BUSINESS (NO PLAGARISM A+ WORK, ON TIME)

Social networks: the future of marketing for small business

Lisa Harris and Alan Rae

Introduction

This paper reviews recent developments in online marketing strategy which demonstrate the

growing power of online communities in building brand reputations and customer

relationships. Our work draws upon the results of an ongoing research project which is

investigating the use of new technologies by entrepreneurial businesses in West London.

We review recent trends and examine the emerging role of social networking within an

integrated marketing strategy that combines online and offline elements in a ‘‘package’’ best

suited to meeting identified customer needs. A range of examples from our 30 case study

businesses are drawn upon to illustrate some of the opportunities and threats associated

with these new marketing priorities. We conclude that social networks will play a key role in

the future of marketing; externally they can replace customer annoyance with engagement,

and internally they help to transform the traditional focus on control with an open and

collaborative approach that is more conducive to success in the modern business

environment.

Brief overview of trends

The internet impacts business innovation by expanding reach and minimizing the time-lag to

market. Not so long ago the goal of an online marketing campaign might only have been to

entice the consumer to click through to a company’s website, but now the objective is to

create ‘‘sustained engagement’’ with the consumer. The growing popularity of websites

such as YouTube and Facebook demonstrates how the internet is changing; users are no

longer simply downloading static data, but are increasingly uploading and sharing content

among themselves, leading to a proliferation of social networks and other user-generated

content sites. Li and Bernoff (2008) refer to this fundamental transfer of power from

institutions to individuals and communities as ‘‘the groundswell’’ and it forms the title of their

thoughtful and thoroughly researched book on the topic. The authors’ predictions of

significant change in marketing practice are supported by a number of respected authors

such as Weber (2008) and Godin (2008).

Web 2.0

This latest iteration of the internet has become known as ‘‘Web 2.0’’. In many ways it

represents a return to its roots. The internet started life as a peer-to-peer communication tool

to exchange data among a number of users, allowing members of the scientific community

to collaborate and share information easily. Today community sites such as TripAdvisor

encourage users to review services that they have experienced for the benefit of other users

who are considering their own possible purchases. These peer reviews are regarded as far

more trustworthy than traditional promotional materials that have been produced by the

company itself. Many people in the UK now buy a product or service directly because of

comments posted on a community by other consumers. This trend is fundamentally

PAGE 24 j JOURNAL OF BUSINESS STRATEGY j VOL. 30 NO. 5 2009, pp. 24-31, Q Emerald Group Publishing Limited, ISSN 0275-6668 DOI 10.1108/02756660910987581

Lisa Harris is Senior

Lecturer in Marketing at the

University of Southampton

School of Management,

Southhampton, UK.

Alan Rae is Managing

Partner of AI Consultants,

Sussex, UK.

changing the relationship between businesses and their customers, particularly as the

information (which may of course be positive or negative) is displayed in a very public –

indeed global – forum.

Global brands try blogging . . .

Businesses cannot expect to keep control of their marketing message while at the same time

allowing a transparent voice to their staff and customers through a blog or other online forum.

Negative feedback cannot be hidden without exposing the business to charges of

censorship that can destroy its credibility. The New York Times (2008) reports on the case of

Walmart, which had to shut down its early blogging efforts as customers felt they lacked

authenticity, regarding them as thinly-veiled PR exercises. The company has recently ‘‘bitten

the bullet’’ again with a new blog called Check Out (http://checkoutblog.com) after lengthy

consultation with the authors of successful blogs about how to develop an appropriate

blogging policy. The blog is written by ordinary employees who are encouraged to speak

freely (and often critically) about Walmart and its suppliers without corporate editing. It

remains to be seen how successful this initiative will be, but the company has clearly learned

from past mistakes and is prepared to try again with an approach that challenges its

traditional organizational culture. In a similar vein, Li (2007) notes how General Motors was

able to identify vocal critics from postings on the company blog, and in response invited

these people to visit the factory where the company demonstrated how the problems they

raised had been addressed. As a consequence, many of the critics were converted into

active and enthusiastic supporters of the brand.

