Role of the Social Media in Corporate Reputation

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The role of social media in corporate reputation – Case Nokia International Business Communication Master’s thesis Antje Grutzmacher 2011 Department of Communication Aalto University School of Economics AALTO UNIVERSITY SCHOOL OF ECONOMICS International Business Communication Master’s Thesis Antje Grutzmacher ABSTRACT 25 March 2011 Reputation 2. : The role of social media in corporate reputation – Case Nokia Objectives – The objective of this study was to examine the role of social media in corporate reputation. In more detail, the study focused on the question if the participation of companies in social media affects their reputation. Nokia served as the case company to examine this objective.
The study was divided into three research problem areas: (1) the study aimed at finding out what potential social media users were influenced by the reputational activities of companies in social media, and who participated in Nokia’s social media activities; (2) the study examined if social media users were potentially aware of the participation and reputational activities of companies in social media in general, and of Nokia’s social media participation in particular; and (3) the study observed if the participation of companies in social media positively or negatively influenced their corporate reputation in general and Nokia’s in particular.
Methodology – The study used a single-case approach, consisting of qualitative interviews with four communication consultants, as well as a quantitative consumer survey among 284 social media users. Nokia was chosen as the case company, as it is a well-known and reputable brand, which is actively incorporating digital and social media marketing throughout its viral campaigns. Findings – The present study could not give a definite answer to the question if social media plays a role in corporate reputation. For instance, it seemed that neither the respondents’ awareness of Nokia’s presence in social media nor their participation in Nokia’s social media activities had a key impact on the evaluation of Nokia’s reputation.
However, the few respondents that evaluated Nokia’s social media participation more positively or negatively also rated the company’s reputation correspondingly. Therefore, a relation between companies’ social media participation and its impact on their corporate reputation could neither be excluded nor denied. For this reason, it seems advisable to test the findings further to achieve more concrete answers based on a larger and more diverse research sample. Research limitations – To date, studies on social media are scarce, and the concept of corporate reputation elusive. Research models linking the two phenomena did not exist, enforcing the utilization of a case study whose results only deliver suggestive considerations.

As a result, the traditional way of corporate communication has changed (Bard, 2010), leading to the notion that the reputation of companies is no longer defined by their actions and accomplishments, but by how consumers perceive, share and comment on companies in social media. As a consequence of the above-mentioned changes, social media has turned into a buzzword in the corporate world. On the one hand, corporate communication practitioners embrace the concept as a cost-efficient solution to seek direct communication with consumers and interact with various stakeholder groups, and, thus, influence the reputation of companies in a positive way (Li & Bernoff, 2008; Pfeiffer & Zinnbauer, 2010; Constantinides & Fountain, 2008; Evans, 2008; Jones, Temperley & Lima, 2009; Tuten, 2008).
On the other hand, it is argued that the contemporary distribution of information in the Web entails reputation risks and risk dynamics that are outside the control and management of companies (Aula, 2010; Scott, 2009; Coombs, 2007, Rice, 2010; Tuten, 2008). For instance, Dell had to experience the effect of negative viral conversations in 2005, when a consumer complained publicly about 1 Dell’s services in his blog, which led to a reputation crisis of the company (Espen, 2007; Geoliv, 2007). This increasing interest in social media has created a need to examine social media in more detail and shed light on the debate of its business and reputation impact. However, despite the expanding use of social media, the academic world has not yet embraced the phenomenon (Constantinides & Fountain, 2008; Hearn, Foth & Gray, 2009).
As Constantinides and Fountain (2008, p. 232) affirm, “there is still no generally accepted definition of the term [Web 2. 0] and no systematic research on its importance and its effect on marketing practices”. The few studies done on social media concentrate predominantly on Web 2. 0 as a technology advancement created by the user (Constantinides & Fountain, 2008; Mazurek, 2009; Christopher, 2007), or on the benefit of social media as an advanced marketing tool (McKinsey 2009; Hearn et al. , 2009), providing mostly theoretical propositions. One reason for the lack of research might be that social media is a relatively new phenomenon (Evans, 2008).
Therefore, Constantinides and Fountain (2008) urge researchers to undertake further studies to (1) identify and classify the different tools of social media, and (2) examine the effect of social media on consumers’ perceptions, needs and behavior. Due to these reasons, three propositions derive that legitimize the purpose of this study. These three rationales form the focal point in the present study. First, this study aims at examining the two gaps identified by Constantinides and Fountain (2008). Accordingly, Reputation 2. 0 is the keyword of this study, combining the subjects of Web 2. 0, the technical platform for all social media applications, and corporate reputation.
The aim is to increase knowledge of the effect of social media on corporate reputation. Second, to date, studies on social media emerge predominantly from the fields of business technology, marketing, advertising, and strategic management (McKinsey 2009; Hearn et al. , 2009, Evans, 2008; Constantinides & Fountain, 2008; Mazurek, 2009; Christopher, 2007; Weber, 2008; Tuten, 2008). However, research of the business communication discipline has left the topic of social media yet untouched. Thus, this study focuses on social media from a business communication perspective, examining it 2 as a potential communication “channel” that might affect the image and reputation of companies.
Third, studies in social media seemed to ignore the consumer perspective of the phenomenon, focusing predominantly on the benefit of social media as a marketing tool for companies (McKinsey 2009; Hearn et al. , 2009). However, in order to examine the effect of social media on consumers’ perceptions, as suggested by Constantinides and Fountain (2008), consumers active in social media have to be analyzed. This consumerperspective is taken in the present study. 1. 1. Objective and research questions of the study The overall objective of this study is to examine if the participation of companies in social media generally affect their corporate reputation, using Nokia as the case company.
According to international reputation rankings, including BrandZ, the Global Reputation Pulse Report, and Fortune’s Most Admired Companies, Nokia seems to be a well-known and reputable brand among consumers worldwide, usually scoring comparably high in the ratings. Furthermore, Nokia very actively incorporates social media in a large number of company activities, thus, gradually incorporating social media into its marketing and communication strategy (Erkkola, 2010). Finally, the global business activities of Nokia add an international aspect to this study. Therefore, Nokia presents a good case company to complement the investigation of this study. The objective of the study comprises three different aspects that have to be taken into consideration, when examining if the participation of companies in social media might affect their corporate reputation.
First, it has to be identified what potential consumer groups participate in social media. It is obvious that those are the people primarily influenced by the social media activities of companies and those that form the reputation of such companies in social media; however they might only cover a small percentage of consumers, which will limit the findings of this study. Second, it has to be determined if social media users are generally aware of the social media activities of companies. If this would be the case, it would indicate that social media users might be influenced by the social media activities of companies in social media. Third, it is 3 ssential to know if the participation of companies in social media positively or negatively influences their corporate reputation from the perspective of social media users. The answer to this question would give the strongest indication to the main objective – if the participation of companies in social media affects their corporate reputation. On the basis of these three considerations, three research questions have been formulated. Due to the general research approach of this study and the simultaneous deployment of the case company, this study arranges general research questions and Nokia-specific questions into three research problem areas to meet the research objective.
Thereby, a-questions address the general core of the research issue while bquestions specifically express questions that relate to Nokia. The three research problem areas are as follows: 1a. What potential social media users would be influenced by the reputational activities of companies in social media? 1b. Who participates in Nokia’s social media activities? 2a. Are social media users potentially aware of the participation and reputational activities of companies in social media? 2b. Are social media users aware of Nokia’s reputational social media activities? 3a. Does the participation of companies in social media positively or negatively influence their corporate reputation? 3b. Does Nokia’s social media presence have a reputational effect on its social media participants?
Due to the limited scope of the study, the concept of reputation cannot be observed from a variety of perspectives. Therefore, in this study, reputation will be only referred to as the “stakeholder’s overall evaluation of a company over time … based on the stakeholder’s direct experiences […and…] any other form of communication” (Gotsi & Wilson, 2001, p. 29). In addition, the term consumer, one of the primary stakeholder groups of companies, in this study refers entirely to consumers active in social media, in other words social media users, as it is assumed that social media do not have any impact on non-social media users. 4 1. 2. Nokia and its social media approach
This section outlines Nokia’s social media approach based on information collected through investigations in the Internet and two interviews with Nokia employees. The interviews were conducted with a Digital Marketing Manager and a Social Computing Strategist of Nokia in order to gather information about the external social media services Nokia employs and the company’s use of social media as internal collaboration tools among employees. Nokia is the world’s leading manufacturer of mobile devices with an estimated share of 38% of the global device market in 2009. Having sold about 432 million devices in 2009, the company’s reported net sales amounted to 41 billion Euros.
