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EUROPEAN BUSINESS SCHOOL LONDON




  A Critical Analysis of Facebook
as an Effective Loyalty-Building Tool
   (A study in Cosmetic Industry)


                         by
            Wansiri Supsrisanjai




     Dissertation submitted in partial fulfilment
        of the requirements for the degree of
                   Master of Arts



                  September 2011
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
ABSTRACT

Increasing customer loyalty, to the company, should be the primary objective in

today‘s increasingly competitive business environment. Every company relies mainly

on its fixed customers and endeavours to increase the number of such clients as

many researches confirm that loyal customers will generate lucrative returns. With

the help of advanced technology and the internet, customer relationship

management technique is implemented through more diverse media channels;

including the newly popular social networking portal - Facebook.



The paper is aimed to examine the performance of Facebook as an effective

relationship strengthening tool to create brand loyalty among target audiences in

cosmetic industry. Like other businesses, beauty brands have started to create the

online presence on Facebook with the purpose of reaching out for amassing

numbers of potential customers and tightening a relationship with their fan base. To

provide answers to the prime research question, the research is carefully planned

and various data collection methods are employed to obtain relevant information.

This research project combines quantitative (questionnaire survey) and qualitative

(interview) methods to retrieve reliable outcomes.



The findings have shown interesting results. Facebook‘s unique features offer both

simplicity and flexibility to connect and communicate with their audiences and can

obviously be another good relationship building tool, yet companies are not able to

manage to reach their ultimate goal; the loyalty. One key problem highlighted here is



                                          I
that what companies currently offer to their targets is irrelevant to their preference,

thus they fail to keep ongoing engagement with their fans.



Based on research conducted, it is imperative for companies to set a clear objective

before implementing any marketing campaigns on Facebook so as to ensure the

content relevance for their target audiences. Continuous interaction between fans

and brands is vital but it is important not to bombard fans with unnecessary

information.




                                          II
ACKNOWLEDGEMENTS

This dissertation would not have been possible without the guidance and the help of

several individuals who in one way or another contributed and extended their

valuable assistance in the preparation and completion of this study.



First and foremost, my utmost gratitude goes to Mr. Richard Mannix, my supervisor,

whose encouragement, patience, guidance and support from the preliminary to the

final level enabled me to develop an understanding of the subject and to successfully

carry out this project.



Also, I am truly indebted and thankful for Khun Nunthawan Laosinchai, who

sacrificed her precious time giving me the opportunity to conduct interview and

provide me a valuable richness of information. Moreover, it is a pleasure to thank all

my friends and those who took part and completed the survey. Without this kind

cooperation and support, this project could not have been conducted successfully.



Lastly and most importantly, I would like to thank my father and my mother for their

faith in me, allowing me to be as ambitious as I wanted and always encouraging me

with their best wishes.




                                          III
TABLE OF CONTENTS

1) INTRODUCTION .................................................................................................. 1

    1.1) Background ................................................................................................... 1

    1.2) Research Objectives...................................................................................... 2

    1.3) Research Justifications .................................................................................. 4

    1.4) Dissertation Structure .................................................................................... 4

2) LITERATURE REVIEW ........................................................................................ 7

    2.1) Customer Relationship Management ............................................................ 8

    2.2) Customer Loyalty : Behaviour or Attitude ?................................................. 13

    2.3) The Loyalty Ladder ..................................................................................... 18

    2.4) Facebook and Customer Relationship Management .................................. 21

    2.5) Summary .................................................................................................... 26

3) RESEARCH METHODOLOGY .......................................................................... 28

    3.1) Research Philosophy .................................................................................. 28

    3.2) Research Approach .................................................................................... 30

    3.3) Time Horizons ............................................................................................. 32

    3.4) Data Collection ........................................................................................... 32

           3.4.1) Primary Data ................................................................................... 34

           3.4.2) Secondary Data ............................................................................... 39

    3.5) Samplings ................................................................................................... 39


                                                          IV
3.6) Limitations and Constraints......................................................................... 41

    3.7) Summary .................................................................................................... 42

4) ANALYSIS AND FINDINGS ............................................................................... 43

    4.1) The Role of Facebook in Cosmetic Industry ............................................... 44

    4.2) Is ‗Like‘ the Beginning of Brand Loyalty ? ................................................... 49

    4.3) Could Facebook help turning ‗Like‘ to ‗Love‘ ? ............................................ 53

    4.4) What are the Key Elements to Ensure Success ? ...................................... 63

    4.5) Summary .................................................................................................... 68

5) CONCLUSION .................................................................................................... 70

6) RECOMMENDATIONS....................................................................................... 73

7) BIBLIOGRAPHY ................................................................................................ 78

8) APPENDICES ..................................................................................................... 88

    Appendix 1 - Survey questionnaire (Section 1) ................................................... 88

    Appendix 2 - Survey questionnaire (Section 2) ................................................... 89

    Appendix 3 - Survey questionnaire (Section 3) ................................................... 90

    Appendix 4 - Motivations for ‗Liking‘ a brand on Facebook ................................. 94

    Appendix 5 - The Net Promoter Score (NPS) Measurement............................... 95

    Appendix 6 - Behaviour of customers after following a brand ............................. 96

    Appendix 7 - Frequency of Facebook log-ons by users ...................................... 97

    Appendix 8 - Frequency of fan page visits by fans .............................................. 98




                                                          V
LIST OF FIGURES

Figure 1.0    The evolution of social customer relationship management ................. 12

Figure 2.0    The loyalty ladder ................................................................................. 19

Figure 3.0    Social networking users by generation ................................................. 22

Figure 4.0    MAC Cosmetics Facebook fan page .................................................... 45

Figure 5.0    Example of different cosmetic brands‘ fan page on Facebook ............. 46

Figure 6.0    Number of brands that people follow on Facebook .............................. 50

Figure 7.0    Motivations for ‗Liking‘ a brand‘s fan page on Facebook ...................... 51

Figure 8.0    The influence of online experience on purchasing behaviour ............... 54

Figure 9.0    A likely change of customer behaviour after having

              a satisfactory online experience (using the NPS measurement) .......... 56

Figure 10.0 People‘s attitudes towards cosmetic brands‘ Facebook marketing ...... 60

Figure 11.0 Popularity of each activity on cosmetic brands‘ fan page ..................... 64

Figure 12.0 Example of a cosmetic brand‘s fan page advertisement ...................... 66




                                                      VI
Chapter 1


INTRODUCTION
1) INTRODUCTION


This chapter will give a brief introduction, outline the main research objectives and

states the purpose of the study as well as how the paper will be structured.




 1.1) Background

Facebook is a social networking website. It allows users to create profiles, connect

with friends, send messages, share photos/contents, play games, etc. Organizations

as well as individuals can have a presence in Facebook by creating pages. A profile

and a page are designed to meet different Facebook needs. Facebook page have

been optimised for a business‘ need to share information, interact with their fans, and

capture new audiences (Facebook Help Center, 2011).



To better comprehend the research topic and analysis, it is crucial for readers to

understand the following terms. The author has listed the most important terms

below.




        ‘Like’ or the ‘Like’ button [   ] - is a way for Facebook users to give positive

         feedback and connect with things they care about.




