SOCIAL MEDIA: GOALS, CHALLENGES AND VALUE TO SMALL FIRMS

Richard Derham University of Canterbury [email protected] Paul Cragg University of Canterbury [email protected] Sussie C. Morrish University of Canterbury [email protected] SUMMARY

This paper investigates the value to small businesses of using social media. It takes the cases of two wineries and examines the different goals, technologies used, results achieved and value created through the use of social media. We find that value creation is manifested in the reach, brand building opportunity and bestowing a sense of legitimacy regardless of its size. Implications for practice from this research are that small firm’s social media strategies vary for different businesses even within similar industries and they should choose appropriate social media tools that match their goals. Furthermore, the choice must also suit the personality of the person responsible for social media. Although small businesses can see the value in using social media and consider it a valuable part of their marketing activities they do not have a way to quantify their value and offers opportunity for further research.

Keywords: social media, SMEs, strategic value, Amit and Zott model Contact details: Richard Derham University of Canterbury Private Bag 4800, Christchurch, New Zealand [email protected]

INTRODUCTION

This paper is concerned with the value to small businesses of using social media like Facebook, Twitter and YouTube. It takes the cases of two wineries, both of which use social media, and examines the different goals, technologies used, results achieved and value created through the use of social media. Social networking sites are web-based services that allow users to post a profile and connect to other users (Boyd and Ellison, 2008). Although users have traditionally been individuals, social networking sites have evolved so that groups, organizations and companies are able to create accounts. This allows organisations to connect with current and potential customers, engage with them and build up a sense of community. As there are low barriers to the use of social networking technologies, small businesses can make use of social media in the same ways that large corporations can, without the need for extensive resources (Harris and Rae, 2009). The main objective of this research is to explore the value that small companies can derive from using social media. Its interactive nature and the associated network effect mean that it is not only the firm that is producing content on its social media sites but also its customers and members of the public interacting with the company and each other. Therefore, this paper also looks at the value produced through this interaction. The social media space is fast changing, both in terms of the technologies available and the popularity of particular sites over time. This seeks to explore how the value to firms changes over time as their level of use, their customer network and the technologies in use change. Online social media is a relatively new field where research so far has been concerned with individuals and their usage patterns, privacy matters and information disclosure. This research seeks to extend the IT value literature by relating it to the business use of social media.

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BACKGROUND LITERATURE Business Use of Social Media Social media is a new phenomenon that has grown rapidly but scholarship has lagged behind its rapid adoption by users and media attention. While popular media have paid particular attention to privacy issues relating to personal information, it is only more recently that scholars have begun to investigate the use of social media in business.

Social Media and Social Networking are two concepts often confused and used interchangeably. Some researchers have taken the view that social networking sites and social media sites are two subcategories of “social web sites” (Kim et al., 2010). Others classify social networking sites as a subset of social media (Boyd and Ellison, 2008). For the purposes of this research, we adopt the term social media, for two reasons. Firstly, social media is the prevalent term for social web sites in industry, irrespective of whether they are strictly focused on media or networking. Secondly, SMEs use social media sites along with social networking ones. It is therefore appropriate to use social media if one is to capture good, innovative use of the technology.

Although social media was originally a tool for friends to connect, communicate and share, it has also been adopted as a business tool. The 2011 McKinsey survey on Internet technologies showed that from a sample of 4,261 companies, 72% used social technologies, benefiting from increased access to knowledge, reduced communication costs, increased access to internal experts, increased marketing effectiveness, increased customer satisfaction and reduced marketing costs. (Bughin and Chui, 2011).

The various technologies described by the terms Web 2.0, social media, social websites and social networking were developed for use by individuals but have quickly been adopted as business tools. The term Enterprise 2.0 has even been coined to describe business use of Web 2.0 (McAfee, 2006, 23). Marketing is the area where social media is most widely used in business. Businesses now have a presence on such social networks as Facebook, MySpace, Twitter, Flickr, YouTube and LinkedIn where they post updates, release announcements, photos, videos and 3

other material in order to promote them and their products (Kim et al., 2010). In the early days of the internet, an online marketing campaign might have aimed to entice the customer to click through to the company’s website. Now with social media companies can aim for sustained engagement with their customers (Harris and Rae, 2009).