Furthermore, the company owns NAVTEQ, the leader in comprehensive digital mapping and navigation solutions, and holds a joint venture with Siemens (Nokia Siemens Networks), which provides equipment, services and solutions for communications networks worldwide (Nokia, 2010). Taking a brief look at the company’s overall reputation evaluation, Nokia regularly ranks among the top 50 global companies in annual corporate reputation rankings, such as BrandZ, the Global Reputation Pulse, and Fortune’s Most Admired Companies (BrandZ, 2010; Global Reputation Pulse Report, 2009; Fortune, 2010). Table 1 provides an overview of the various reputation rankings. Table 1. Nokia’s corporate reputation rankings BrandZ 3rd Apple 14th BlackBerry 43th Nokia Global Reputation Pulse Report 6th Apple 7th Nokia Fortune’s most admired companies 1st Apple 41st Nokia 42nd Samsung Electronics
As Table 1 depicts, in comparison to its competitors, the company usually ranks behind rivals, such as Apple and BlackBerry, but before other competitors, like Samsung, 5 SonyEricsson, or Motorola (BrandZ, 2010; Global Reputation Pulse Report, 2009; Fortune, 2010). Whether Nokia’s social media activities have any effect on these results is impossible to evaluate. However, the competition among mobile device manufacturers is severe, and companies in general have to increase activities to strengthen their corporate reputation and to remain sustainable in the future (Van Riel & Fombrun, 2008). In order to ensure this future sustainability, Nokia embraces novel approaches towards marketing and communication, including social media marketing.
Thus, the company launched its first online forums in the early 2000s and the first external blog in 2005. Figure 1 presents Nokia’s social media strategy, showing a simultaneous reduction of expenses in traditional marketing and communication media and an increase of expenses in social media. The amount of expenses is expressed by the size of the circles. Figure 1. Nokia’s social media strategy (adapted from Erkkola, 2010) As can be seen in Figure 1, Nokia’s social media strategy intends to gradually reduce the expenses spent on the company’s own media (e. g. its websites) and bought media (e. g. advertisements) and invest in earned media, which Nokia defines as “something, which can neither be bought nor controlled”.
In the marketing context, earned media is often defined as publicity, which can derive from public relations (Henderson, 2006). 6 According to Blackshaw (2009) and Cass (2009), social media in particular have fostered the dispersion of earned media, evolving from conversations held in social media by various people, and including buzz, word-of-mouth, as well as brand and corporate reputation. In fact, Nokia realizes that social media may potentially enhance the reputation of the company, as the presence and participation in social media signals proactive thinking to the consumer. Nokia expects especially younger generations to feel attracted to a company that embraces innovation, authenticity, participation, and transparency in such a way.
In addition, Nokia aspires to become more attractive to future employees. However, as Nokia’s Social Computing Strategist underlines, a sound reputation is merely a positive side effect, while Nokia’s main attention is paid to the market and to promoting Nokia brands in form of online marketing and viral campaigns. Nokia’s social media strategy is accomplished through the participation in multiple and diverse social media tools and services. The range of tools and services Nokia uses specifically targets different stakeholder groups and satisfies their needs and demands: some social media tools inform people, some try to attract future employees, and others aim at pleasing the geeks and technology enthusiasts.
The variety of target groups is visible within the different social media services employed, as they are selected according to two factors: first, consumer behavior and usage and second, objectives and targets set by Nokia. Below, the main social media tools and services used by Nokia are introduced: Blogs – Nokia maintains several blogs with emphasis on different topics and subjects (e. g. an official Nokia blog nokia. conversations. com, the Ovi Blog promoting Nokia applications, or the Nokia Nseries Blog promoting devices) Forums – Nokia keeps several support forums where users can share advice and tips (e. g. discussions. europe. nokia. com) or develop and distribute own applications (forum. nokia. com) Social Networks – Nokia opened groups and fan pages in various social media networks, such as Facebook and LinkedIn.
Consumers can find the most suitable group to obtain information about the company (e. g. Facebook and LinkedIn 7 group of the Nokia company, Nokia Italy, UK, or France) and its products (e. g. Facebook groups about the Nokia 5800 Xpress Music, or Nokia E71), receive alerts about job openings (e. g. Facebook group Future Talent @ Nokia), get into contact with the company, and exchange information with other group members. Microblogs – Nokia supports a number of branded Twitter accounts, for instance, about the company, specific products (e. g. Nseries), Ovi, Nokia Conversations, Forum Nokia, and Nokia Beta Labs, as well as a range of local Twitter accounts. Photo and video sharing – Nokia has its own channel on YouTube (www. outube/Nokia), showing commercials and other promotion material, and publishes, for instance, product pictures on Flickr. White Label Network – Ovi, the brand for Nokia’s Internet services, enables users to download Nokia services, and share photos, videos and other files through third parties, such as Flickr, for instance. Collaborative tools – via the Nokia Beta Labs users can try software and applications and give feedback or start discussions. Internal social media – Nokia implemented a number of internal blogs and blog-hubs, wikis, micro-messaging tools, video hubs, and discussion forums to improve collaboration between different departments and across different subsidiaries, collect ideas, and distribute information.
Moreover, those internal social media tools shall flatten the organizational hierarchy, motivate employees, provide a tool to express opinions, and altogether foster the affiliation and loyalty of employees towards the organization. In order to drive traffic to its social media services, Nokia’s external and internal social media services are advertised and promoted. For instance, Nokia creates a number of campaigns, posters, videos, and other communication activities to increase the awareness of its social media presence and participation. In addition, Nokia engages its social media stakeholders in various activities. For instance, Nokia has asked its Facebook participants to upload pictures taken with their Nokia phones on their personal profiles, and it has invited them to discuss their favorite Nokia mobile phone. 8
All social media services are integrated into Nokia’s marketing and communication strategy. Employees throughout the organization collaborate to manage Nokia’s social media activities in order to ensure a comprehensive implementation of the strategy. For instance, besides agreeing on the services and messages of social media activities, the effect of these activities is measured. Measures applied comprehend, for instance, page hits (the number of visitors on the page) and page stickiness (the length of time visitors spend on a webpage). Such examples illustrate that social media is an important part of Nokia’s digital marketing approach, professionally integrated into the company’s business activities. 1. 3. Definitions
As the terminology for social media is not yet established, some terms will be explained to prevent potential confusion of expressions in this study. The danger of confusion primarily derives when describing social media: often social media are interchangeably described as platforms, channels, tools, or applications. However, this study predominantly applies the terms social media tools and social media services: Social media tools encompass the various channels in social media, such as blogs, social networks, or photo sharing sites. Social media services define examples of service providers in the different social media tools, as in line with Aula (2010). For instance, Facebook is a service provider within various social networks, and Flickr is a service for photo sharing tools.
In addition, the term social media marketing is used in this study to describe social media activities that trigger conversations of companies and their brands (Evans, 2008). According to Weber (2007) the main tasks of social media marketing comprise to (1) create experiences consumers would want to have and talk about, and (2) participate in the viral conversations about companies in social media. However, these tasks imply primarily communication activities, positioning this study into business communication rather than marketing. 9 1. 4. Outline of the study This study is structured into six chapters. Chapter 2 reviews relevant literature on social media and corporate reputation, the two focal points of this study. Chapter 3 outlines the empirical research methodology and design.
On the one hand, interviews with Nokia employees and communication and marketing consultants were held; on the other hand, a quantitative consumer survey was conducted that will both help to answer the research questions. Chapter 4 and 5 analyze and discuss the findings of the study, and compare them to earlier studies reviewed in the literature. Finally, Chapter 6 concludes the study, suggests managerial implications, and presents the limitations of this study. 10 2. LITERATURE REVIEW The purpose of this chapter is to review literature that is relevant to the objective of this study, which is to examine if the use of social media affects the reputation of companies.
The aim of the chapter is to develop a theoretical framework for the forthcoming research. In order to pursue this aim, the literature review pays special attention to the three research questions of this study, analyzing (1) who uses social media, (2) what is their awareness level of companies in social media, and (3) how important is the participation of companies in social media in the view of consumers. The literature review is divided into four sections. The first section describes social media and establishes a common understanding of the phenomenon. It particularly emphasizes the development of social media and describes social media tools (in this study defined as blogs, social media networks etc. and services (in this study defined as Facebook, YouTube, Twitter etc. ). The second section discusses the concept of corporate reputation, which is, similar to social media, rather vague and often interchangeably used with the concepts of corporate identity and corporate image. Due to this misunderstanding, the second section clarifies the concept of corporate reputation, as well as explains its building and maintenance and the benefits of a sound reputation and risks of a weak one. Social media and corporate reputation are discussed to develop the foundation for the third section, which examines the impact of social media on corporate reputation.
This is the most important section, as it addresses the objective of this study. Based on the literature review, the fourth section finally develops the theoretical framework for this study. 2. 1. Social media This section examines social media from different perspectives, focusing specifically on its technological evolution and categorization of social media tools. Due to its recent emergence in 2005, social media has received limited attention in the academic literature so far. As this limited attention might indicate a lack of knowledge about social media, the aim of this section is to provide a common understanding of the elusive phenomenon.
This understanding is important to examine the impact of social 11 media on the reputation of companies, which will be done in more detail in section 2. 3. First, the section reviews the different viewpoints on social media in an attempt to offer a consensus of the phenomenon. Second, it describes the evolution of Web 2. 0, the technical platform of all social media tools and services. Third, it provides an overview of the different social media tools and services, and categorizes them. 2. 1. 1. Definition of social media This subsection gives an overview of social media as it is understood today in academic literature. This is important to achieve a shared understanding of the concept.