        Facebook page, or so called ‘fan page’ - is a public profile that enables

         companies/brands to share their business and products with Facebook users.




                                            1
Over the past few years, the phenomenal growth in such a social network site has

attracted the attention of companies to tap into these potential benefits. Many

businesses have created their fan pages and added Facebook ‗Like‘ widget to both

on their Facebook pages and other websites outside of Facebook in hope to make

connections with enthusiasts on this social media platform and that the companies

have the ability to publish updates to the users. Additionally, the ‗Like‘ button not only

enables users to connect to a fan page but also share content back to their friends as

a link of the fan page or website will appear in the user‘s friend‘s news feed and it

shows that their friends have already ‗liked‘ it (Trusov et al., 2009).



With the prominent features of Facebook are to stay in touch and share experiences

with people you know, it is quickly becoming the new marketing tool for digital

marketers for the purpose of developing a closer relationship with their customers.

For this reason, the author has come up with a question to challenge the idea of how

effective the strategic use of Facebook can establish deeper customer relationships.



 1.2) Research Objectives


Following the discussion in the previous section, the central research question for

this dissertation has been formed below;



        Can and how might Facebook be used to nurture brand loyalty?



The aim of the research presented in this dissertation is to investigate and evaluate

the effectiveness of the world‘s most-visited social networking portal ‗Facebook‘,


                                            2
serving as another supportive relationship building tool to create a brand loyalty

among target audiences. This paper will limit its focus on cosmetic industry and look

at how likely it is that Facebook can be used to optimize the stated marketing

purpose.



So as to direct the author to tackle the main research question posed above, the

following set of issues has been automatically addressed below;




      What does ‘Like’ mean to business?

       To acknowledge the business implications of ‘Like‘ marketing for companies in

       the focused industry.

      Is ‘Like’ the beginning of brand loyalty?

       To find out real motivations behind the ‗Like‘ activity so as to determine a level

       of accomplishment.

      What are customers’ attitudes towards Facebook marketing campaigns?

       To discover how customers feel and think about current marketing campaigns

       on a brand‘s fan page.

      How does Facebook experience affect customer behaviour?

       To observe a likely change of customer behaviour after experiencing and

       participating with marketing activities on Facebook.



By carrying out this research, the main research question will be answered and

various key points will be highlighted throughout the research.




                                           3
1.3) Research Justifications


This paper aims to provide practical guidance which could be beneficial for

companies regardless of the sizes and sectors; either are using, or will use Facebook

as a       medium   to   communicate   with    their target    customers.   Constructive

recommendations will be proposed on what companies should do in order to get the

maximum benefit out of this social media channel.



 1.4) Dissertation Structure


In order to facilitate the readers‘ comprehension, this paper will be structured by its

logical flows of arguments. This dissertation is, therefore, divided into 6 chapters as

follows;



Chapter 1 : Introduction

              This chapter gives an introduction to the research, identifies research

              objectives and research questions as well as the dissertation structure.



Chapter 2 : Literature Review

              This chapter draws an overall picture of what the research is all about

              and gives an insight into the subject of studies. Firstly, it looks at a

              background and an evolution of customer relationship management.

              Moreover, major theoretical explanations of the notion of loyalty and

              analytical framework; the Loyalty Ladder, are explored. Lastly, various

              studies carried out by previous researchers on the subject of Facebook

              and its opportunity for marketing is examined.

                                           4
Chapter 3 : Research Methodology

           This chapter shows how the research was planned and constructed

           relating to different research philosophies and research approaches.

           The methods employed to obtain both relevant quantitative and

           qualitative data are explained. Also, the major limitations and

           constraints during the investigation are addressed.



Chapter 4 : Analysis and Findings

           This chapter describes all findings and in-depth analyses with an

           attempt to answer the prime research question. Various past and

           current Facebook marketing campaigns from major beauty brands are

           explained here in order to have an overview of the social media

           marketing environment in the cosmetic industry. The results of the

           survey (quantitative) and the interview (qualitative) are analyzed and

           applied to a theoretical framework; the Loyalty Ladder. Additionally, the

           comparison is made to present the feasibility and the derivations of

           what have been found in the previous studies on the subject of the

           performance of Facebook as a relationship building tool. Finally, an

           outline of possible implications for companies in light of utilizing this

           social networking portal is demonstrated.



Chapter 5 : Conclusion

           This chapter provides a brief summary of what have been achieved

           from this research. The summary will look back at the beginning of the




                                        5
research and highlight various important aspects as well as assessing

          briefly whether the project aims and objectives have been met.



Chapter 6 : Recommendations

          This chapter addresses the possible opportunities for beauty companies

          to implement their marketing strategies within this social media

          platform. Various key success factors are proposed based on the

          undertaken research and findings; including what could motivate and

          de-motivate ongoing customer engagement. Also, other interesting

          areas that deserve further investigation are highlighted.




                                       6
Chapter 2

LITERATURE
    REVIEW
2) LITERATURE REVIEW


The literature review is a crucial aspect of a research study. It enables the researcher

to look into past studies and get an insight into what has already been done and

allows researchers to build on previous findings and studies. To ensure and facilitate

the reader‘s comprehension about the dissertation topic, this chapter will cover the

following aspects;



     ● The background and the development of customer relationship

     management - Why this strategy has increasingly become one of the most

     important elements in modern marketing and how companies implement this

     strategy in the digital age.



     ● The major theoretical explanations of loyalty – To gain an insight into

     different types of studies on the concept of loyalty and to find out whether it is

     an attitude or a behaviour.



     ● The Loyalty Ladder – An analytical framework which guides companies to

     determine and develop a deeper relationship with customers step-by-step.



     ● The role of Facebook for customer relationship management – To

     examine how Facebook fits itself nicely with customer relationship building

     opportunity and identify the problems that marketers are likely to face when

     company´s marketing is interfering with the community‘s environment.


                                           7
2.1) Customer Relationship Management


Over the past decade or so, it became increasingly difficult to differentiate from

competitors by only serving general product needs (Doole et al, 2005). Some believe

that the growth of internet has made information completely transparent and that has

put customer firmly back in control (Seybold, 2001). Now customers expect individual

attention and companies have shifted their focus to customer orientation (Sharma

and Sheth, 2004).



In this customer-centric environment, all companies are adjusting to a new era of

deeper customer engagement and seeking the new way to provide long-term value

to customers rather than focusing on a day-to-day transaction. Research has proven

that retention with the current customer base delivers highly desirable results; both

by improved turnover and reduced costs, as clearly acquisition costs are usually far

higher than maintenance costs (Chaffey et al, 2009).



In recent years, the main focus has been moved away from customer acquisition to

customer retention and the need to build up loyalty among these existing customers

(Goodwin and Ball, 2003). To retain current customers, the idea of relationship

marketing should be taken into account. Harker (1999) proposed a definition of

relationship marketing as follows ―An organization engaged in proactively creating,

developing and maintaining committed, interactive and profitable exchanges with

selected customers (partners) overtime.‖ So to speak, relationship marketing is a

strategy designed to foster customer loyalty, interaction and long-term engagement

(Harridge-March and Quinton, 2009). However, to be able to do this, companies


                                         8
need to know who its important customers are and what their needs are. This is

where the technique of customer relationship management fits in.