Closely related to marketing is customer relations management. Social media lends itself to an interactive approach to customer relations, so it is not just about the message from the company. Feedback, complaints, support issues and requests can all be gathered and responded to via social media (Kim et al, 2010). Most social media sites allow businesses to create a presence for free, but it is important that the business makes an investment in terms of time and attention so that responses can be made professionally and in a way that is appropriate to the social media context. A marketing effort that is perceived as not done right (or sometimes even perceived as a marketing effort) can backfire, earning the ire of social media users. The use of social media for CRM has changed the nature of the relationship between businesses and customers. Whereas in the past interactions were private to the individuals involved, now information – whether good or bad – is available to a global audience (Harris and Rae, 2009).

Social media also allows some of these functions to be carried out customer to customer due to the connectedness of the network. This web of connections means that social media can be a very efficient way of connecting with many people. The fact that a user is in contact with, in a group about or a ‘fan’ of a company is propagated through their network. As friends follow suit their networks are also informed. Thus, a particular marketing campaign can quickly ‘go viral’. Social media has allowed communication to progress beyond one-to-one or one-to-many on to many-to-many communications (Hawn, 2009).

Beyond marketing and CRM, companies and employees of companies also use social media for their own business networking. Companies can use tools such as Lotus or SharePoint to create an internal social network on their intranet for sharing of information and resources, messaging and expert finding (Kim et al, 2010). Companies such as IBM and Pfizer have created proprietary in 4

house social networks to connect their employees (Leader-Chivée et al, 2008). Pfizer plans for their network to let employees know each other’s areas of expertise, provide feeds of content based on job function, and allow show users what their colleagues are reading in order to pull them into collaboration. IBM hopes to foster relationships between geographically distributed employees through event planning, photo sharing and discussion groups. A smaller enterprise is unlikely to have the resources required to implement a stand-alone social network. However it is also possible to claim a space on a business oriented site such as LinkedIn or even on a general site such as Facebook to perform these same functions (Misner et al, 2009).

Sites such as LinkedIn and Ecademy are also popular for networking outside the company (Misner et al, 2009). Small businesses and entrepreneurs can make contacts in their industry, find suppliers, get advice and learn new skills through networking opportunities and participation in online activities (Kim et al, 2010). This opens up a completely new source of knowledge and expertise unlikely to be available in a small firm, but does bring with it the risks associated with information flowing the other way, such as loss of trade secrets and potential damage to reputation (Kim et al, 2010).

Social networking sites have also become an important tool for recruitment. Twitter is popular, especially in technical industries, for announcing vacancies while many professionals host their CVs on LinkedIn. Alternatively, firms also use the publically available information on Social Media sites to conduct background checks on potential employees (Millard, 2007). Dow Chemical has taken their use of Social Media even further by creating a social network especially for ex-employees. This has kept former employees connected to their former employer and has resulted in a significant increase in rehires (Leader-Chivée et al, 2008).

Social Media Use in Small Businesses Small businesses are not a homogeneous group, but rather they differ in several ways. For example, owner-managers differ from each other in their age and educational level, their attitude towards eBusiness, their degree of entrepreneurship, market and/or export orientation, their 5

business goals and their degree of preference for face-to-face interaction with customers, strategic focus, customer orientation, business growth, business processes, owner attitude and social networks, level of eBusiness knowledge and skills. Furthermore, there are differences in the pressure from customers and/or suppliers to use eBusiness. Each of these different dimensions makes every SME different and means that social media is a more suitable tool for some than others. Additionally, many of the decision makers in small businesses are not governed by typical business objectives such as profit, growth and competitive advantage but more by social and family motives, such as maintaining personal identity or maintaining family connections. (Chua et al, 2009; Parker and Castleman, 2007)

Harris et al (2008) point out that small businesses have often struggled to adopt technology due to their lack of skills, resources and technical knowledge compared with large firms. However, Web 2.0 provides a small business with an opportunity to overcome these difficulties. The internet has massively reduced costs of marketing compared to traditional methods (Harris et al, 2008). Businesses can take advantage of others’ connections to each other to market their products, services and brands (Harris and Rae, 2009). Thus “gifted amateurs” can “punch above their weight” (Harris and Rae, 2009).