Despite the growing interest in social media, there are few definitions of the technological tools. Especially scholarly articles lack definitions of social media. For this reason, other respectable sources have to be consulted in order to define the concept. The Social Networking and Media Association (2009) summarizes that the “term ‘social media’ relates in general to the effective use of Web 2. 0 tools to provide a more collaborative Web. Social Media is focused mostly around User Generated Content (UGC) … [It comprises] the ability for people to rate, comment, link, blog and discuss”. In the international conference on Web Search and Web Data Mining Agichtein, Castillo, Donato, Gionis, and Mishne (2008, p. 83) came to a similar conclusion about social media; they describe the term as “popular user-generated content domains [that] include blogs and Web forums, social bookmarking sites, photo and video sharing communities, as well as social networking platforms such as Facebook and MySpace, which offer a combination of all of these with an emphasis on the relationships among the users of the community”. Finally, the user-contributed online encyclopedia Wikipedia (2010) defines social media as “web-based technologies to transform and broadcast media monologues into social media dialogues. They support the democratization of knowledge and information and transform people from content consumers to content producers”. To summarize the descriptions above, definitions of social media center around three main agreements. 12 (1) Social media are web-based technologies enabled through Web 2. , (2) Social media comprise content provided by its users, and (3) Social media emphasize dialogues and relationships among users of a community This study uses these three characteristics to create a shared understanding of social media for this study, which is important to fully understand social media in the context of this study. 2. 1. 2. Evolution of social media This subsection outlines the evolution of the different social media tools and services through Web 2. 0, the technical platform of all social media (Tuten, 2008). In order to fully grasp the impact of social media on the communication approaches of companies, it is significant to understand what factors drove social media to emerge and what level of importance and value it has among its users. This will be done in the following subsection.
According to Weber (2007), the evolution of the Web (short form for World Wide Web), and, thus, the emergence of social media, can be described in four phases, as illustrated in Figure 2. 13 Figure 2. The evolution of the Web (Weber, 2007, pp. 12-13) As depicted in Figure 2, the first phase, the Web 1. 0, concentrated on the website building using Hypertext Markup Language (HTML), which provides structure to a website using, for instance, headings, paragraphs, lists, links, and quotes. As a result, websites were rather static, offering companies an additional one-way communication tool to broadcast information to stakeholders (Mazurek, 2009).
The second and third phases of the Web comprehend what is known today as Web 2. 0. During the second phase of the Web, the Internet became more interactive, marking the emergence of search engines, click-throughs of Web banners and pop-ups. Since the initiation of the third phase in 2005 the consumption of the Internet has proliferated, leading to different ranges of software such as Facebook or Microsoft Messenger (MSN) that fostered the formation of online communities and the interaction among people (Li & Bernoff, 2008; Hearn, Foth & Gray, 2009). Thus, Web 2. 0 allows a two-way or multi-way communication composed by the consumer (Mazurek, 2009).
According to Weber (2007), the Web is currently undergoing this third phase. However, in the future, it will head towards the fourth phase, featuring rich media, such as video, sound and touch transmitted via high-speed broadband connections, allowing the Web to be more emotional (Weber, 2007). Tim O’Reilly and Dale Dougherty coined the term Web 2. 0 in 2005, describing the Web as a platform where users create content and new sites, thereby, encouraging others to participate, collaborate and exchange content (Jones, Temperley & Lima 2009; Constantinides & Fountain, 2008; Singh, Veron-Jackson & Cullinane, 2008). Due to this participation and collaboration empowerment, Web 2. 0 is often referred to as the 14
Social Web (Jones, Temperley & Lima, 2009; Evans, 2009), signifying the way people communicate, make decisions, socialize, learn, entertain themselves, and interact with each other in the Web (Schau & Gilly, 2003; Booth & Matic, 2010). Since O’Reilly’s and Dougherty’s publication, the term Web 2. 0 has turned into a general buzzword, encompassing social media services such as eBay, Amazon, Wikipedia, Flickr, Google, BitTorrent and Napster, to name but a few (Constantinides & Fountain, 2008). However, Web 2. 0 is often interchangeably used with social media, although there is one major distinction between the terms: Web 2. 0 predominantly refers to the technical platform on which social media tools and services can be used, whereas social media rather describe the social aspects of Web 2. applications, including participation, openness, conversation, community, and connectedness enhanced through various tools, such as blogs, social networks, or discussion forums (Constantinides & Fountain 2008). This distinction will be also maintained within this study. In order to make the difference between Web 2. 0 and social media more distinct, Constantinides and Fountain (2008, p. 232) provide a comprehensive definition of Web 2. 0, taking the different aspects of the technology into account. According to them “Web 2. 0 is a collection of open-source, interactive, and user-controlled online applications expanding the experiences, knowledge and market power of the users as participants in business and social processes. Web 2. applications support the creation of informal users’ networks facilitating the flow of ideas and knowledge by allowing efficient generation, dissemination, sharing and editing/refining of informational content”. To date, millions of social media participants create and share social media content, including texts, photos and videos. For instance, in 2009 the Internet population of the United States accounted for 200 million people with the majority of them consuming social media (Booth & Matic, 2010; Li & Bernoff, 2008). Thus, social media became the biggest invention in the history of public relations and a significant communication tool with reputation (risk) dynamics (Aula, 2010; Flanagan, 2010; Booth & Matic, 2010). 15 To summarize, it is important to distinguish between Web 2. 0 and social media, as the two terms are still interchangeably used.
However, due to the development of Web 2. 0 in 2005 and the proliferated spread and consumption of the Internet, the Web became more social, enabling social media services to emerge. As a result, the marketplace undergoes a tremendous shift of market power from producers and vendors to consumers, which will be debated in more detail in section 2. 3. (Constantinides & Fountain, 2008; Bunting & Lipski, 2000). This development and shift of market power is very important to understand in order to comprehend the effect of social media on the communication strategies of companies, and, subsequently, the strategies to build and maintain their corporate reputation. 2. 1. 3.
The social media landscape This subsection reviews the various social media tools and services, and categorizes them. Merely naming the different tools and services in social media is not enough anymore to obtain a comprehensive overview of the phenomenon, but it is important to understand what purpose and function they fulfill. On the one hand, this knowledge helps to identify social media users and their activities in social media; on the other hand, companies can define the range of social media activities they can undertake to enhance their reputation. The sheer number of social media tools available to date makes their understanding rather challenging.
Until recently, the attempts to structure and categorize social media for a better understanding did not exist. In 2007, the former Microsoft employee and celebrity blogger Robert Scoble (2007) was among the first to illustrate and categorize the social media landscape, which he named the Social Media Starfish. An overview of this graph including examples of social media tools and their most popular services can be found in Appendix 1. In reference to this Social Media Starfish the most important social media tools are described below: 16 Blog – short for weblog – is a sequential online diary others can comment on and post images or links to other websites (Weber, 2007).
However, these comments differentiate the blog tremendously from a diary, and make it interactive and participative (Evens, 2008). Often blogs are combined with digital audio or video files (Constantinides & Fountain, 2008). Collaborative Tools – include for instance open-source software products such as Linux or Firefox. The code of the software is provided on an online platform and contributors can collaboratively build, test, and improve such software products (Li & Bernoff, 2008). Events – mean event service provider, such as Eventful. Members can upload their music list from popular listening services, such as iTunes, and the event service provider will send a notification to the user, when his or her favorite artist plays a concert close-by.
In addition, Eventful recommends related genre artists the user might like (Evans, 2008). Forums – are online discussion sites on which people can post questions and react to others’ questions and comments. Yahoo and AOL, for instance, provide very popular discussion forums on a number of subjects (Li & Bernoff, 2008). Microblogs – are a form of blogging that differs from traditional blogs in the sense that their contents are predominantly short sentences, phrases or thoughts, often limited to 140 characters (Evans, 2008). One of the most successful microblogs is the service provider Twitter with a user base of 75 million people (Neal, 2010).
Personal Social Networks – are applications allowing users to build personal websites and meet like-minded people to express opinions and share information (Weber, 2007; Constantinides & Fountain, 2008). One of the most popular service providers of social networks is Facebook, having currently more than 400 million active users (Facebook statistics, 2010). 17 Photo and Video Sharing – are websites that organize and share content in form of photos (e. g. Flickr) and videos (e. g. YouTube) (Constantinides & Fountain, 2008). Podcast – are audio and video files, which are distributed via an RSS feed (an alert to inform about updated Web content) to subscribers of the service.
The audio and video files can then be played on computers or portable digital audio players (Scott, 2009; Li & Bernoff, 2008). Reviews and Ratings – are very popular tools on retail sites such as Amazon. com to evaluate a product, either by formulating one’s opinion in a short essay (review) or by appraising the product’s position on a scale (rating) (Li & Bernoff, 2008). White label social networks – can be described as an organization’s or brand’s own social community, including, for instance, Apple’s iTunes store or Nokia’s Ovi store. The purpose of such private networks comprises to enhance customer support, product development, and customer engagement (Evans, 2008).