Kotler and Armstrong (2010) believe that customer relationship management is

perhaps the most important element of modern marketing. As defined by Srivastava

et al (1999), ―Customer relationship management (CRM) is a core organizational

process that focuses on establishing, maintaining, and enhancing long-term

associations with customers.‖ To simplify this, Fitzgibbon and White (2004) described

that the fundamental purpose of CRM, however, is to understand customers better

and to effectively build relationship with them.



Essentially, the ultimate goal of an overall process is to increase customer loyalty

(Kincaid, 2003). Mentioned by Chaffey et al (2009) that the benefit of loyal customers

is that they are less price-sensitive (they are satisfied with the value they receive).

From the business point of view, it means that less incentives are required to

maintain customers, which, in turn, directly leads to the positive bottom-line profits.

Moreover, loyal customers tend to recommend the company to others (referrals).



In this digital era, companies are engaging with their customers in more meaningful

ways. With the help of new technology and the advent of internet, it provides a

relationship building opportunities for marketers by incorporating more interactive

approaches that help build two-way communication rather than relying on the

traditional one-way media messages. New tools for socializing include everything

from e-mail, blogs, websites to online communities and social networks (Kotler and

Armstrong, 2010).


                                            9
Over the past two years, that evolution has only accelerated. More and more

consumers are spending more time on their PC and smartphones screens rather

than TV screen; using digital video recorders to fast-forward through TV commercials

and consuming video content on Web sites such as YouTube and on mobile devices.

Billboards alongside train lines and bus routes struggle to capture the attention of

people. Shih (2009) suggested that marketers should be aware of where customers

are and choose to communicate with them through their preferred channels. This,

therefore, includes actively taking part in the newly popular social networking avenue

‗Facebook‘; a focused medium of communication for this dissertation.



There is no doubt that social media and social networking have changed the way

people connect and communicate. As these technologies are being adopted by

people of all ages, all over the world, whole new audiences can now easily connect

with anyone through internet access and e-mail address regardless of geographical

boundaries. For business especially, social networking has forever changed the way

they communicate with their customers (Shih, 2009).



The impact of an explosive growth of social networking portals has transferred the

control over customer/company relationship to a firm grip of customer. Through social

networking channels, consumers can openly discuss about and gain more

information from their friends or other participants who had experience with the

brand. More importantly, they find this information more trustworthy than the

company marketing messages (Greenberg, 2009). This transformation in social

communication has sparked the need for a new breed of CRM which is called ‗Social

Customer Relationship Management (SCRM)‘.


                                         10
Greenberg (2009) defines Social CRM as ―a philosophy & a business strategy,

supported by a technology platform, business rules, workflow, processes & social

characteristics, designed to engage the customer in a collaborative conversation in

order to provide mutually beneficial value in a trusted & transparent business

environment. It‘s the company‘s programmatic response to the customer‘s ownership

of the conversation.”



Another theoretical definition also comes from Michael Fauschette: ―Social CRM is

the tools and processes that encourage better, more effective customer interaction

and leverage the collective intelligence of the broader customer community with the

intended result of increasing intimacy between an organization and its prospects and

customers. The goal is to make the relationship with the customer more intimate and

tied to the company by building a public ecosystem to better understand what they

want and how they interact with the various company touch points like sales,

customer service etc.‖ (Cited from Ogneva, 2010).




                                        11
Figure 1.0 The evolution of social customer relationship management




Source : Wibbels (2010)


To simplify this concept, social CRM is all focused on the idea that customers have

changed and the company has to tackle these changes in customers (See Figure

1.0). The expectations of that customer are different, the way they consume

information is different, whom they trust is different, how they communicate is

different and what constitutes success with that customer is different. In social CRM,

the customer is actually the focal point of how an organization operates. Instead of

marketing or pushing advertising messages to customers, brands now communicate

and collaborate with customers to solve business problems, empower customers to

shape their own experience and build customer relationships, which will hopefully

turn them into customer advocates (Greenberg, 2009).

                                          12
However, it is very important to bear in mind that social CRM is not a new thing that

is going to replace CRM, it is simply an extension of what CRM has always been.

―Although it has a dramatic change in what it adds to the features, functions, and

characteristics of CRM but it is still based on the prime principle that a business

needs loyal customers‖ said Greenberg (2009).



To successfully develop such a strategy, it is useful to acknowledge the concept of

loyalty. The following section will further examine the synthesis of the notion of loyalty

and explore its major theoretical explanations in order to offer readers a

comprehensive understanding of customer loyalty.




 2.2) Customer Loyalty : Behaviour or Attitude ?


Historically, in the marketing literature, numbers of researches have been attempting

to clarify the concept of loyalty (Cunningham, 1961). Since the acknowledgement of

positive effects of loyalty on a company‘s success, it has been a pivotal reason for

the sustained interest and popularity (Bennett and Rundle-Thiele, 2005; Davis-

Sramek et al, 2009; Dowling and Uncles, 1997).



Nowadays, there are still some misconceptions and partial truths about what defines

customer loyalty. Javalgi and Moberg (1997) proposed that it appears to be two main

strands of thought on the essence of loyalty; behavioural and attitudinal. To define

customer loyalty, people might have approached it from one of two different

directions. Although each of these directions is valid, they have different implications

and lead to very different prescriptions for businesses.


                                           13
Behavioural terms - This measure is usually based on observable,

        factual behaviours such as quantity purchased, the frequency of such

        purchases and any brand switching.

        Attitudinal terms - This measure are concerned with consumers‟

        preferences and disposition towards brands and their purchase

        intentions.




To further clarify, the behavioural definition of loyalty is solely concerned with a

customer's actual conduct (repurchase activity), regardless of any favourable

attitudes or internally held preferences that underlie that conduct. By this definition, a

customer is considered "loyal" to a company, if they buy from it and then continue to

buy from it (Sheth, 1968).



Since the behaviourist approach of loyalty emphasizes on measurable and

observable customer behaviours, particularly in customer relationship database,

these are the fundamental basis of sales figures and profits. For business, this

aspect of loyalty is probably viewed as the most important element (Lichtlé and

Plichon, 2008). A company wanting to increase customer loyalty, in this sense, will

focus on whatever tactics that will in fact increase the amount of repurchase

behaviour. This might include a loyalty scheme where various incentives are offered

to generate repeat purchase or to sell more products (Fitzgibbon and White, 2004).



However, without realising the motivations behind such behaviour, this behavioural

measurement is becoming increasingly technical and cannot always be a precise


                                           14
predictor of future behaviours (Lichtlé and Plichon, 2008). Some researchers argued

that there could be many other reasons for repeat patronage other than loyalty; for

example, lack of other alternatives, habit, low income, convenience, etc. (Hart, et al,

1999). This repeated purchase without emotional attachment to the brand is referred

as spurious loyalty (Dick and Basu, 1994) or inertia loyalty (Bloemer and Kasper,

1995; Schiffman and Kanuk, 2010). Thus, it can be implied that simple repeat

patronage alone is not enough to guarantee loyalty.