The Amit and Zott Model Amit and Zott (2001), developed a theory on value creation by eBusiness. The model consists of four interlinked value drivers: efficiency, novelty, lock-in and complementarities. Efficiency is about reducing the cost of each transaction, complementarities involve bundling goods and services together for a greater value than those goods and services would have unbundled, lockin is motivating customers to continue trading and incentivizing strategic partners to maintain the relationship and novelty is introducing something new to the business environment. In eBusiness, the source of value creation is in the interdependencies between each of the sources of value (Amit and Zott 2001).

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Novelty

New transaction structures New transactional content New participants, etc.

Efficiency

Lock-In

Value

Search costs Selection range Symmetric information Simplicity Speed Scale economies etc.

Switching costs Loyalty programs Dominant design Trust Customization, etc. Positive network externalities Direct Indirect

Complementarities Between products and services for customers (vertical versus horizontal) Between on-line and off-line assets Between technologies Between activities

Figure 1: Amit & Zott (2001, 509) Sources of value creation in e-business

RESEARCH OBJECTIVE The main objective of this research is to explore the value that SMEs can derive through the use of Social Media. Part of this is to look at what value the SME gains through using social media, another is how the value is derived. The following research questions addressed: 1.

What are SMEs uses for social media?

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What value is gained by SMEs through the use of social media?

In order to answer these questions we use view social media through the lens of Amit and Zott’s model on the sources of value creation in e-business. This model serves as a starting point and we look for the value drivers relating to social media.

METHODOLOGY As a relatively new research area, an exploratory case study approach was adopted (Yin, 2009). We have chosen two wine companies, both from the Canterbury region. Multiple cases provide 7

an analytical advantage over a single case study in that there is the opportunity for replication in the results, increasing the potential for generalizibility (Yin, 2009). Having multiple cases also mitigates the risk that the selected single case happens to be entirely unique (Yin, 2009). Thus, multiple case studies yield more compelling evidence than single cases (Dubé & Paré, 2003). Multiple case studies are also appropriate for research of an exploratory nature, where the research questions tend to be how and why questions about contemporary event (Yin, 2009). The research questions proposed for this study are questions of this type and the phenomenon under investigation is very much a contemporary one.

Data was collected through the use of semi-structured, face to face interviews with business owners and key decision makers within the case firms. The use of semi-structured interviews ensures a degree of consistency in the information collected between the different firms but still has enough flexibility to allow for new, unexpected or interesting information to emerge during the interview.

Data were collected through the use of semi-structured, face to face interviews with business owners, key decision makers and social media users within the firm. Due to the small size of the case study firms these roles tended to be filled by the same one or two individuals. The use of semi-structured interviews ensures a degree of consistency in the information collected between the different firms but still has enough flexibility to allow new, unexpected or interesting information to emerge during the interview.

Interviews were recorded, transcribed, coded and analysed using NVivo 9.2. Coding is useful for reducing data to make it more manageable, help future researchers replicate the study and avoid bias and increase reliability, to help future researchers replicate the study and to avoid bias and increase reliability (Dubé & Paré 2003). The transcripts were supplemented by field notes to convey additional non-verbal and contextual information not captured by the recording itself (Dubé & Paré 2003). Interview data were triangulated with data obtained from the firms’ actual social media output, such as material posted on Facebook, Twitter, YouTube and similar web sites. Triangulated data strengthens the constructs and hypotheses created from the interview 8

data (Eisenhardt, 1989; Dubé & Paré, 2003). The cases selected are both current users of social media as it is the value that usage produces that is being researched, rather than adoption of the technology. The Case Firms The two cases are both wineries in the Canterbury region of New Zealand. Case One is one of Canterbury’s oldest vineyards, purchased by its current owners in 2005. The owners, a couple, and the winemaker are the businesses only full-time staff. At various times of the year they take on casual employees for seasonal activities such as harvesting and pruning. This winery produces wine mainly for the export market, although it does sell wine online and onsite at its cellar door. Social media is the responsibility of the co-owner, who devotes 30 minutes daily to the task.