Wiki – is a site that multiple contributors develop collectively, often in form of texts and pictures (Evans, 2008; Li & Bernoff, 2008). The largest and most popular service provider is Wikipedia, a user-contributed online encyclopedia, currently encompassing more than seven million articles in over 200 languages (Scott, 2009). Given this vast number of social media tools and services, Evans (2008) concludes that (1) social media consist of a number of different activities, including video sharing, texting, blogging and so forth, and (2) their effectiveness relies on the activities and combination of tools the audience is attracted to. Taking these two assumptions into account, Li and
Bernoff (2008) grouped the activities facilitated by social media into five categories. These categories are valuable, as they describe why people use a certain range of social media, and suggest how companies can utilize this information for marketing and communication activities. Weber (2007) adds that companies, thus, have 18 specified consumer segments to target and influence. The five categories of social media suggested by Li and Bernoff (2008) are described below: 1. People Creating – people create content in form of photos, videos, podcasts and texts as a way of self-expression, to enact brand relationships, and seek opinions of other consumers (Schau & Gilly, 2003).
Blogging is indeed one of the most popular social media activities. According to Forrester’s Social Technographics Survey of 2007, an independent technology and market research company, one out of four Americans reads blogs. In Japan even half of the online consumers are active blog readers. Therefore, social content channels are an advantageous solution for companies to follow conversations and spot consumers’ opinions about themselves or their brand (Scott, 2009; Li & Bernoff, 2008). 2. People Connecting – users joining social networks or online communities aim at maintaining own profiles, connecting to other people, and interacting with them.
One key activity connected to social networking is the so-called friending, a means to develop and maintain relationships with friends and acquaintances. Furthermore, people join online communities to share information and experiences, and to belong to a group (Weber, 2007). Companies can join such social networks in order to observe consumer conversations, increase their awareness, and energize consumers (Li & Bernoff, 2008). 3. People Collaborating – collaboration encompasses the common and collective contribution of participants in wikis or other collaborative sites. When coordinating and steering such collaboration towards a common goal, the outcome can be powerful, leading, for instance, to new product ideas and even product developments (e. g. open-source software).
From this point of view, such collaborative tools can be very advantageous for companies aiming, for instance, at improving products or sales processes. However, companies often have no influence on the content of such wikis. Monitoring the content of wikis and correcting false details is often the only action they can take. 4. People reacting (to each other) – forums, ratings and reviews are very common online tools for online retailers nowadays, empowering people to interact and 19 react to each other by participating in discussions and sharing opinions and experiences. This gives retailers and companies the benefit of enhancing sales and identifying what people like and dislike in a product in concrete terms. 5. People organizing content – people can organize online content by tagging.
Tagging is a way to categorize and classify, for instance, photos, videos, podcasts and even blogs, helping others to find this content without much effort. Companies can monitor how people classify them and their products as well as upload and tag own content to support people finding them in social media. Reviewing the different media tools identified by Scoble (2007) and integrating them into the five categories defined by Li and Bernoff (2008), the following Figure 3 aims at summarizing the social media landscape: People Organizing People Reacting Ratings & Reviews Forums Tags Personal Social Networks White-Label Social Networks People Connecting Events Social Media Tools Blogs & Microblogs Wikis Collaborative Tools Podcasts Videos Photos People Collaborating People Creating
Figure 3. Social media tools and groupings (adapted from Scoble, 2007; Li & Bernoff, 2008, pp. 1739) 20 Figure 3 above provides an overview of the social media landscape and how people use the different social media tools. The middle part represents the Social Media Starfish by Scoble (2007) with the various social media tools he defines. The Social Media Starfish is revised and complemented by Li and Bernoff’s five social media categories at the edges of the figure. The puzzle pieces that match each other illustrate that the social media tools are interconnected and cannot be observed entirely in isolation, as outlined by Cartman and Ting (2008).
Although typifying and categorizing social media contributes to obtaining an overview of the social media landscape, it still does not explain what consumer groups largely use which social media tools or services. This means that consumer groups cannot be simply distinguished by their activities. In 2010, Bloch conducted a survey using Google Ad Planner to determine users groups of the eight most successful social media networks (Digg, Stumbleupon, Reddit, Facebook, LinkedIn, Twitter, MySpace, and Ning) (see Appendix 2). He observed that there are obvious differences in the demographics of these network users with regard to gender, income, education and age.
Five of these eight social media networks are compared in Table 2, as they represent the most common personal social networks. Table 2. Demographics of personal social networks (adapted from Bloch, 2010) Demographics Gender Income Education Age Reddit More male Average/ High College/ Bachelor 25-44 Facebook More female Average/ High College 25-64 LinkedIn Equal ratio High College/ Bachelor 25-64 Twitter More female Average/ High College 25-54 MySpace More female Average/ High High school/ College 0-17 & 35-54 As Table 2 demonstrates, the social network services Facebook and LinkedIn attract, among others, a mature crowd of people up to 64. According to Bloch (2010) and Usman (2009) many new users are between 45 to 55. In contrast, similar social network 21 ervices like MySpace primarily attract users below the age of 18 (Chong, 2010). While Facebook, MySpace, and Twitter rather attract female users, the female/male ratio in LinkedIn is equal, and Reddit attracts proportionally more male users. In addition, compared to Facebook, Twitter and MySpace, LinkedIn and Reddit have a higher proportion of well-educated people with, for instance, a Bachelor’s degree, which subsequently results in a larger amount of high-income level users (Chong, 2010). In addition to that, the BIGresearch Simultaneous Media Usage Survey of over 22. 000 participants revealed that the majority of social media users use several social media services.
For instance, 63. 4% of LinkedIn users also use Facebook, while 24. 3% are also active in MySpace, and 22. 1% employ Twitter (Flanagan, 2010). These results imply that social media users are scattered in social media consuming different social media services according to their needs and interests, as suggested by Kevany (2010). Even more, they use a variety of social media services. This means that social media tools and services should not be observed entirely in isolation, but as part of a complex system, as users participating in social networks will most likely also read and comment on blogs, and share videos or photos (Cartman & Ting, 2008).
The challenge for companies is, thus, to assess where their online stakeholders are and to target them directly. To summarize, the vast number of social media channels, from blogs to wikis, has to be structured and categorized in order to understand the social media’s range of activities, and to comprehend their purposes. In connection to this study, this is relevant to identify social media users as well as to define the range of social media activities companies can undertake to enhance their reputation. Scoble (2007) and Li and Bernoff (2008) provide categories that cluster consumers into segments, and, thus, support companies to decide on the most suitable communication and marketing actions to reach out to those segments.
However, even though this categorization provides a tool to cluster consumer segments, the various social media services attract different users. In addition, social media users seem to use a variety of different social media tools and services. This means companies still need to investigate these social media tools and services in order to explore where their stakeholders or potential target groups are. 22 To conclude section 2. 1. , emerging in 2005, social media form a recent phenomenon of which the knowledge and effect on the business performance is scarce. Especially the shift of market power from a company to the consumer is a fact that should be realized by the corporate world.
Understanding the concept of social media and the function and purposes of the various social media tools and services is, therefore, essential for this study and presents a crucial part for the examination of the effect of social media on the reputation of companies. 2. 2. Corporate Reputation Before examining the role of social media in corporate reputation, this section discusses the elusive concept of corporate reputation, and puts it into the context of this study. As such, corporate reputation needs to be further explained to fully grasp how it is constructed, and what factors influence the perception of consumers, who, subsequently, form the reputation of companies (Helm, 2007; Gotsi & Wilson, 2001; Bontis, Booker & Serenko, 2007).
First, the section reviews the different viewpoints on corporate reputation in the literature in an attempt to define the elusive concept. Second, it describes how a positive reputation is built and maintained. Third, it explains the benefits of a positive corporate reputation and the risks of having a weak one. 2. 2. 1. Definition of corporate reputation This subsection aims at shedding more light on the vague and complex construct of corporate reputation, as it encompasses a number of definitions that often distinguish dramatically from each other and even contradict (Bontis, Booker, and Serenko, 2007; Chun, 2005; Gotsi & Wilson, 2001; Caruana, 1997; Helm, 2007).
Furthermore, it is necessary to differentiate corporate reputation from the related concepts of corporate image and corporate identity, which, as key components of corporate communication, form the internal and external perception of companies. Based on the definition of corporate reputation, it is possible to examine the impact of social media on the reputation of companies in the present study. 23 Reviewing the corporate reputation literature, it becomes apparent that there is no single definition of what corporate reputation is, as this concept is relatively new, is undergoing constant changes, and is subject to ongoing research within the corporate reputation and communication discipline (Bontis et al. , 2007; Gotsi & Wilson, 2001).
Gotsi and Wilson (2001) developed one of the most comprehensive definitions of corporate reputation that can be found in the literature. They gathered the facts consistent with the majority of corporate reputation definitions and developed their own description of the concept. According to Gotsi and Wilson (2001, p. 29) “corporate reputation is a stakeholder’s overall evaluation of a company over time. This evaluation is based on the stakeholder’s direct experiences with the company, any other form of communication and symbolism that provides information about the firm’s actions and/or a comparison with the actions of other leading rivals. ” This definition of corporate reputation shall also be applied in this study.