Additionally, some of behavioural researchers believe that brand loyalty results from

an initial product trial that is reinforced through satisfaction, leading to repeat

purchase (Schiffman and Kanuk, 2010). Many people might equate customer

satisfaction with loyalty. However, customers who may have a high degree of

satisfaction, are not necessarily loyal. Reichheld (1996) measured and showed the

relationship between customer satisfaction and loyalty are independent factors. A

customer can be very satisfied and still be indifferent as to which products he buys;

for instance, shopping only for the best deal (Kincaid, 2003). Satisfaction, therefore,

is necessary but still not a sufficient condition for customer loyalty (Griffin, 1995).



As explained earlier, the behaviourist approach still has several limitations due to the

lack of concern on situational variables and personal motivation. Hence, the

attitudinal approach has been proposed to offset the drawbacks of behavioural

theory. In particular, it highlights customer motivation.



The attitudinal definition of loyalty, on the other hand, implies that loyalty is a state of

mind. By this definition, a customer is considered "loyal" to a brand or a company if


                                            15
they have a positive, preferential attitude towards it. They like the company, its

products or its brands, and they therefore prefer to buy from it, rather than from the

company's competitors (Siemieniako et al, 2010).



Cognitive researchers emphasize the role of mental processes in building brand

loyalty. They believe that consumers engage in extensive problem-solving behaviour

involving brand and attribute comparisons, leading to a strong brand preference and

repeat purchase behaviour (Schiffman and Kanuk, 2010). From this perspective,

loyalty is the end result of a psychological evaluation and decision making process

with clear cognitive and emotional undertones (Jacoby and Kyner, 1973).



Some research shows that attitudinal loyalty also contributes to a greater tolerance of

negative experiences and lower price sensitivity (Yoo et al, 2000). This infers the

reduced need for incentives to generate repeat patronage, which leads to more

profitable customers. Besides, customers who have a positive emotional attachment

with a brand are more likely to generate word-of-mouth advertising than those who

are loyal only on a behavioural basis. This offers added benefits from a customer

acquisition perspective (Chaudhuri and Holbrook, 2001).



Despite all the advantages of attitudinal perspective, it is also likely that a customer

with favourable attitudes towards a company or brand may not express their

preference in behaviour; so to speak, no purchase but strong attachment and

predisposition towards the brand. Dick and Basu (1994) referred to this positive

attitude without purchasing activity as latent loyalty or covetous loyalty (Schiffman

and Kanuk, 2010).


                                          16
Therefore, in order to accurately measure and manage brand loyalty, Day (1969)

proposed a two-dimensional vision of loyalty (mixed or composite approach). To

simplify this concept, it can be described that a loyal consumer is the one who will

keep repeatedly purchase the brand and that behaviour must be accompanied by

deeply held positive feelings.



After having investigated several explanatory theories for loyalty, the author believes

that rather than relying on the use of only one theory or another, it is better to take

both behavioural and attitudinal approach into account when looking at particular

context. Therefore, the author agrees with Day (1969) that the two-dimensional

perspective is the most comprehensive approach to define the word loyalty for this

dissertation.



In order to cultivate a long-lasting relationship with customers, companies should

recognize the needs of different customers and know how to communicate with them.

One analytical framework that could help recognise and identify different levels of

relationship between companies and customers is called ‗The loyalty Ladder‘. The

following section will focus on how this model works and why it can be useful for

companies.




                                          17
2.3) The Loyalty Ladder


If customer relationship management is all about engaging in collaborative activities

with customers to create mutual advantage which leads to a formation of loyalty, it is

important to know who your customers are and what their needs are so as to provide

them useful information (Doole et al, 2005).



However, among those target customers, there is possibly a mix of varied types of

customers. Thus, in order to build a long-lasting customer relationship, it is important

to look at how to retain or cultivate customers at different stages (Griffin, 1995).



Mcdonald and Christopher (2003) outlined the ‗Loyalty Ladder‘ in order to categorize

consumers according to their level of behavioural loyalty. Generally speaking, the

higher the customers move up the ladder, the higher the level of loyalty they display

through their behaviour towards an organization.



Based on the preceding discussion on the essence loyalty, the author recognizes

that every behavioural activity is underpinned by attitudinal influence. As both

behaviour and attitude are interconnected, the author, therefore, assumes that

focusing on behavioural loyalty will automatically include preferential attitude and

these will drive brand recommendation and increase consumer retention.




                                            18
Figure 2.0 The loyalty ladder




Source : Mcdonald and Christopher (2003)



Figure 2.0 shows the main steps in the process of attracting and retaining customers.

If long-term customer relationships are to deliver increasing value to both parties, the

aim is to keep profitable customers and move them up the loyalty ladder (Doole et al,

2005). Starting from the bottom rung of the ladder;



      Target : After segmenting the market, target is a group of individuals whom

       marketers believe would benefit from offered products.

      Prospect : Having shaped the marketing mix to target this set of customers,

       individuals who respond positively, indicating they want to talk more with the

       company/brand, these are called prospects.



                                           19
   Buyer : After engaging in dialogue with the prospects, Those who decide to

       buy the products become buyer. However, buyer will only have performed one

       transaction with the company.



After sending out marketing message to get a set of customers interested in the

company‘s products and work hard to convert them to a buyer, this process is known

as „customer catching‟. But as this ladder shows a long way to go above simply being

a buyer, the company, if it sees this relationship being profitable, it will certainly want

to help buyers ascend towards the top of the loyalty ladder in order to gain their

loyalty. Thus, from this point upward, it is all about enhancing and developing a

closer relationship; known as „customer keeping‟ process.




      Customer : If all marketing efforts work and a buyer makes a repeat

       purchase, he/she is considered to be a customer.

      Client : The customers, who stay loyal and are likely to buy a greater and

       broader range of goods if their need have been met or exceeded, become

       clients.

      Supporter : Ex-users or interested and knowledgeable party who may have

       influence over others without necessarily being a current customer, called

       supporter.

      Advocate : The very satisfied client who will actively support and openly

       promote the organization becomes an advocate.




                                            20
Obviously, an advocate is the company‘s ultimate goal. To have customers raving

about and telling everyone about the company is a great place to be. What can be

done to move people up the ladder is to actively communicating with customers in

order to find out what they actually want. If their need have been satisfied, it is likely

that a strong ongoing relationship has been formed and that makes them immune to

the pull of competition (Griffin, 1995).



The succeeding section will examine the role of Facebook as a customer relationship

building tool for today‘s businesses. Also, the author will investigate how relationship

via the world‘s most popular social network platform is developed and how it

influences customer behaviour as well as how companies can capitalize from this

phenomenon.




 2.4) Facebook and Customer Relationship Management


In recent years, social networking sites have experienced explosive growth over the

internet and revolutionized the way people communicate and share information with

one another in today‘s society. Figure 3.0 shows that across all generations, more

people than ever are now using social network; especially those between 18-33 year-

old (Millennials), representing the fastest growing rate of all age segments

(Williamson, 2011). According to the Nielsen Company (2010), the world‘s most-

visited social networking destination was Facebook, with over 500 million active

users and 67% of global social networkers accessed to the site during each month.