Online communities

Good and bad examples

Online communities have evolved considerably since the early days of news groups and

chat rooms. They offer a simple means of overcoming the lack of human contact online and

hence can meet consumers’ social activity needs. Cisco (www.cisco.com) is a successful

example of a company that has fostered customer communities and saved significant

customer support costs by letting customers help themselves to technical support

information via web communities. After Cisco put the technical support function online,

customers began to compete with each other to answer queries that had been posted by

other customers. Amazon has pioneered the process of ‘‘collaborative filtering’’ whereby

recommendations are made to customers on the basis of what other customers buying the

same book also bought. Together with displays of unedited customer reviews, this strategy

contributes towards the creation of a community of people with similar interests who will trust

and act upon the recommendations of others in the group. By encouraging customers to try

out other items in this way, not only are total sales increased but also their scope – customers

may not otherwise have ventured outside the Top 100 books without a specific

recommendation that was probably unknown to them beforehand. Amazon now makes

one third of its sales from outside the top 130,000 titles, and these books are unlikely to be

offered at a discounted price.

On the negative side, the vigilante site www.untied.com is devoted to criticism of the

customer service provided by United Airlines. Originally established by one disgruntled

passenger, the site developed momentum as others contributed their own horror stories

about the service quality and the company presented a series of textbook examples of how

not to handle complaints. A recent example of a successful online community is www.

getsatisfaction.com which provides a forum for customers to raise questions or complain

about a wide range of companies, and for the resulting discussions to be displayed for other

enquirers to search and view. Companies can elect to participate in the discussions in order

to address issues raised by customers, in which case the active involvement of their

employees is clearly flagged up. The flip side is that companies electing not to participate in

the community discussions about their products and services can come across as secretive

and unhelpful, and their brand image can be damaged as a result.

VOL. 30 NO. 5 2009 jJOURNAL OF BUSINESS STRATEGYj PAGE 25

Most online communities are currently at a relatively early evolutionary stage and have yet to

be subjected to serious study, but from the company perspective the information posted on

relevant community sites can provide valuable research data about such issues as product

quality, how useful the website content is and how easy it is for customers to navigate and

find what they are looking for. Conversations within online communities can encourage

customers to co-create brand values and spread a message virally, rather than just

passively consume brands as per the traditional marketing model. Think for example of how

customer-to-customer interaction has contributed to the growth of the eBay brand. eBay’s

transparent service quality rating system allows prospective customers to evaluate potential

suppliers in terms of their trustworthiness and reliability based on the experiences of other

customers’ transactions with that supplier.

Alongside the growth in company or industry-specific communities, more generic online

social networking has become hugely popular in recent months. According to Goad and

Mooney (2008) the most popular social networks in the UK are currently Facebook, Bebo

and My Space, with market shares of 38, 28, and 19 percent, respectively. The authors cite

figures showing that a larger proportion of the UK population have chosen to communicate

with friends through social networks than by e-mail services such as Hotmail since October

2007, and that the age profile of users is rising rapidly with strongest growth amongst the

over 55s. Businesses are now recognizing the potential of these communities for the

development of their brands and to build relationships with key customers. For example, the

retailer Primark is surfing the wave with its Primark Appreciation Society Facebook Group

which has over 100,000 members who are signed up ‘‘fans’’ of the Primark brand. Satisfied

customers brag about the bargains they have found in the stores or campaign for the

opening of new Primark outlets in their locality. On the same discussion boards, however,

disgruntled customers also complain about the poor quality of goods they have purchased

from the company.

The Royal British Legion ran a successful campaign in November 2007 whereby people

could download an application to display a poppy on their Facebook profile. This promoted

both an increase in the total number of visitors to the British Legion website, and also

attracted a younger demographic profile than the Legion does through its traditional

communication channels since 31 percent of the site visitors were aged 18-34 (Goad and

Mooney, 2008). Facebook needs to operate as a profitable business of course, but the

danger is that over-commercialization of a social network through advertisingmay prompt an

exodus of users towards the ‘‘next big thing’’, as well as damage relationships between

consumers and participating brands if interactions within the network are not managed

carefully. At present, Facebook’s policy is for users to receive a maximum of two sponsored

messages per day.

Microblogging – the next big thing?