Based on Gotsi and Wilson’s (2001) classification, the reputation of companies is created through consistent communication towards the companies’ stakeholders, including advertising, public relations, websites, logos, media tie-ins, sponsorships and other tools of modern corporate communications. More importantly, companies have to prove the messages communicated through deeds (Deephouse, 2000; Bunting & Lipski, 2000; Marken, 2004; Genasi, 2001). Caruana (1997) adds that reputations can even be formed through indirect experiences with the firm triggered through word-of-mouth, the media, or other publics. The success of such communication is subsequently the responses to those messages (Bunting & Lipski, 2000).
Due to its historical development, corporate reputation is often synonymously used with the related concepts of corporate image and corporate identity. According to Bennett and Kottasz (2000) corporate reputation evolved already in the 1950’s, focusing predominantly on corporate image, a concept related to corporate reputation. In the 1970’s and 1980’s this focus shifted towards corporate identity, another construct closely intertwined with corporate reputation. Finally, in the 1990’s corporate reputation received proliferating attention due to its competency to create financial (stock) value, attract investors, support consumers in their buying decisions, or retain employees (see section 2. 2. 3. ). This development labels corporate reputation as a rather new academic 24 ubject influenced by various concept-relevant disciplines (Deephouse, 2000; Weiwei, 2007; Chun, 2005; Gotsi & Wilson, 2001; Fombrun & van Riel, 1997; van Riel & Fombrun, 2008). However, according to Chun (2005), corporate reputation represents rather an umbrella construct for corporate image and corporate identity, as can be seen in Figure 4. Figure 4. Key elements of corporate reputation (adapted from Chun, 2005, p. 98) According to Figure 4 image, identity, and desired identity are independent concepts that form corporate reputation. Image is the perception of others of a company (Chun, 2005). Chun (2005, p. 95) formulated this into a simple statement: “How others see us”.
Image can, thus, change more quickly than reputation through, for instance, advertisements. Identity refers to what the members of the organization perceive, feel and think about the company. This is a rather internal view of a company. Chun (2005, p. 96) attached the statement “How we see ourselves” to the concept to describe its core meaning. Chun (2005) further includes the concept of desired identity. Desired identity describes how a company likes to be perceived – “How we want others to perceive ourselves” (Chun, 2005, p. 97). This relates to the visual cues such as name, logo, and symbols, as well as the strategic cues, such as the vision, mission and philosophy of a company.
The gap represents how a company is perceived internally and externally, as well as how it wants to be perceived. Wide gaps in the identity, image, and desired 25 identity indicate inconsistencies in the communication approaches, and have to be aligned to strengthen a firm’s aggregated reputation. A concept simultaneously appearing with social media is online reputation. Online reputation simply comprises the reputation of companies established in the Internet (Jones, Temperley & Lima, 2009). According to Weber (2007) online reputation is predominantly built by community participation and through the so-called ‘reputation aggregators’, such as search engines like Google, which enable people to find content online.
However, Wind, Wind and Mahajan (2001, p. 153) conclude that, especially in the online environment, participants are rather diverse and scattered in the Web so that a good “reputation alone has a limited effect in the open, global, heterogeneous, and constantly changing system” companies use to establish their corporate reputation. This development changes traditional approaches to corporate communication aiming at enhancing the corporate reputation of companies, which has to be taken into account when participating, for instance, in social media (Bunting & Lipski, 2000). How online reputation is affected by social media is explored in more detail in section 2. 3..
To summarize, corporate reputation is simply the stakeholders’ overall long-term evaluation of companies, which is formed through the experiences of stakeholders and the communication approaches of companies. Furthermore, although linked to those concepts, corporate reputation has to be distinguished from corporate image – the external perception of a company – and corporate identity – the internal perception of a company. This definition and distinction to other concepts is relevant in order to examine the effect of social media on the reputation of companies. Furthermore, due to new communication channels such as social media, at least the traditional way of communication, including advertisements and public relations, has to be adapted to the online environment, which will be analyzed in the section 2. 3.. 2. 2. 2.
Building and maintaining a strong corporate reputation This subsection discusses the way the various reputations of companies can be aligned to build and maintain a strong corporate reputation. Looking at this subject could generate more specific answers to the question how social media affect the reputation of 26 companies. From the different literatures (e. g. Chun, 2005; Doorley & Garcia, 2007; Helm, 2007) it becomes apparent that the enhancement of reputation lies within the observations of different stakeholder perceptions, and alignment of those perceptions via communication actions to form a consistent and strong corporate reputation. Studies by Page and Fear (2005) and Helm (2007) illustrate that the fair treatment of consumers and company success frame the key characteristics that impact stakeholders’ perceptions most.
Thus, companies should communicate information on these two topics to all stakeholders in order to enhance their overall reputation. In order to build and maintain their reputation companies have to understand who their stakeholders are and how these stakeholders perceive them (Alsop, 2006). The stakeholder theory implies that companies can hold multiple reputations depending on the interest and background of their stakeholders (Gotsi & Wilson, 2001; Bontis, Booker & Serenko, 2007). This means that reputation is formed by the collective perception of a variety of individuals. The gap between the various perceptions is crucial in reputation management (Chun, 2005).
The more similar the different stakeholder reputations of a specific company are, the stronger the reputation of that company. However, except from that instruction, the literature agrees that the reputation of companies is rather difficult to control (Greyser, 1999). A study by Page and Fearn (2005) suggests that the multiple reputations of companies can best be enhanced and aligned by communicating consistent messages about (1) the leadership and success of companies and (2) the companies’ position towards consumer fairness in advertisements, press releases, websites, and other forms of communication: (1) Leadership and success – implies the success, innovativeness, leadership style, and behavior of the CEO.
Indeed, a study in 2003 showed that the majority of respondents attribute more than half of the reputation of companies to the reputation of their CEO (Alsop, 2005). (2) Consumer fairness – encompasses the adequate treatment of consumers, fair pricing, the quality of products, trust in companies, and credible advertising. 27 In addition to the study of Page and Fearn (2008), Helm (2007) measured the perception of companies’ reputation among different stakeholder groups (consumers, employees and investors) based on the same dimensions as identified by those two researchers. However, Helm (2007) aimed at observing whether the stakeholders’ perception of companies is influenced by different criteria, and if so, which stakeholder group values which criterion.
She came to the conclusion that the three stakeholder groups examined assess the reputation of companies based on the same criteria. This finding implies that for managing and enhancing the reputation of companies, executives have to concentrate on the same content of messages in order to ensure a consistent corporate communication, and, thus, be able to build and maintain a strong corporate reputation. In order to communicate these consistent messages, the communication process has to be orchestrated into unison. This is called integrated marketing communication (IMC), and describes “the strategic co-ordination of all messages and media used by an organization to collectively influence its perceived brand value” (Gurau, 2008, p. 171).
This includes the concept of strategic alignment of all internal and external messages, free from all internal contradictions, to nourish the brands’ or companies’ value (van Riel & Fombrun, 2008). The concept of IMC evolved in the 1990’s due to the increased fragmentation and segmentation of markets, the development of new communication technologies and database applications as well as the increased fragmentation of media audiences and multiplicity, and saturation of media channels (Singh, Veron-Jackson & Cullinane, 2008; Gurau, 2008). Therefore, marketing and advertising executives searched for a way to provide greater communication consistency and improve the client return on investment (Gurau, 2008). Van
Riel and Fombrun (2008) developed a model to demonstrate how communication has to be aligned in order to influence the stakeholders’ formation of the reputation of companies. The model is illustrated in Figure 5 below. 28 Figure 5. The integrative model (van Riel & Fombrun, 2008, p. 10) As Figure 5 shows, stakeholders (A) influence the strategy of companies, and form reputations (H) of the same ones. Depending on the behavior of their stakeholders, companies have to adapt their strategy (B) to the various needs of their constituencies. The strategic attributes have to be consistent with the organizations’ identity (C) and brand (D) in order to be perceived as credible by the stakeholders.
This means that in order to be authentic and able to strengthen the corporate reputation, companies have to align their strategy to the firm’s core values and corporate brand as part of the visual representation of themselves. Van Riel and Fombrun (2008) define the strategy, identity, and brand as the starting points of every corporate communication system. Furthermore, the strategy, identity, and corporate brand have to be communicated (E) in a consistent manner to signal a comprehensive picture of companies. Communicating effectively requires a systematic integration of all communication channels and messages in order to prevent a blurred or fragmented image of organizations (Hawabhay, Abratt & Peters, 2009). This is called expressiveness – the visibility and distinctiveness, but also transparency, authenticity, and responsiveness of messages (F).