                                           21
Figure 3.0 Social networking users by generation




             Source : Williamson (2011)


Apart from its typical purpose of keeping in touch and connecting with long lost

friends, lovers and family, currently various companies see this great market potential

and are tapping into this growing social network site to reach more customers

(Trusov et al., 2009). One of the main reasons is simply the behaviour of the users as

well as its size. When logging on Facebook, people usually look through everything

posted on their news feed and this is considered a great opportunity for companies to

have their marketing information exposed to their target audiences. Additionally,

Facebook users tend to enjoy content sharing and this has usually been done

through the relationship network of users. This means Facebook‘s fast content

                                          22
distribution feature allows companies to get their messages transmitted to other

potential customers by using their current customers as a medium of communication.

Besides making personal connections, Facebook is a place where buying decisions

are influenced through group interactions (Lee, 2010).



So far, it appears that the popularity of Facebook gives the companies a good

opportunity to address their information to more precise target groups due to the high

amount of information customers are publishing about themselves on their profile

pages (Usha, 2009). Also, online social networks help connect like-minded people

which make it easier for companies to target and to tailor their market offerings and

communications to the special preferences and behaviours of target segments. This

could eventually lead to a form of stronger customer relationship (Philips et al.,

2010).



Szmigin et al. (2005) mentioned that the advent of this popular social network

platform allows companies to enhance their performance of relationship marketing in

two ways. Firstly, it offers an opportunity for interaction with potential prospects and

secondly companies can observe and gain deeper understanding with the nature and

content of community through such interactions. Companies, thus, can better extract

wants and needs and the potential uses of the product so that they eventually create

marketing offers expected to meet the needs of those members accordingly.

Moreover, it is believed that brand communities not only provide marketers with

insights about consumers but also contribute to new customer acquisition, loyalty

reinforcement and increase demand for products (Muniz and Schau, 2007).




                                          23
What strengthens online brand communities in social networking sites like Facebook

is its interactive communication; either between like-minded people, guest experts

and beginners, or buyers and brand‘s managers. Apart from building relationship,

interactive communication also gives members access to abundance of exclusive

and free contents. These combinations are what keep and draw consumers back to

the site on a frequent and regular basis (McWilliam, 2000). The intentions of

members to revisit a certain brand‘s fan page could, thereby, be expressed as a form

of loyalty (Shen et al, 2010).



The recent study pointed out that customers think more positively about companies,

where social media tool is in use as it provides another platform for the customers to

express their opinions and feedbacks (Universal Mccann International, 2008). As one

of its prominent features is a platform for people to share their views, preferences,

and experiences, companies are not only able to gain feedbacks and ideas via such

customer interaction but this platform also provides an advantage of ‗word-of-mouth

(WOM)‘ marketing (Trusov et al., 2009).



Word of mouth has always been the most effective form of marketing as people tend

to trust their friends‘ opinions (Kozinets et al, 2010). The study of Harrison-Walker

(2001) has proven the fact that customers prefer to be guided by information from

friends and other personal contacts rather than a company‘s formal promotion mix.

Accordingly, the nature of Facebook offers itself nicely in line with that WOM

marketing purpose by catering a convenient way for suggesting other members and

sharing information. Recent research shows that social networking people are more




                                          24
likely to ask for their friend‘s or other‘s opinion than ordinary internet users (Lee,

2010).



Via a peer-to-peer interaction, it creates interpersonal ties which, in turn, influence

members to commit to an organization (Kim et al, 2008). As conceived by Berry and

Parasuraman (1991) and Morgan and Hunt (1994), ―Commitment is a necessary

condition for developing ongoing long-term relationships‖. The relationships,

developed among those within social networks, results in social and emotional bonds

being formed and that create a sense loyalty. Sheth and Parvatiyar (2002) suggested

that strong social bonds are difficult to be replicated by competitors. This

relationship creates an entry barrier and potentially leads to sustainable competitive

advantage.



However, effectiveness of this new social media marketing option also depends on

level and frequency of how the companies interact with customers. Despite all the

advantages, using social networking sites can be a double-edged sword. Expert

warned that it could backfire if the companies overused this communication channel.

Arun Sundararajan, a professor of information, operations and management

sciences at New York University once mentioned ―There is a fine line between giving

people a steady stream of useful information and bombarding them. If you do the

latter you are in danger of turning customers off‖ (Prentice, 2009).




                                          25
2.5) Summary


To briefly summarize, in today‘s fiercely competitive business environment,

companies are adjusting their marketing strategies to be more focused on building a

long-term partnership and loyalty as proven by many studies that loyal customers

produce more profitable bottom-line profits. The marketing technique that is

employed so as to deliver this ultimate result is called customer relationship

management (CRM).



With the advent of new digital technology and the internet, the channel of

communication between companies and customers has been drastically changed.

More and more customers seek for more information about the products of their

interest through internet. Marketers, therefore, need to approach their targets through

this preferred channel. Over the last few years, one of the promising medium that has

become a centre of attention is Facebook; where a large and growing portion of

some of the most valuable demographics are spending more of their time on .

Facebook‘s simple feature of connecting and sharing with friends present a great

opportunity for companies to develop promotional strategies that are more of a

personal conversation with customers.



Therefore, it is believed that strong customer relationships, in this case loyalty, can

be established through the strategic use of this media channel. The notion of loyalty

can be broadly defined into two terms; behavioural and attitudinal. Behavioural

perspective only determines loyal consumer by his/her repurchasing activity while

attitudinal approach emphasizes more on a psychological influence behind such


                                          26
actions. This research will focus on both theoretical explanations by describing that a

loyal customer is the one who keeps repeatedly buying products from a brand and

such behaviour must be underpinned by preferential attitude. To assist the analysis,

an analytical framework; called The Loyalty Ladder, will be in use.



By attempting to resolve the research question, it is important to have a defined

research plan and appropriate methods to obtain relevant data as well as being fully

aware of potential obstacles that might occur. Those aforementioned issues will be

looked at in the following chapter.




                                          27
Chapter 3

   RESEARCH
METHODOLOGY
3) RESEARCH METHODOLOGY

This research is aimed to investigate, analyze and develop an evaluation of the

performance of social networking site ‗Facebook‘; serving as an effective marketing

option to instill a sense of brand loyalty among targeted audience in cosmetic

industry.



The purpose of this chapter is to explain how the research is designed and the

methods employed to collect relevant data as well as mentioning the limitations and

constraints that either hindered or intervened with the result of data collection.



 3.1) Research Philosophy


This research began with a simple question: Can and how might Facebook be used

to nurture brand loyalty among consumers in cosmetics industry? When undertaking

a research, it is important to consider different research paradigms and matters of

ontology and epistemology. Since these parameters describe perceptions, beliefs,

assumptions and the nature of reality and truth (knowledge of that reality), they can

influence the way in which the research is undertaken, from design through to

conclusions.



A research philosophy is a belief about the way in which data related with a

phenomenon should be gathered, analysed and used. Three major research

philosophies have been identified according to Saunders et al (2009), namely

positivism, interpretivism and critical realism.