Another form of social networking activity to emerge recently is ‘‘microblogging’’ through

sites such as Twitter, Pownce and Jaiku. Using these sites, people can communicate with

their chosen network in a real time, heavily abbreviated content format (maximum 140

characters) that may include a url. For example, a typical messagemay read ‘‘click here for a

discount on my latest book published on Amazon today’’. These messages can reach a

wider audience when they are fed through to display in the author’s blog or Facebook profile.

Dell Computers is using Twitter to sell off clearance items to its brand champions who are

following Dell at: http://twitter.com/delloutlet. A business seeking to raise awareness of a new

electronic product, for example, would be keen to recruit Twitter users to its cause because

they are:

‘‘ Social networks will play a key role in the future of marketing. ’’

PAGE 26 j JOURNAL OF BUSINESS STRATEGYj VOL. 30 NO. 5 2009

B early adopters of new technologies;

B well-educated, with high profile careers and large salaries;

B receptive to relevant advertising and are likely to talk about products within the Twitter

community to ‘‘spread the word’’; and

B very influential within their own community and potentially able to develop the profile of the

brand through its endorsement when interacting with their followers.

By actively courting both key players within these niche social networks and the identified

vocal ‘‘fans’’ from Facebook groups, businesses may find that they can raise brand

awareness and build customer relationships at a very low cost to themselves. What prevents

many from doing so is the fear that an influential brand advocate who has a bad experience

may start spreading negative messages about the company. In the next section we will

discuss the experiences of our case study businesses and attempt to draw out some ‘‘best

practice’’ guidelines from these early adopters for the benefit of others who may be

considering whether to integrate social networking into their marketing operations.

Social networking by our case study businesses

Some of the businesses we studied have become quite sophisticated at using the

collaboration and advocacy intrinsic to social networking to promote and grow their

businesses. It requires a certain robustness of spirit to be prepared to take criticism along

with the praise, but for those prepared to operate transparently the benefits are there to be

taken. Table I summarizes the specific activities undertaken by the main players and the

nature of their business.

Effective collaboration using Ecademy

Many of our interviewees were active on Ecademy, a business networking platform which

uniquely combines a substantial face-to-face networking component with blogs, special

interest online discussion groups and meetings, allowing many people to login without

having to move from their desk. The network provides instant access to a diverse range of

individuals around the world which allows personal networks to be broadened and

strengthened, thereby overcoming many of the limitations of traditional face-to-face

networking such as small network size and lack of diversity. The interviewees gave examples

where they had rapidly found partners for projects, introductions to people they wanted to

meet, and answers to technical or business problems by a process of ‘‘asking the

audience’’. This is an illustration of the ‘‘wisdom of crowds’’ phenomenon by Surowiecki

(2005). A technical problem posted on the front page of Ecademy will soon have relevant

Table I Social networking in our case study businesses

Company name Business focus Ecademy

business network Facebook Second

life Blog Own

forum

Word of Mouse Applies the principles of social networking to business needs, in order to generate business leads and referrals £ £ £ £

The Money Gym A training and educational company teaching people how to make money and set themselves free £ £ £ £

Wiggly Wigglers A horticultural business dedicated to natural gardening. The online shop stocks all manner of equipment that promotes this, such as composters, bird feeders, hedging plants and tools £ £ £

Pro-Excellence Provides sales training for consultants £ £ £

Informed Choice Assists clients with independent financial advice on all aspects of pensions, investments, protection and financial planning £ £ £ £

VOL. 30 NO. 5 2009 jJOURNAL OF BUSINESS STRATEGYj PAGE 27

members competing to demonstrate their expertise by providing a solution. There is no

quality control other than peer pressure, and the advisers need to guard their reputation

jealously in what is effectively a ‘‘hot-house’’ environment that is self-policing. Because many

Ecademy members are self-employed consultants, the ‘‘invisible hand’’ of the market place

means that they offer free information because it builds their online profile as experts in their

field to whom others can safely refer business. Satisfied enquirers can leave a glowing

testimonial on the profile of the person who helped them, and such recommendations can

encourage potential clients to make contact. All of our interviewees listed in Table I have won

business contracts in this manner, and they display impressive feedback from satisfied

customers. For example, Richard White of Pro Excellence built a club on Ecademy allowing

his potential customers to debate with him and with each other. As the club has grown to

have over 750 members its name has changed from ‘‘I hate Selling’’ to ‘‘Soft Selling’’ to ‘‘the

Accidental Salesman’’. Richard says:

Many of the courses that I originally did free or nearly free I have since done commercially in a

much more polished form as a result of having the opportunity to test and do feedback. It also

generated leads through referrals and helped build my reputation through advocacy.