Moreover, the way the communication process is integrated into the companies affects their organization and structure (G). In return, this entire corporate communication system leads to the stakeholders’ beliefs about the honesty of companies to deliver their 29 promises; in other words it leads to a positive corporate reputation and a sound way to manage reputation, if successfully implemented (van Riel & Fombrun, 2008). To summarize, companies need to measure, monitor, and co-ordinate the different stakeholder reputations they possess in order to manage their corporate reputation. The more these stakeholder reputations are identical, the stronger is the reputation of companies.
The studies by Page and Fearn (2005) and Helm (2007) show that communicating messages with regard to fairness to consumers, leadership, innovation, and company success in a consistent manner can align the various perceptions of the stakeholders of companies and, thus, strengthen the corporate reputation of those companies. In order to signal an authentic identity, companies have to co-ordinate their entire strategic communication approach at all organizational levels to communicate an honest and credible picture of the corporation that influences the stakeholders’ perception of the companies in a positive way. This assumption will potentially also apply when building a reputation online, which should be considered with regard to the social media context.
This is an important point in the present study, as the dimensions supporting the creation and maintenance of a sound reputation give valuable clues about how companies can potentially affect their reputation in social media. 2. 2. 3. Impact of corporate reputation This subsection describes the benefits of a sound corporate reputation and risks of a weak one. Both conditions play an essential role with regard to social media, and are, therefore, relevant to mention. For instance, a positive reputation underlines the valuable asset corporate reputation can form, while a negative reputation is considered a major threat to business operations by many researchers (Aula, 2010, Evans, 2008, Tuten, 2008; Weber, 2007).
Especially the loss of reputation in social media presents a major risk to companies (Aula, 2010). The benefits of corporate reputation can be divided into five streams of research results: earlier studies revealed that a positive corporate reputation (1) increases the stock value of companies, (2) provides greater competitiveness, (3) influences satisfaction and 30 loyalty of consumers, (4) attracts and retains employees, and (5) supports companies in times of crisis (Deephouse, 2007, Sarstedt, 2009; Greyser, 1999; Helm, 2007): (1) Increased financial performance – Past research concluded that a positive reputation is an asset leading to financial benefits, such as increases in stock value.
Overall, corporate reputation can indicate the future cash flow of companies, and, thus, serves as a risk-reducing indicator of the capital market performance of companies for investors. This means that investors provide money in form of shares more willingly to companies (Sarstedt, 2009; Helm, 2007; Deephouse, 2007; Chun, 2005). Other studies found that a good reputation correlates with superior overall return, lowers cost of capital, and enhances the competitive ability of companies (Caruana, 1997; Chun, 2005) (2) Greater competitiveness – Sarstedt (2009), Caruana (1997) and Helm (2007) argue that companies with a favorable reputation can easily charge higher prices.
A positive reputation can increase the perceived quality of products, and make consumers less price conscious; hence, they are more willing to pay premium prices. Furthermore, companies can also use their reputation as a source of distinctiveness and differentiation from their competitors. Research has shown that nine out of ten consumers choose the brand with the most favorable reputation when the product or service offering is similar in quality, features, and price (Greyser, 1999; van Riel & Fountain, 2008). (3) Higher satisfaction and loyalty among consumers – Various authors confirm that a good reputation increases satisfaction and supports the establishment and retention of loyal relationships with consumers (Rice, 2010; Chun, 2005).
By examining the linkages between satisfaction, reputation, loyalty, and service recommendation, Bontis, Booker and Serenko (2007) found that corporate reputation is enhanced by satisfaction, which, in turn, positively influences consumers’ loyalty and recommendation likeliness (or word-of-mouth) (see Appendix 3). As a result, the sales performances of companies and their market shares increase (Chun, 2005). 31 (4) Attract and retain employees – The human resource management literature provides evidence that a positive corporate reputation attracts highly skilled job applicants and ensures employee retention (Chun, 2005; Helm, 2007, van Riel & Fombrun, 2008). Reputation can enable a strong rganizational identification, and even increase the inter-organizational cooperation, or citizenship behavior, which positively influences both future and current employees (Caruana, 1997). (5) Support in crisis – Finally, reputation is a valuable asset in any crisis, and can help companies to overcome it and prevent high economic losses (Greyser, 1999; Jones, 2000). A study by CoreBrand, a communications consultancy, showed that companies with a good reputation experience less market decline compared to companies with a weak reputation (van Riel & Fombrun, 2008). A good reputation can potentially strengthen the corporate image and, thus, influence stakeholders’ perception of problems companies are facing (Jones et al. , 2009).
As such, corporate reputation can affect attitudes, which sequentially influence the behaviors of stakeholders (van Riel & Fombrun, 2008). In addition to these five benefits, when the reputation of companies is affected, its revitalization is challenging. As Firestein (2006) explains, stock prices can recover, business strategies can be adapted, but when an organization’s reputation is damaged, its recovery is difficult and long lasting. Therefore, reputation risk, “the possibility or danger of losing one’s reputation”, constitutes a major threat to a variety of companies (Aula, 2010, p. 44). As Aula (2010) outlines, reputation risk comprises an operative risk generated by the inability of companies to operate internal processes, systems, people, or external threats.
However, the loss of reputation is devastating, affecting, for instance, the competitiveness of companies and their positioning, the trust of external stakeholders, the availability of employees, the relationships with consumers, or media relations. Sometimes even financial and legal obligations might occur. Although the benefits and risks corporate reputation entails are crucial, Chun (2005, p. 91) argues that the majority of the above mentioned claims “have been challenged as being anecdotal” or subject to flawed research methods. For instance, the effect of the reputation companies in crisis situations is difficult to scientifically evaluate. 32 Furthermore, Page and Fearn (2005) note that a poor reputation hampers the establishment of strong brands, but a good reputation is no guarantee of success either.
To summarize, a positive corporate reputation seems to offer companies a number of valuable financial, competitive, and strategic advantages that can enhance their performance. Although corporate reputation is a valuable asset, it seems that its constitution is rather fragile and exposed to many reputation risks. Among these reputation risks is, for instance, the free flow of information in social media (Aula, 2010), which will be described in more detail in section 2. 3.. The effect of corporate reputation on the performance of companies is relevant to mention here, as both a positive and negative reputation are, among others, potential consequences of the activities companies in social media.
To conclude section 2. 2. , understanding the construct and influence of corporate reputation is crucial for companies. Corporate reputation, as the stakeholder’s overall long-term evaluation of companies, influences the stock value of companies, their competitiveness, consumer satisfaction and loyalty, and employees, and protects companies against external threats. Especially in the light of this study corporate reputation presents an essential part, aiming at examining the effect of social media on the reputation of companies. Therefore, this section explained how corporate reputation is constructed, and what factors shape the perception of consumers.
Furthermore, it is relevant to understand the impact of a positive or negative reputation to the business performance in order to fully assess the impact of social media on companies. 2. 3. The role of social media in corporate reputation This section examines the impact of social media on corporate reputation, which forms the main objective of this study. Therefore, specifically consumers’ awareness and consumers’ perceived importance of the participation of companies in social media are emphasized to build a foundation for the theoretical framework. As outlined in the previous sections, the emergence of social media has led to a change of behavior among consumers, since they are now able to exchange information and experiences, learn 33 bout companies from various sources, and make buying decisions dependent on this information without companies being able to influence such processes (Schau & Gilly, 2003; Bunting & Lipski, 2000). As a consequence of embracing social media, a number of authors and researchers agree that companies should refrain from the traditional topdown communication models and build open, qualitative, and trustworthy dialogues with stakeholders in social media to increase consumers’ awareness and perception of them (Tuten, 2008; Bunting & Lipski, 2000; Evans, 2008; Weber, 2008). Gurau (2008) summarizes the impact of social media applications on the behavior of online audiences.
According to Gurau (2008): (1) Social media equal a network, making it possible for various audiences to communicate back to companies (2) Audiences are connected to one another, enabling discussions and debates about companies and their product (3) Audiences have access to other information ensured through the spread of the Web and discussions with other stakeholders of the companies (4) Audiences are now able to select information they want to receive Due to these implications it can be concluded that companies lose their dominance over information flows, being exposed to critics and negative word-of-mouth affecting their reputation at a vast speed (Bunting & Lipski, 2000; Jones et al. , 2009, Neef, 2003; Ferguson, 2008; Rice, 2010; Aula, 2010). According to the Word of mouth Marketing Association (WOMMA) (2007), word-of-mouth “is the most honest form of marketing, building upon people’s natural desire to share their experiences with family, friends, and colleagues”.
In addition to losing dominance over information flows, Aula (2010) argues that companies also lose their control over stakeholder relations and communications between their various stakeholder groups. These arguments are supported by the example of Dell, which underwent a difficult phase in 2005 after the consumer Jeff Jarvis complained about the company’s customer service, writing “Dell sucks” as a post on his blog. This situation resulted in a series of negative comments throughout the Web, impacting progressively on the company’s reputation (Espen, 34 2007; Geoliv, 2007). Therefore, it can be concluded that social media increase the risk of reputation and comprise certain risk dynamics (Aula, 2010).