                                            28
Beginning with positivism, positivist relates to the philosophical stance of natural

scientist. This entails working with an observable social reality and the end product

can be law-like generalizations (Saunders et al, 2009). Although it allows researchers

to use an existing theory in order to develop a hypothesis which then will be tested

through various quantifiable methods, it does not discover the meanings people

attach to social phenomena and understand social interactions. Positivists believe

that knowledge can be described by the traditional scientific approach and consists of

verified hypotheses that can be regarded as facts or laws. In this paper, the author

aims to investigate a current phenomenon of Facebook marketing and people‘s

attitude towards it. Thus this approach is considered inappropriate for this

dissertation. Unlike the object, human behaviour is constantly changing over time,

the end result could not deliver generalised conclusions as expected by positivistic

approach.



On the other hand, interpretivism argues that the social reality is far too complex to

lend itself to theorising by definite laws in the same way as physical science.

Interpretivists believe that knowledge does not only rely on observable phenomena,

but also on subjective beliefs, values, reasons and understanding. It emphasizes the

difference between conducting research among people rather than objects

(Saunders et al, 2009). This approach allows researchers to explore an insight

through various qualitative methods which the author finds it, somehow, works on

certain aspects of this dissertation, especially to find out how and why Facebook

marketing has become increasingly popular and people‘s feeling/opinion towards this

current phenomenon. However, the author was aware that the truth is the conclusion

of mind and prejudice of individuals. To be able to make this dissertation more


                                         29
convincing and credible, the need of firm statistical and other quantifiable data are

still a major subject of concern.



To be able provide a comprehensive knowledge to the research question, the author

sought for an approach which gives way both quantitative and qualitative methods.

The last standpoint, critical realism, believes that it is impossible for humans to truly

perceive reality with their imperfect sensory and mental capacity and researchers can

identify what we do not see through practical and theoretical processes. Also it is

quite similar to positivism in that it assumes a scientific approach the development of

knowledge (Saunders et al, 2009). Therefore, the philosophy that the author viewed

as the most appropriate for this dissertation is critical realism because it involves the

need for and possibility of critically evaluating existing theories. At the same time, this

perspective acknowledges the human perception towards social reality.



 3.2) Research Approach


The research question posed above influences on choices of research approach as it

will serve as a plan of how the paper will be carried out to answer the proposed

research question. According to Saunders et al (2009), there are two broad methods

of reasoning - inductive and deductive.



An inductive approach works from specific observations to broader generalizations

and theories. In this approach, the researcher would begin with specific observations

and measure in order to detect patterns and regularities, formulate some tentative

hypotheses that could be explored, and finally end up developing some general


                                            30
conclusions or theories (Saunders et al, 2009). Generally speaking, an inductive

approach is aiming at theory building.



However, the purpose of this dissertation is not building theories but more on testing

theories. Hence, an inductive approach cannot be applied to the conduct of this

dissertation. In contrast, a deductive approach works the other way, moving from the

more general to the more specific. In this approach, the researcher would create a

hypothesis based on theories and then develop a research strategy which would

allow for the testing of hypothesis. Conclusion, thus, follows logically from premises

(available facts) (Saunders et al, 2009). So to speak, a deductive approach is aiming

at theory testing.



Therefore, the methodological approach used in this dissertation will be deductive.

The research began with the literature review, which consisted of academic articles,

journals and theories to have an overview of what studies had been conducted and

what the outcomes of those studies were. This therefore allowed the author to

generate some research questions. Once the research questions had been decided

upon, the following step was to decide on what the approach and the method would

be when tackling the data. Finally, the author attempted to answer the research

question by employing various data collection techniques to allow for better results

obtained.




                                         31
3.3) Time Horizons


When planning a research project, there are two types of time horizons to choose

either between cross-sectional studies or longitudinal studies. The first horizon is

often referred as a ―snapshot‖ because the research is made at a particular point of

time. This method is commonly used for research projects that have a time limit. The

longitudinal time horizon is also known as the ―diary‖ perspective which observes

people or events over time (Saunders et al, 2009).



This dissertation follows the first horizon; cross-sectional studies, mainly because of

the time limits that does not allow for a study over a period of time. Hence, the author

would like to describe this research work as a ―snapshot‖.



 3.4) Data Collection


The research topic will determine what types of data are necessary for the study.

Broadly speaking, there are two types of data; quantitative and qualitative (Saunders

et al, 2009). To simplify these two terms, brief explanations are shown as follows;




                                          32
Quantitative (Establishing statistical reliability)

        This process utilizes detailed questionnaires often distributed to large

        numbers of people. Quantitative research collects a huge amount of

        data, which can often be generalized to a larger population and allow

        for direct comparisons between two or more groups. It also provides

        statisticians with a great deal of flexibility in analyzing the results.



        Qualitative (Gathering insights)

        This is typically a one-on-one process in which a researcher poses

        questions directly to an individual. The questions often ask not only

        for information and opinions but also allow the interviewer to probe

        the richness of emotions and motivations related to the topic.




In order to solve the research question, the multiple methods will be in use. The

quantitative data will be collected by a self-completion online survey, which will

emphasize on the consumer´s perception about companies using Facebook as a

new medium of communication, whereas, the qualitative data will be gathered

through in-depth interviews with some marketers and managers in leading cosmetic

companies. The interviews will mainly focus on how effective Facebook is to enhance

customer relationship. By combining the two approaches, it will allow for some of the

quantitative answers to be backed up by the qualitative answers, which in turn will

give the researcher a better understanding of the research topic. Additionally,

extensive use of internet and online database will further provide supporting information


                                             33
to this research. To further clarify the details of how all data will be collected for this

dissertation, it can be categorized by the sources of information as follows;



3.4.1) Primary Data

The primary data will mainly be collected through semi-structured interviews

(qualitative) and a self-completion online questionnaire (quantitative).



1) Interview

Interviews can be classified as followings; structured, semi-structured and

unstructured. Structured interviews use a standardised set of questions in every

interview conducted. This type of interview is more suitable for quantifiable data

hence it is also called quantitative research interviews (Saunders et al, 2009). For

this dissertation, the author aims for a qualitative outcome, thus structured interview

is considered unsuitable.



By comparison, semi-structured and unstructured interviews are less attached to the

set of questions and often referred to as qualitative research interview. In a semi-

structured interview, usually the interviewer would have a list of topics that should be

covered. This type enables more flexibility and interaction between interviewer and

interviewee, while unstructured interview is informal and allows interviewer to explore

a more in-depth in an area of interest with no predetermined list of questions

(Saunders et al, 2009).



The problem with an unstructured interview is that there are no prepared questions.

The author was unsure that the interviewee would be able to give a precise answer

                                            34
to the research question or to what the author were looking for. Hence, the semi-

structured interview seems to be the most appropriate method. A list of questions to

be covered is prepared beforehand as a guideline for the interview although

additional questions may be required and these may vary from interview to interview.



Managers and marketers from major cosmetic companies will be contacted and

interviewed. The focus of the interviews will be on their past experience and attitude

towards Facebook as a marketing tool for their relationship marketing campaign and

to what extent this marketing technique delivers any satisfied outcomes and provides

extended opportunities for their businesses.



