, perhaps, the company has also gained valuable experience concerning how to use these social media resources to better engage its customers and promote sales (Gallo 2011). Although an air carrier, Gallo suggests that Virgin America’s use of social media resources provides a set of best practices for practitioners in virtually any industry. In this regard, Gallo (2011, p. 3) concludes that, “The Virgin America social media experience carries important lessons for other brands, regardless of industry. This is the world we live in. Everything has a social media component. Always remain focused on the guest experience, even in your social media channels. Be authentic and resolve guest issues on those channels. You’re receiving valuable feedback and that means you need to listen and respond to the good and the bad.” As noted above, by leaving negative feedback so that other customers can see that the company took steps to respond to issues and sincerely cared about their customers’ experiences, Virgin America has set an important standard for companies competing in any industry.
The company has attracted hundreds of thousands of users to its social media sites, and Virgin America has clearly modeled the way for others seeking to optimize their social media resources. A final important point made by Gallo concerning Virgin America’s successful use of social media resources is the need to gradually establish credibility with smaller initiatives and campaigns and identify opportunities for improving future efforts. According to Gallo (2011, p. 4). “Social media tools are your best weapon, but only after you have built a relationship with your followers or fans. Relationships are conversations and conversations are positive and negative.By embracing all types of conversations — and not hiding from a crisis — a company like Virgin America can build trust with its customers and enhance brand loyalty.”
This guidance is highly congruent with the advice provided by Klie (2013) who cites recent research from J.D. Power & Associates that shows organizations need to use their social media for marketing as well as customer service. In this regard, Klie (2013, p. 24) emphasizes that, “A one-pronged approach to social [media] is no longer an option.” In Klie’s (2013) study, Virgin America is cited as being among the brands that perform both customer service and marketing functions effectively in its social media usage.
Chapter Four: Conclusions and Recommendations
The research showed that there is growing interest among retailers in using social media resources to promote their brands and gain a competitive advantage. There was also a clear indication that more companies are recognizing the need to incorporate a social business element in their business operations, including their social media offerings. One of the primary ways that retailers have accomplished this was through including interactive features and promotional events concerning their specials, discounts and sales, of course, but their social business practices as well. The research was consistent in showing that social media networks can provide these valuable outcomes, but it remains less clear just how much impact that social media sites can have on companies’ bottom lines. While there is a growing body of knowledge concerning the appropriate uses for these online resources, there is always the potential for disaster and dozens of companies have learned the hard way that what might appear amusing or benign can easily be interpreted in unexpected ways by people from other countries and cultures. Indeed, what is known for certain at this point in time is that improperly conceptualized, implemented and administered, social media promotions can result in a wide range of unexpected adverse outcomes as exemplified by Morris’s list of the top ten social media disasters of 2012. The proliferation of these online resources suggests that there will be more instances of these types of lapses of good judgment when it comes to social media promotional efforts, but savvy managers will take careful note of these failures to ensure that steps are taken to avoid them (such as a policy concerning the inappropriateness of tying promotional efforts to anthropogenic and natural disasters). It is also reasonable to conclude that in the future, successful retailers will increase their use of social media marketing to achieve their marketing goals, and growing numbers of consumers will continue to rely on this platform to learn more about products and services they are interested in from sources they deem reliable and trustworthy. In the process, retailers can reap the benefits of their consumers’ doing a great deal of their promotion through the positive comments and “likes” left by Facebook visitors and comparable practices on other social media networks.
Companies such as Staples, Inc., Honda and Virgin America were shown to be doing all of the right things in administering their social media resources, and the representative commentary concerning these companies shows their competitors just how it should be done. All three of these companies responded to users’ negative comments or questions (sometimes in mere minutes or even seconds), clearly demonstrating that they have assigned responsibility for their social media management to full-time professionals. These companies have demonstrated that taking the high road, acknowledging mistakes and accepting responsibility can pay major dividends. By leaving their negative commentary on their social media sites, Virgin America is also demonstrating how to turn potential disasters into customer service opportunities. These best practices can help develop salient recommendations for retailers seeking to implement social media resources of their own and these are presented below.
1. First and foremost, avoid tying social media promotional campaigns to natural or manmade disasters at all costs.
2. Assign a full-time manager to oversee social media resources; if there is more than one resource used (Facebook, MySpace, Twitter, YouTube, etc.), companies should consider assigning a full-time manager to each social media resource.
3. Carefully monitor consumer feedback on all social media networks, but especially Twitter where large volumes of feedback may be received in a short period of time in response to promotional initiatives consumers find desirable or, conversely undesirable for unforeseen reasons.
4. Maintain negative feedback and the company’s response on social media sites in order to demonstrate transparency and integrity to build customer trust and loyalty.
5. Finally, because the learning curve is steep and expensive, it is important for all proposed promotional content for social media sites to be reviewed by an executive in a position to make decisions with respect to appropriateness for all but the most routine and benign promotions (i.,e., “Two for one on all luxury bed sheets and pillow cases for the next 24 hours!”). Even these otherwise-benign promotional efforts might be ill-advised if they are timed with manmade or natural disasters, or for, example, a local Ku Klux Klan rally. Therefore, a final best practice is to have more than one set of eyes (and more if possible), review social media promotional content prior to publication.
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