Aula (2010), for instance, summarizes three scenarios in which social media can increase the reputation risk that companies are exposed to: (1) While the content in social media is user-generated, social media users can publish true and false facts of companies, or distribute information about them that differs from what the companies are willing to share; (2) Social media can enhance expectations (e. g. in the ethical behavior and transparency of companies), which companies might not be able to fulfill; and (3) Reputation risk results from the dialogues and behavior of companies in social media, including reactions to conversations held, or the manipulation of information (e. g. acts about the company in Wikipedia) and activist influencers in social media (e. g. the bribing of popular bloggers). In contrast to Aula (2010), Valor (2009) argues that “the internet is the best tool for improving reputation that has yet been created”. He suggests that blogs and social networks reveal new opportunities for consumers to express positive opinions about companies and their brands, and influence the reputation of corporations in a positive way. In addition, Flanagan (2010) underlines that social media attract voluntary participants, who join social media services, because it is advantageous to them. These are desirable target groups, as it can be assumed that they are rather active consumers.
As Andy Sernovitz, CEO of WOMMA explains, people appreciate to talk about brands and mention on average 20 to 30 brands a day during ordinary conversations (Ferguson, 2008), which certainly also applies to conversations held in social media. To enhance these positive conversations about companies and their brands in social media, Bunting and Lipski (2000) suggest to adapt the traditional corporate communication methods to the complexity of the social media environment. As Clark (2001, p. 262) argues, “the Internet changes the ability of external commentators to make their opinions widely known, and in this way requires change in the process of reputation management”. For this reason, a number of practitioners and researchers argue that companies need to participate in social media in order to observe 35 onversations and correct information in time (Coombs, 2007; Rice, 2010; Tuten, 2008; Aula, 2010). An illustrative example for this proposition is the case of B&H PhotoVideo, a leading photo and video equipment store in the United States. The photography supplier took orders for the new Nikon D200 camera, which was sold out right after its launch, and cancelled all orders after charging buyers the price of the camera via credit card. Within a few hours a number of forums discussed this issue, and the tone became very critical of B&H until a B&H employee apologized and explained why this mistake occurred. By acknowledging the issue, the tone of the discussion changed entirely, and probably saved the reputation of the company (Scott, 2009).
In addition to participating in social media, Aula (2010) even suggests that a proactive communication approach should be implemented in order to prevent the risk of losing online reputation and being able to correct such situations. Indeed, a McKinsey study by Burghin, Chui and Miller (2009) showed that companies implementing social media into their business operations have: 25% increased awareness, 19% higher consideration of purchases, 17% greater conversions from online registrations to actual purchases; and 30% higher consumer satisfaction and loyalty. Thus, the participation of companies in social media can also lead to valuable benefits, which practitioners should consider.
With regard to consumers’ awareness of companies in social media, a study by Constantinides and Fountain (2008) illustrates that consumers are not only exposed to information in social media, but also through communications by companies. They identified four stimuli, or influencers, that affect consumers in their behavior and purchasing decisions. Figure 6 depicts the four stimuli influencing this decision-making process. 36 A. Controllable Stimuli Traditional Marketing Mix B. Uncontrollable Stimuli Demographic, personal, cultural, attitudinal, perceptual, sociological, economic, legal, environmental etc. Consumer decision: Consumer Black box: Processing Center Product Brand Choice Dealer choice Purchasing timing C. Controllable Stimuli Online Controllable marketing factors: website, usability, interactivity, trust, aesthetics, online marketing mix D. Web 2. Experience Online uncontrollable factors: blogs, social networks, podcasts, communities, tagging, forums, bulleting boards etc. Consumer Feedback Figure 6. Stimuli influencing the decision-making process of consumers (adapted from Constantinides & Fountain, 2008, p. 240) As Figure 6 shows, consumers are equally influenced by: (A) Controllable stimuli, such as the traditional marketing mix of companies, (B) Uncontrollable stimuli steering from the demographics, culture, economic situation, environment etc. of a person, (C) The Web experiences (online, controllable) consumers undergo when surfing on the websites of companies, and (D) The Web 2. 0 experience (online, uncontrollable), comprising inputs from others in social media.
According to Constantinides and Fountain (2008), these stimuli are processed by the consumer in the processing center, leading finally to decisions with regard to products, brand choices, dealer choices, or purchasing time. Although not particularly emphasized in the model, it can be assumed that the reputation of companies is also influenced by those stimuli. Distinguishing between Constantinides and Fountain’s (2008) controllable and uncontrollable stimuli, controllable ones (A. and C. in Figure 6) predominantly comprise a one-way communication, meaning that the company sends out information 37 through, for instance, TV, radio, and print as well as the majority of the online media. Furthermore, uncontrollable stimuli (B. and D. n Figure 6) entail a two-way or multiway communication composed by the consumer (Mazurek, 2009). However, according to a study of Deloitte Touche USA in 2006, consumers do not trust traditional marketing actions. In contrast, 62% of the US consumers read consumer-generated online reviews (uncontrollable stimuli), influencing 80% of those consumers to base their buying-decisions on them (Constantinides & Fountain, 2008). This implies that word-of-mouth, including conversations via social media, is generally considered more trustworthy, and, thus, more important to consumers, than controlled media messages (Evans, 2008; Li & Bernoff, 2008; Tuten, 2008).
With regard to the importance of the social media participation of companies to consumers, Bromley (2000) argues that people form opinions about companies based on three levels: (1) Primary level – based on personal experiences (2) Secondary level – based on what friends and colleagues have to say about companies or their products (3) Tertiary level – based on mass media information, including paid advertising and unpaid publicity As Broomley (2000) remarks, the largest influence on reputation derives from personal experiences consumers make with companies or their products. However, only few people draw information on this primary level, but obtain it from indirect sources, such as friends or the media. In this sense, word-of-mouth has a greater influence on individual perceptions (van Riel & Fombrun, 2008). In addition, Steffes and Burgee (2009) support this assumption by observing that online word-of-mouth is equally influential in students’ decision-making as speaking with friends in person (word-ofmouth).
Moreover, Neef (2003) examined that the online behavior of companies and their perception by the stakeholders has an increasingly greater impact on the reputation of those companies than any philanthropic actions, donations, websites, or CSR reports. Finally, Singh, Veron-Jackson and Cullinane (2008, p. 282) surveyed that consumers are more likely influenced by marketing activities “when they have control over what 38 they see, when they see it, whether it can be personalized to fit their needs, and when they can actively participate in the marketing process”. From all these studies it can be concluded that social media have a great impact on the perception of consumers towards companies, and that, subsequently, online word-of-mouth and online reputation influence companies tremendously.
Although social media seem to be influential and important to consumers, a study by Pfeiffer and Zinnbauer (2010) illustrates that traditional advertising, specifically emphasizing TV commercials, outperforms pure online search-engine marketing when aiming at generating awareness and online registrations. Conversely, compared to TV, search engine marketing clearly shows a higher conversion rate from an actual registration to a paying membership. This means that online marketing, including social media, is effective once a product or brand has gained awareness. However, to enhance brand strength and foster the market position of companies, and potentially also their reputation, traditional advertising remains a necessity. This is an important fact when answering the questions about consumers’ awareness of the social media activities by companies and its importance to them.
To summarize, the evolution of social media allowed consumers to become the key contributors on the Web, providing information, exchanging experiences, and, thus, influencing peers in their decision-making process of products and services (Constantinides & Fountain, 2008; Bunting & Lipski, 2000). This implies that companies lose some of their dominance over information flows, which can affect their reputation significantly. Besides these reputation risk dynamics, companies can actively influence online users, and, thus, protect their reputation by engaging in social media. This requires that companies need to reconsider their communication strategy and incorporate social media activities into their overall communication approach to listen to consumers and start dialogues with them (Jones et al. 2009; Constantinides & Fountain, 2008; Bunting & Lipski, 2000). As Bunting and Lipski (2000, p. 174) put it “the Internet has made good PR more important, not less”. Word-of-mouth is considered an important component in influencing individual perceptions of consumers with regard to the reputation of companies. However, traditional marketing and communication approaches still play an important role and are as essential as social 39 media in building and enhancing the reputation of companies (Pfeiffer and Zinnbauer, 2010). Therefore, Constantinides and Fountain’s (2008) model of stimuli (see Figure 6) will be predominantly considered in this study. To conclude section 2. 3. the impact of social media on corporate reputation presents the main objective of the present study. In addition, consumers’ awareness and their perceived importance of the participation of companies in social media are essential prerequisites in constructing the theoretical framework for this study. Therefore, this section plays a very relevant role in this study. 2. 4. Research Framework This section combines the three core areas discussed in the literature review to form the theoretical framework of the present study. The theoretical framework deriving from the three core areas is illustrated in Figure 7 below: Figure 7. Theoretical framework of the study
As Figure 7 shows, the diversity of consumers using social media is presented in the middle of the circle. Based on subsection 2. 1. 3. , these users cannot be identify 40 specifically, as they do not distinguish from each other by their social media activities or demographic factors, including age, gender, education, or income level. This means that a company needs to determine beforehand who and where its specific online stakeholders are, if it wants to participate in social media. Furthermore, it is assumed that companies can only influence the perception of social media users if they are aware of the social media activities of those companies.