What drives this online collaboration forward in all the businesses we studied is a culture of

trust – something that the conventional world does badly. ‘‘Givers gain’’ and ‘‘paying it

forward’’ are phrases that occur frequently in Ecademy. There is an expectation that the best

way of building influence over the longer term is to be seen as a ‘‘giver’’ of good quality

practical information and advice. What seems to happen, over a period of time, is that these

individuals obtain a reputation and position based on a combination of their expertise and

‘‘connectedness’’ which make them attractive to other players in the same space. Alliances

build and ‘‘clumping’’ of commercial activity starts to take place in seed form. Usually there

are between three and five individuals in a clump but these overlap and interlock. For

example, one of our interviewees described the spectacular hyping of his book And Death

Came Third. The publisher put together a significant package of benefits to anyone who

bought the book on its launch day. Drawing upon his Ecademy contacts, other respected

and influential individuals were encouraged to email their own networks with news of the

offer. The result was the book got to number 2 on the Amazon bestseller list for that day.

Aside from Ecademy, other forms of online networking were also popular amongst our

interviewees. Heather Gorringe of Wiggly Wigglers runs a regular and lengthy ‘‘stream of

consciousness’’ podcast which tells her listeners what is going on in the business. Despite

breaking normal podcasting rules by extending to over 30 minutes per episode, she has

built up a global audience of 10,000 that for a small horticultural business is pretty good

going. She has recently introduced a video channel and an active Facebook group into the

mix as well. At the time of writing there are 497 members of the Wiggly Wigglers Facebook

group and 123 current discussion topics within the forum. A popular topic of conversation in

this community concerns the type of waste that can be safely composted, and the

discussion includes some very personal information indeed! (see for yourself at: www.

facebook.com/topic.php?uid ¼ 3120520301&topic ¼ 4344) In Heather’s words:

I do think it’s all about goodwill. Our job is to keep goodwill with our customers, readers and

listeners. Not only does that involve encouraging a conversation to find out what other people

think, but also to make sure that if we have got that goodwill, that they bother to tell other people

about us.

The potential of social networking for small businesses with limited marketing budgets was

neatly summarized another interviewee, Mike Southon:

We need to understand social networks – how much is it going to change the world? The great

thing is you can try things cheaply and then home in on what works.

Martin Bamford of Informed Choice is an IFA who has used social networking to back up his

traditional local referral based business. He estimates that up to 40 percent of his business

may eventually come through use of these techniques. He particularly recognizes the power

of being a player in this environment in helping him to develop his understanding of how

online marketing works. He says:

PAGE 28 j JOURNAL OF BUSINESS STRATEGYj VOL. 30 NO. 5 2009

Ecademy is packed full of early adopters – I wouldn’t be so far on in my marketing if I wasn’t

exposed to the intensity of activity and the degree to which people share knowledge in my IFA

club which is unheard of in the profession. It’s also proved to be a good source of trusted

suppliers.

Virtual worlds – only for the brave

Virtual communities such as Second Life pose some interesting challenges to

entrepreneurial small businesses. According to its website:

Second Life is an online 3D virtual world imagined, created, and owned by its residents that offers

a platform for communication, business, education, and organizational development to anyone

who wants to try it.

Or, as the tagline aptly states, ‘‘It’s just like real life, but you can fly.’’ The platform offers a rich

interactive experience for the consumer, and has already been well-tested in the area of

gathering market research data from consumers and developing brand relationships. These

communities allow for research and experimentation on the part of the organization at a

fraction of the cost of real-world research and development. The behavior of an avatar can

be instantly tracked and analyzed by organizations that are interested in studying consumer

habits and reactions. There are a number of major corporations that have established a

virtual presence within Second Life, including: IBM, Nike, BMW, Dell, Sun Microsystems,

Sears, ABN AMRO and Sony. Motivations vary as to why each company joined the virtual

world, and results are equally disparate as to their experiences so far, but according to

Vedrashko (2006):

The world’s creative flexibility coupled with the pioneering spirit of its residents makes Second

Life an attractive sandbox for advertisers willing to experiment with new ideas that might be

difficult or costly to try elsewhere.