The second case is also a family owned business. The family bought land and planted grapes in the mid 1980s then produced the first vintage in 1991. The firm has about 30 full time employees and at various times of the year calls in a similar number on a casual basis for various vineyard activities. Three brothers and their partners occupy the senior roles in the firm including General Manager, Marketing, Wine Makers and Restaurant Manager. The social media activities are run by the general manager of the firm. Both wineries have websites and have official company Facebook, Twitter, YouTube and Flickr accounts. Neither firm has any dedicated IT staff or staff with a full time responsibility for social media. In both cases, a dedicated staff member maintains the social media accounts as an ancillary part of their job.

RESULTS AND IMPLICATIONS

The two cases have proved to be quite different in terms of their motivations for using social media, the individual characteristics of the primary user within the firm, and the value obtained. Case One Social media was the responsibility of the co-owner who devoted 30 minutes daily to the task. Their motivation for using social media was to create legitimacy for the business. Social media was seen as something the firm should be seen using to be viewed as an active and authoritative 9

participant in the industry. If a journalist, potential distributor or customer looked for the company online and could find no social media presence it could give the impression that they were not a serious industry player. This firm used a combination of blog posts and twitter to create and release posts about wine production processes and industry commentary. However given the time commitment involved, these factors outweighed the perceived value that social media engagement has to the small wine company. They have since withdrawn from blogging due to these reasons. Additionally, Twitter was not perceived a good fit with their social media strategy given Twitter is a tool that is very much about the present, and the company is unable to respond to posts immediately. The company is planning to move on to Facebook as it is seen as a better fit being less immediate and interactive and requires lower time commitment than a blog due to the smaller size of status updates compared with blog posts.

Case Two The social media activities are run by the general manager of the firm. They adopted social media to reach a different audience than traditional marketing channels. Social media can put them in touch with new customers and even more importantly, wine writers and sommeliers. They see it as a relatively low cost way of promoting brand awareness. Although Facebook was their main tool originally, they quickly found Twitter more valuable. They use Facebook for more static content such as links to reviews and awards and Twitter for interaction, mainly via mobile phone. This firm has found Twitter a valuable tool in reaching influential people in the wine industry and giving them a favourable impression of the brand.

Sources of Value The necessity of using social media is thrust upon businesses and while there may be hesitation, it does appear that there is some intrinsic value that can be generated from engaging with the online community. We identify three main sources of value: reach, brand building and perceived legitimacy.

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With social media, there is unlimited reach enabling businesses to bridge the distance from their offline users. Through social media organisations can reach out, both through the users’ networks and by contacting influential people they never could offline. More than ever, businesses can form intimate relationships with customers, allowing them to glimpse into the profiles and characteristics of the users. They can be privy to their thoughts, opinions and activities. Social media takes the form of online word of mouth and can leverage existing networks to reach other users thus a multiplier effect.

Many businesses have leveraged social media presence to build their brand. For less known or new brands, an online presence complements offline marketing activities to build their profile and generate brand awareness. This is likely to lead to a degree of brand recognition. Through clever use of social media, businesses can build the image they desire for their brand and differentiating from other competitors. Users are likely to engage with sites that they like such as posting comments and liking them.