2) Survey

According to Saunders et al (2009), the survey technique is usually associated with

the deductive approach and is most commonly used to answer who, what, where,

how much and how many questions.



To further analyse the research hypothesis, a self-completion online questionnaire

will be sent out to the author‘s network community in Facebook and those who join

online beauty communities. The content of the survey will mainly emphasize on the

consumer‘s perception towards a company‘s new way of communication and to what

extent their attitude and behaviour has been influenced by an experience through

such virtual interactions. The questionnaire will be created and the data will be

analysed through online survey software; surveymonkey.com.




                                         35
The survey was developed by looking at the literature review and relevant findings

then channelling all the thoughts into what the research questions were to be. Once

these were decided upon, they were broken down into different headings, allowing

for certain questions to be grouped together in order to get a consistent flow

throughout the survey.



The survey was divided into 3 sections as follows; (For further information, see

Appendix 1-3)




      Section 1 : Personal Data

       This section is where the demographical details of respondents are collected.

       These include gender and age. The chosen age range (18-33) presented in

       this section is based on the proven facts by Williamson (2011) in literature

       review that it is the fastest-growing group of all age segments. This section

       aims to define gender and age groups related with the research which allows

       for comparison and reference.




      Section 2 : Facebook usage

       This section looks at the frequency and purpose of respondents when using

       Facebook. The questions asked in this section were based on the followings;



          o Frequency of logins
          o Time spending
          o Activities that users are likely to do when logging on


                                         36
By asking questions along the lines of the above, it would be a way of getting

    to know exactly what users tend to use Facebook for and whether any of the

    above reasons stand out for a particular group of individuals.




   Section 3 : Consumers’ awareness, motivation and attitude towards

    Facebook marketing

    This is the final section of the survey and will give participants the ability to

    address their views and perceptions on various aspects as follows;



        o Awareness of cosmetic brands‘ fan page on Facebook


        o Motivations for ‗Liking‘ any cosmetic brands‘ fan page on Facebook
           List of answers is mostly based on the previous survey (Appendix 4)

             conducted by Williamson (2011). Thus this question allows for

             testing if the results would come out similarly to the original one.

             Participants who respond to this question also can be identified at

             which the level of the loyalty ladder they are.



        o Elements/activities of a fan page that interest fans (Ranking scale)
           Some of the answers are based on Williamson and Maul (2011)‘s

             suggestions about what would drive more engagement between fans

             and brands while the rest of the choices test subjective norm. All

             participants were obliged to scale from 1st (the most interesting) to 7th

             (the least interesting). Each number is allowed for only one answer.



                                       37
This question is expected to find out which of the activities that would

     effectively engage customers the most. The outcomes can be used

     to support and prove whether the suggestions are accurate as well

     as to propose the future recommendations.



o The likely changes of consumer‘s behaviour (Rating Scale)
   This question aims to identify how likely it is that consumer‘s

     behaviour would change after engaging with the brand on Facebook.

     Respondents were asked to rate their agreement with the statements

     using likert scale from 0 (not at all likely) to 10 (extremely likely). The

     levels of involvement are categorized accordingly to the loyalty

     ladder (Mcdonald and Christopher, 2003).



     This allows the author to test if any interactions between brands and

     customers occur, it would get them move up to the higher level of the

     loyalty ladder, linking to Williamson and Maul (2011) who suggested

     that more engagement will drive a personal attachment between fans

     and brands.



     To compare the overall rating, the author adopted the measurement

     called ‗Net Promoter Score (NPS)‘, developed by Reichheld (2003),

     in order to gauge the loyalty of a firm‘s customer relationships (See

     Appendix 5).



o Overall attitudes towards Facebook marketing.

                                38
By answering all sections of this survey correctly, it is expected to generate a lot of

interesting findings which can be quantified into charts and others to get a full grasp

of to what extent Facebook can help cultivate a sense of brand loyalty between fans

and brands.



3.4.2) Secondary Data

To find secondary data, the author will use the internet extensively. Google.co.uk will

be used as the main search engine to filter and find relevant websites on the internet.

However, the author is well aware of the authenticity and validity problem of the data

found on the internet and will therefore only use websites that the author deem

credible.



Furthermore, the author will use online databases such as Datamonitor and Emerald

as well as online journal databases to find supporting information for this dissertation.



 3.5) Samplings


By undertaking a questionnaire survey, it is important to employ appropriate

techniques to collect relevant data. With limited time and budget constraints, it was

impracticable to collect data from the entire population. Therefore, a small, but

carefully chosen sample can be used to represent the population. The sample

reflects the characteristics of the population from which it is drawn. Sampling

methods are classified as either probability or non-probability.




                                           39
With probability sampling, the chance, or probability, of each case being selected

from the populations is known and is usually equal for all cases (Saunders et al,

2009). In this dissertation, the author was not able to know the total population, thus

a probability sampling seems not to be most appropriate technique. On the other

hand, non-probability sampling allows researcher to select a case from the total

population which is not known and members are selected from the population in a

non-random manner (Saunders et al, 2009).



Non-probability method includes various types of sampling. Ones that the author

employed to conduct this dissertation are shown as follows;




      Purposive sampling : enables researcher to select the sample based on

       judgment (Saunders et al, 2009). The author chose cases that are considered

       best to answer the research question by manually selecting and sending out

       the survey to people in her Facebook network.

      Convenience sampling : involves selecting those cases that are easiest to

       obtain for samples (Saunders et al, 2009). To get a gross estimate of the

       results, the author also picked ones that appeared to have the ease of filling

       out the survey. Once the questionnaire was distributed to all chosen cases,

       the sample selecting process is continued until the required sample size was

       reached.

      Snowball sampling : relies on referrals from initial subjects to generate

       additional subjects (Saunders et al, 2009). The sense of sharing on Facebook

       enables members to easily share contents with one another and so does this



                                          40
survey. The author found that some of the primary respondents also passed

       the questionnaire along to friends in his/her Facebook network.



 3.6) Limitations and Constraints


The author has mostly faced several limitations and constraints during the process of

primary data extraction. As the majority of respondents are expected to be Thai, the

obvious limitation could possibly be the fact of language barrier. When completing

the online survey, respondents might either be short in time or do not fully

understand all questions. Thus they might not fill in the survey properly or might

leave the survey without entirely completing it. This could affect the validity of

information obtained by this internet survey. However, the author was well aware of

this potential problem and in order to avoid it, the author has put the Thai translation

in brackets next to all questions and answer options. Also, time constraint was

considered a main obstacle. Due to a time limitation, the author was only able to find

a limited number of responses which would be a threat to reliability.



Another potential problem was the distance interview with experts. As, the author had

no personal relationship with any of interviewees, it was expected that they were not

likely to share any negative aspects of using this marketing tool or would say what

they thought their superior wanted them to say, described by Saunders et al (2009)

as the ‗good news syndrome‘. This political bias could influence the credibility and

reliability of the outcomes.