Our case study businesses were intrigued by the possibility it offers of real-time,

shared-space collaboration, something that is not always possible in the real world. Nicola

Cairncross, owner of the Money Gym, focuses on helping divorced or single women take

control of their financial destiny. She stands out from our sample as being the first to have a

serious attempt to build Second Life into her marketing arsenal:

I can practice in Second Life as a real estate agency – buying and selling things in it. As a wealth

coach it’s a really good training tool. We find it also drives traffic to the real site.

For others it was a step too far. According to Martin Bamford, who is proactive in other forms

of social networking:

I’ve not considered Second Life – If I go in there I’ll never come out again – Ecademy is bad

enough!

Such caution may well be justified as intellectual property theft, child pornography, virtual

gambling and even terrorism are some of the cyber crimes now being reported in virtual

worlds. A group calling themselves the Second Life Liberation Army recently executed a

siege on Reebok’s in-world store to protest against retail brands populating virtual worlds,

and a video clip of the event even made it onto YouTube. It must be questioned how

companies can be certain of the true demographics of the in-world consumer market, given

that there is no obligation for people to replicate their real world personas (for example age,

gender) within Second Life. Residents are heavily relied upon to police their own

environment and report violators. Offenders’ accounts can be suspended or shut-down for

good, but it is possible for them to simply create a new account using a different real-world

identity. At this stage, it remains to be seen whether the early business ventures into Second

Life will pay off in the light of these difficulties.

Discussion and conclusion

Modern marketing requires a focus on innovation and the building of brand relationships.

Marketing guru Seth Godin (2008) neatly captures the sea change in his latest book, rather

bizarrely called ‘‘Meatball Sundae’’. As exemplified in the title, Seth notes that organizations

have to be ‘‘remarkable’’ to succeed in the marketplace today, which comes down to getting

VOL. 30 NO. 5 2009 jJOURNAL OF BUSINESS STRATEGYj PAGE 29

‘‘talked about virally’’ both online and offline. He is critical of organizations that attempt a

‘‘quick fix’’ by ‘‘bolting on’’ new forms of marketing communication to structures, processes

and culture which have yet to evolve from their deeply embedded ‘‘command and control’’

preoccupations of the mass marketing era. The result of this approach is an unlikely mixture

of incompatible ingredients which works for nobody – the ‘‘meatball sundae’’. The Walmart

example described earlier may yet backfire if more broadly the company continues to

maintain its well-established culture of secrecy and conformity which does not sit easily with

authentic blogging within an online community.

A key issue that our case study businesses had to bear in mind when considering the use of

social networks for communicating with customers, was the extent to which different

segments of their customer base might be receptive to such approaches. Li (2007) has

coined the term ‘‘social technographics’’ to describe the different ways in which consumers

may behave online, which in turn governs how they will respond to approaches from

companies via social networking channels. For example, a person defined as a ‘‘critic’’ is

likely to comment on blog postings whereas a ‘‘spectator’’ is not, and someone categorized

as ‘‘inactive’’ is unlikely to respond to any type of new media communication. Li highlights

the importance for companies of understanding how their customers use new media,

establishing what that means for how they should best communicate with them, and

agreeing on how best to handle the possible loss of control associated with public display of

negativity about the business on social networks.

There are also issues with regard to the privacy of personal data and how it will be used.