Social media users are influenced by four stimuli as identified by Constantinides and Fountain (2008) and shown in Figure 7 – (1) the traditional marketing mix of companies, (2) the online marketing mix, including companies’ website(s), pop-ups and other online advertising, (3) social media, including conversations by participants of social media, and (4) individual factors steering from the demographics, culture, economic situation or environment of a person (see Figure 6 in section 2. 3. ). As section 2. 3. demonstrates, word-of-mouth stimulated via conversations in social media is increasingly affecting the reputation of companies and plays an important role to consumers (Steffes & Burgee, 2009; Singh et al. , 2008; Neef, 2003).
Nevertheless, traditional media have a great impact on realizing awareness, and driving traffic to a webpage (Pfeiffer & Zinnbauer, 2010). Therefore, the present study agrees with Constantinides and Fountain (2008) that the four stimuli influencing consumers are equally affecting the consumers’ behavior and reputation formation. As Figure 7 further shows, these four stimuli affect consumers’ image perception of companies, which, in the long run, shapes the reputation of those companies. Corporate image is here assumed to be the mediating element between social media users and corporate reputation. As section 2. 2. describes, consumers form opinions rather about the corporate image of companies.
Only multiple opinions and perceptions indicate the collective reputation of that company (Chun, 2005). In addition, as other external and internal factors impact the reputation of companies as well, these factors have to be taken into consideration, and are marked here as other factors. To summarize, the framework established in this section forms the foundation for the research of this study. The propositions of potential relations among the factors derive from the literature review and will be tested in the upcoming research. 41 3. METHODOLOGY This chapter outlines the methodology applied in the present study to examine if the participation of companies in social media affect their reputation. For this purpose, a case study was conducted.
A case study is an “empirical inquiry that investigates a contemporary phenomenon in depth and within its real-life context” (Yin 2009, p. 18). To date, case studies have become increasingly popular and relevant research strategies (Eisenhardt, 1989) and belong to the most impactful research methodologies in the management field (Gibbert & Ruigrok, 2010). As Yin (2009) and Perry (1998) underline, case studies give answers to “how” and “why” questions or “how do” problems that help to explain phenomena or experiments. Their function is to educe hypotheses, which later studies can examine in more depth, and to correct old theories (Malhotra & Birks, 2006; Flyvbjerg, 2004; Cooper & Schindler, 2008).
Therefore, a case study approach presents a valuable tool for the following study on social media. The following sections will describe (1) the design of the case study research, including the rationale and role of choosing Nokia as the case company, (2) the data collection methods, encompassing qualitative interviews and a quantitative consumer survey, (3) the data analysis, and (4) the trustworthiness of this study. 3. 1. Single-case design This section justifies the two-step empirical single-case study design, which was chosen to address (1) social media users, (2) their awareness of companies active in social media, and (3) the importance they attach to the social media participation of companies.
Due to the practicability of this study, only those consumers can be examined that are active in social media, in other words social media users, as it is unlikely that companies can influence non-social media users through their social media participation. This fact naturally limits the findings of the present study, which has to be taken into consideration. Due to the fact that the area of social media is rather broad and previous studies lacking, Nokia was selected as the case company to answer the research questions. According to 42 various researchers, case studies prove especially valuable in the preliminary stages of an investigation, which applies to the under-researched area of social media (Eisenhardt, 1989; Flyvbjerg, 2004; Gibbert, Ruigrok & Wicki, 2008).
In such cases accepted principles and theories are not yet established, and case studies’ inductive approach generates new theory without the need of previous literature or prior empirical evidence (Eisenhardt, 1989, Eisenhardt & Graebner, 2007; Perry, 1998). However, case studies entail one of the weakest research methods with regard to the quality of the research design (Yin, 2009). In order to diminish this weakness, Perry (1998) points out that both induction and deduction approaches have to be involved in the case study research: the analysis of prior theory adds value to the development of new theory and can be used to triangulate additional evidence, and thus quality, to the research results. Furthermore, case studies are often seen as subjective and liable to bias. To overcome bias, Eisenhardt and Graebner (2007, p. 0) underline that “careful justification of theory building, theoretical sampling of cases, interviews that limit informant bias, rich presentation of evidence in tables and appendixes, and clear statement of theoretical arguments” support the legitimacy of this research method. These points will be considered to enhance the rigor of the present study (Eisenhardt & Graebner, 2007; Gibbert et al. , 2008). Case studies can be conducted qualitatively, quantitatively, or as a combination of the two methodologies (Eisenhardt, 1989; Yin, 2009; Gibbert & Ruigrok, 2010). Qualitative research methods emphasize the inductive approach in which the result of the esearch is the theory (Bryman and Bell, 2003; Cooper & Schindler, 2008). Quantitative research methods, in contrast, focus on the collection and analysis of data, and, therefore, follow the deductive approach, which aims at testing theory on the basis of the data collected. Nevertheless, various researchers agree that the combination of qualitative and quantitative methods increases the value and perceived quality of the research. This approach is called triangulation, aiming at observing the research issue from at least two different angles including multiple data collection methods (Eisenhardt, 1989; Cooper & Schindler, 2008; Flick, 2004).
As Cooper and Schindler (2008) explain, qualitative and quantitative research methods can succeed one another, or be conducted simultaneously, thereby compensating the weaknesses of the other 43 methodology and providing stronger validation of new theories. Therefore, the present study applies both methods to increase its quality and rigor. The present research process consists of two major steps. In the first step, qualitative interviews with Nokia employees and communication consultants were conducted. In the second step, a quantitative consumer survey was carried out online. The Nokia case is used to support the quantitative consumer survey, as questions can be formulated explicitly, generating clear results.
In particular Nokia was chosen, as (1) The company is a globally well-known and reputable brand (BrandZ, 2010) so that the probability is large that survey respondents know Nokia and are even connected to the company in social media, (2) The company has actively incorporated digital and social media marketing throughout its viral marketing campaigns since 2005, (3) In the interviews with communication consultants Nokia was suggested as a pioneer among the companies participating in social media in Finland, and (4) In line with Eisenhardt and Graebner (2007), Nokia seemed to be an informative case example with opportunities for research access. The qualitative and quantitative research methods aim at answering the research questions and achieving the research objective outlined above.
Their details are summarized in the following sections. 3. 2. Data collection This section outlines the process of preparing and conducting the data collection approaches. Thereby, the two methodologies of qualitative interviews and the quantitative consumer survey are described in chronological order to alleviate the understanding of the two-step empirical process design. 44 3. 2. 1. Qualitative interviews This subsection gives an overview of the in-depth, semi-structured interviews used to collect information. First, Nokia representatives and, second, communication consultants were interviewed. Nokia interviews Two Nokia employees were interviewed, using the semi-structured interview approach.
They were experts in digital and social media marketing: one of them was a Digital Marketing Manager, sharing his knowledge on the external social media services Nokia employs and the other one was a Social Computing Strategist, outlining the appliance of social media as internal collaboration tools among employees. The interview method seemed best as it generates deep knowledge of Nokia’s social media strategy (Mack, Woodsong, MacQueen, Guest & Namey, 2005; Cooper & Schindler, 2008). The interviews were only conducted to receive background information about Nokia’s social media participation, which is described in the introduction of the present study.
Due to the convenience of the two interviewees, the interviews were held at the same time, July 7th, 2010 between 9 and 10am. The interviews lasted approximately 40 minutes, and were structured by the following questions: “What external/internal social media services do you use in Nokia? ”, “Why does Nokia engage into social media activities? ”, and “Do you think social media can be used to enhance the reputation of Nokia? ”. The interviews were conducted in English and the interview framework is attached to Appendix 4. Consultant interviews Four communication consultants, in this study referred to as consultants, were interviewed, using the semi-structured interview approach.
As in line with Eisenhardt (1989), the interviews were used to form the basis for the quantitative consumer survey. Thus, for instance, the interviewees’ answers were used to improve the questionnaire directed at consumers. Furthermore, the interview findings were used to triangulate 45 them with the survey findings. The interview method seemed suitable as it presents a way to gather information from the most knowledgeable specialists that can explain and clarify an issue and provide reasons for their answers (Mack et al. , 2005; Cooper & Schindler, 2008). The interviews, including interviewees’ position, their company, the interview date, and the interview duration, are summarized in Table 3. Table 3.
Consultant interviews Interviewee Position Gender Female Female Female Male Company Company A Company B Company B Company C Interview Date 13. 08. 2010; 9-10am Interview Duration 36 minutes Referred to in the text I1 I2 I3 I4 Interviewee 1 Interactive Strategy Director Interviewee 2 Account manager Interviewee 3 Account manager Interviewee 4 General manager 20. 08. 2010; 10-11am 32 minutes 20. 08. 2010; 10-11am 32 minutes 21. 09. 2010; 2-3pm 36 minutes The consultants were selected based on their proficiency in the field of social media. Not all communication consultancies provide social media services, and the knowledge and know-how of consultants was pivotal for the

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