Finally, the web becomes a level playing field whereby size does not matter. A small business can have as much online content as a multi-national corporation. It is a marketplace whereby visits are measured by clicks and how long users linger in the sits and not by foot traffic. Consequently, with consumers more likely to use the web for information search, a web presence bestows a sense of legitimacy to a business regardless of size. In fact, it is now expected of businesses to have some online presence if they want to survive what has become an online battle to be returned when users do a online search for their products or services. CONCLUSION AND LIMITATIONS

This study has set out to identify how SMEs use social media in their business and the value derived from such use. We have focused on a couple of cases from the wine industry that have different experiences. While there are challenges, we find that overall social media does offer some value propositions relating to reach, brand building and perceived legitimacy. However, not all types of social media deliver such value and businesses therefore need to be cognizant of their own resources in their online strategies. For example, Twitter demands real time responses, 11

Facebook is reactive but does not necessarily have to be instantaneous, whereas Linked In is static. It is very easy for companies to be seduced by the perceived benefits of social media but also need to be wary of the speed by which information spreads. While this is no doubt a good thing for positive information, it is disastrous for negative publicity, thus calls for a careful balance of online strategies.

Implications for practice from this research are that small firm’s social media strategies vary for different businesses even within similar industries and they should choose appropriate social media tools that match their goals. Furthermore, the choice must also suit the personality of the person responsible for social media.

Although small businesses can see the value in using social media and consider it a valuable part of their marketing activities they do not have a way to quantify their value and offers opportunity for further research. While we have uncovered some interesting insights, we are conscious that the results may not hold true for other SMEs. We have focused on a couple of companies in one industry that is highly specialised and only in a narrow geographic region. Expanding this investigation to other industries with a larger sample will enhance our understanding of the value that social media derives. REFERENCES

Amit, R., & Zott, C. (2001). Value creation in e-business. Strategic Management Journal, 22(6/7), 493-520. Boyd, D. M., and Ellison, N. B. (2008). Social network sites: Definition, history, and scholarship. Journal of Computer-Mediated Communication, 13(1), 210-230. Bughin, J, and Chui, M. (2011). How social technologies are extending the organization, McKinsey Quarterly.

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Chua, A. P. H., Deans, K. R., & Parker, C. M. (2009). Exploring the Types of SMEs Which Could use Blogs as a Marketing Tool: a Proposed Future Research Agenda. Australasian Journal of Information Systems, 16(1). Dubé, L., & Paré, G. (2003). Rigor in information systems positivist case research: Current practices, trends, and recommendations. MIS Quarterly, 27(4), 597-636. Eisenhardt, K. M. (1989). Building theories from case study research. Academy of Management Review, 14(4), 532-550. Harris, L., and Rae, A. (2009). Social networks: the future of marketing for small business. Journal of Business Strategy, 30(5), 24-31. Harris, L., Rae, A., Dhaliwal, J., & Grewal, S. (2008). Punching above their weight with Web 2.0: the rise of the gifted amateur. Retrieved from http://www.jasdhaliwal.com/downloads/York_Paper_PAYW.pdf on 20/04/2012. Hawn, C. (2009). Take Two Aspirin And Tweet Me In The Morning: How Twitter, Facebook, And Other Social Media Are Reshaping Health Care. Health Affairs, 28(2), 361. Kim, W., Jeong, O. R., & Lee, S. W. (2010). On social Web sites. Information Systems 35(2), 35(2),215-236. Leader-Chivée, L., Hamilton, B. A., & Cowan, E. (2008). Networking the Way to Success: Online Social Networks for Workplace and Competitave Advantage. People and Strategy, 31(4), 40-46. McAfee, A. P. (2006). Enterprise 2.0: The Dawn of Emergent Collaboration. MIT Sloan Management Review, 47(3), 21-28. Millard, E. (2007). Online Background Checks. ABA Journal, 93, 37. Misner, I., Harris, L., & Rae, A. (2009, 10 November). How - and Where - People Network. Retrieved 20 April, 2012, from http://www.entrepreneur.com/marketing/marketingideas/networkingcolumnistivanmisner /article203952.html

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Parker, C., & Castleman, T. (2007). New directions for research on SME-eBusiness: insights from an analysis of journal articles from 2003 to 2006. Journal of Information Systems and Small Business, 1(1-2), 21-40. Yin, R. K. (2009). Case Study Research: Design and Methods, 4th edn. Sage, Thousand Oaks.

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