Networks such as Facebook offer privacy controls where members can specify the extent of

the information they wish to receive or share with individual friends. However, it is not always

obvious how to set the controls and information may be unwittingly shared with the wrong

people. Identity theft resulting from the harvesting of personal data that is posted on social

networks is a growing concern. In addition, as we noted earlier, if social networks become

too greedy in terms of the level of advertising that they permit, then users can very quickly

shift their allegiance away from the network. Another warning note comes from recent

research by the British Library (Manchester, 2008) which found that the skills and

enthusiasm for Web 2.0 tools amongst the ‘‘Google generation’’ had been highly overrated,

because while the respondents were prepared to use social networks for personal activities,

they were skeptical about their relevance to the business world. Developments in the

technologies themselves, as well as a reduction in costs, will mean that more and more

information will be available to consumers. This results in unprecedented levels of

transparency of dealings between businesses and their customers. A key challenge when

engaging customers through these social networks is how to give away power and control

while at the same time avoiding embarrassment to the company. According to Leadbetter

(2008): ‘‘you are what you share’’, but he also notes: ‘‘The optimists describe the web as a

conversation. Yet much of the web seems raucous and unruly. More like a bar-room brawl

than a moderated discussion’’ (p. 4).

The positive experiences of our case study businesses with Ecademy support the former

statement rather than the latter.

Despite these issues, the use of ‘‘Web 2.0’’ technologies by businesses is likely to increase

significantly. Our work so far has focused on experiments by early adopter businesses, run

‘‘ A recent example of a successful online community is www. getsatisfaction.com which provides a forum for customers to raise questions or complain about a wide range of companies, and for the resulting discussions to be displayed for other enquirers to search and view. ’’

PAGE 30 j JOURNAL OF BUSINESS STRATEGYj VOL. 30 NO. 5 2009

by entrepreneurial individuals who are ahead of the curve and not afraid to take risks or try

out new ideas. It is important to remember that these tools are still largely untested in more

mainstream businesses. But consumers will increasingly expect companies to communicate

with them through these tools. The concept of the ‘‘superfan’’ is much debated in marketing

circles at the moment. This is considered by many to be the ‘‘holy grail’’ of online marketing –

creating a network of customers who are so positive about a brand that they do much of its

marketing and sales themselves – and for free. Good examples of this are the

TheAppleBlog.com and a Facebook Group called Apple Students (currently with 434,162

members), demonstrating how Apple has harnessed the power of these new social

technologies to support one of the most successful brands in the world. On a smaller scale,

the Wiggly Wigglers group we studied is well populated with ‘‘superfans’’. On balance we

believe our case studies indicate that online communities will play a key role in the future of

marketing because they replace customer annoyance with engagement, and control with

collaboration for those firms brave enough to take the plunge. The businesses that prosper

will be those who proactively embrace this new world, because they regard change as an

opportunity rather than as a threat to be avoided at all costs.

Keywords:

Communities,

Small enterprises,

Networking,

Communication

References

Goad, R. and Mooney, A. (2008), ‘‘The impact of social networking in the UK’’, Hitwise/Experian Report.

Godin, S. (2008), Meatball Sundae, Piatkus, New York, NY.

Leadbetter, C. (2008), We-think: The Power of Mass Creativity, Profile Books, London.

Li, C. (2007), ‘‘Social technographics’’, Forrester Research Paper.

Li, C. and Bernoff, J. (2008), Groundswell: Winning in a World Transformed by Social Technologies,

Harvard Business School Press, Boston, MA.

Manchester, P. (2008), ‘‘Librarians challenge Web 2.0 youf-work myths’’, available at: www.

regdeveloper.co.uk

(The) New York Times (2008), 3 March.

Surowiecki, J. (2005), The Wisdom of Crowds, Abacus, London.

Vedrashko, I. (2006), ‘‘Advertising in computer games’’, MSc thesis, Massachusetts Institute of

Technology, Cambridge, MA.

Weber, L. (2008),Marketing to the Social Web: How Digital Customer Communities Build Your Business,

John Wiley & Sons, Hoboken, NJ.

About the authors

Lisa Harris is a Senior Lecturer in Marketing at Southampton University School of Management and Course Director of the MSc in Marketing Analytics. She is a Chartered Marketer and a Director of the Chartered Institute of Marketing. Lisa Harris is the corresponding author and can be contacted at: [email protected]

Alan Rae is Managing Partner of AI Consultants, which researches how small companies use IT and the internet.

VOL. 30 NO. 5 2009 jJOURNAL OF BUSINESS STRATEGYj PAGE 31

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