                                          41
Moreover, ethical issues are also needed to be taken into account, especially when

conducting a research related to personal ego. The author realised that some of the

questions might be intrusive as they could identify a social class of respondents or

level of income. For example, the question that asked respondents to choose the

current cosmetic brands they use. Some respondents might not have chosen or

answered the real brand that they currently use, instead they distorted the facts by

selecting a mid-high label brands listed in available alternatives so as to reflect their

high social status and luxurious personal taste. To minimize this limitation, the author

provided additional comment field where respondents could put their own answers.

Another example could be when participants responded to the question that asked

for their motivations for ‗liking‘ a certain brand. Some might hesitate to admit that they

became a fan of the brand, only for discounts or freebies, but opted for other choices

that sounded less economically-driven. These ethical issues might affect the quality

of outcomes.



 3.7) Summary


In this chapter, the author has stated how the research is approached. This includes

looking at different research philosophies, research approaches and time horizons.

Both quantitative and qualitative data are obtained in order to provide a firm support

for further analysis. The means of data collection employed in this dissertation

involve a survey questionnaire and semi-structured interviews with experts. Also,

possible limitations and constraints are highlighted. The effectiveness and outcomes

of methods applied will be shown in the next chapter.




                                           42
Chapter 4

ANALYSIS AND
    FINDINGS
4) ANALYSIS AND FINDINGS

The purpose of chapter is to investigate and evaluate the effectiveness of Facebook

as a relationship building tool. The results obtained from the author‘s own research

and relevant findings will be used to critically analyze and ultimately answer the

research question:



       “Can and how might Facebook be used to nurture brand loyalty?”



This chapter will be divided into 4 sections;

      The role of Facebook in cosmetic industry – To review how different major

       cosmetic companies utilize this social networking platform for their marketing

       purposes and how this online channel helps businesses to achieve their

       objectives.

      Is ‘Like’ the beginning of brand loyalty? – To investigate the hidden

       motivations why people ‗Like‘ a brand‘s fan page and what the possible

       business implications are behind this ‗Like‘ activity.

      Could Facebook help turning ‘Like’ to ‘Love’? – To examine whether

       Facebook has a likely opportunity to deepen a relationship between fans and

       brands and to what extent the current Facebook marketing activities help

       companies reach the ultimate goal.

      What are the key elements to ensure success? – To explore the mind of

       consumers so as to discover what customers actually want out of this media

       channel and eventually offer practical solutions.

                                           43
4.1) The Role of Facebook in Cosmetic Industry


Nowadays, businesses still continue to utilize the world‘s most popular social media

site; Facebook, as a part of their advertising campaigns. In fact, they are likely to

designate more time, effort and even funds towards developing strong social media

presence (Philips et al., 2010).



Those businesses include leading beauty brands as well. Although it is very typical

for cosmetic brands to hugely invest in traditional media and their own website -

flipping through any women‘s magazines, it is inevitable not to bump into tons of

beauty advertisements and free samples - Facebook has increasingly played a major

role in their marketing, e-commerce and customer service strategies (Indvik, 2011).



According to a recent report from Brand Keys; a world leader in customer loyalty and

engagement metrics, showed that almost 75% of the top 50 loyalty leader came from

three categories, which one of them is cosmetics (O‘Leary, 2010). As mentioned

earlier, cosmetic and beauty consumers tend to be very brand loyal, as equally when

it comes to online communities, site should have loyal followers and fans as well.



Since 2008, major cosmetic brands have started to set up their fan page on

Facebook. One of the marketing managers was interviewed about its expansion into

Facebook, she said ―Our expanding Facebook community provides us with an

engaged consumer group that understands our products and wants to learn about

the future of our brands.‖ (Dey, 2010).




                                          44
Figure 4.0 MAC Cosmetics Facebook fan page




  Source : MAC Cosmetics Facebook (2011)



One of the early leaders that has been voted as no. 1 cosmetic brand on Facebook is

MAC Cosmetics (Dey, 2010). MAC global marketing manager said ―At present,

Facebook is a platform for engagement and a community building, not sales‖.

Currently, MAC is running at almost 2.2 million fans. The company frequently

launches news alerts and articles about their new collections as well as interacts with

their supporters to cultivate a sense of community on its fan page (MAC Cosmetics

Facebook, 2011). (See Figure 4.0)




                                           45
Also there are some other leading cosmetic brands, which already created its

presence on Facebook. Here are a few examples as follows (See Figure 5.0);




Figure 5.0 Example of different cosmetic brands‘ fan page on Facebook




Source : Benefit Cosmetics Facebook (2011)

         Smashbox Cosmetics Facebook (2011)

         Bobbi Brown Cosmetics Facebook (2011)



      Benefit Cosmetics : Currently having almost 250,000 fans, Benefits often

       holds contest for its fans as well as receives rave or rant on any of their

       products (Benefit Cosmetics Facebook, 2011).




                                          46
   Bobbi Brown : Bobbi Brown sporadically invites beauty bloggers for

       makeovers, workshops and product launches. Visitors can learn tips and tricks

       plus how to apply makeup in the Bobbi Brown way and participate in real-time

       live chat. (Bobbi Brown Cosmetics Facebook, 2011).

      NARS : New products and upcoming events are frequently updated and

       posted in its fan page. Also the site offers online makeup tutorials and tips on

       how to replicate celebrities‘ looks (NARS Cosmetics Facebook, 2011).

      Smashbox Cosmetics : Get trend alerts, how-to techniques, product launch

       info, free gifts and samples by visiting their Facebook page and signing up on

       their main website (Smashbox Cosmetics Facebook, 2011).



For customers to interact with the brand and get access to all those exclusive

contents, they only have to click the Facebook‘s ‗Like‘ button on a fan page. This

‗Like‘ widget represents a big opportunity. Apart from earning media exposure, it

drives traffic, and earns consumer validation for the brand. When users click on the

‗Like‘ button, a few things happen beyond affinity being established. Their pages are

added to their interests section of their Facebook profile, the page is shared out to

the news feeds where it is visible to all of the user‘s friends, and now brands gain the

ability to send updates to the user via their news feed. Social media marketers in

general are fond of garnering more ‗Likes‘ for their Facebook fan pages, in hopes of

either providing social proof through sheer number of fans or amassing subscribers

to be fed announcements, promotions, offers, and contests.



Nunthawan Laosinchai, brand general manager at The Estee Lauder Companies

(Thailand), (Laosinchai, 2011), gave an example of the brand, Clinique, and

                                          47
explained how Facebook strategy works for her company. Clinique launched one of

its bestsellers; the 3-step skincare, program via its fan page on Facebook. By clicking

‗Like‘ on the brand‘s fan page, registered fans were appointed to pick up their free

samples at specific retail counters. In turn, they were also asked to fill out the follow-

up survey with full contact details in order for the brand to keep individual records for

its future customer base. Laosinchai (2011) said ―Sampling is not a new technique,

but implementing it through Facebook, it provides the brand an ability to hear what

people really think.‖ Also it helps bridging the gap between online and offline

channels by turning those who participated online to join offline activities.



And of course, it helps generate buzz marketing. After fans register, they can invite

friends to do so as well. ―We experience a massive number of our online fans

queuing up over our retail counter. This creates a strong spill-over effect on our

potential customers and passers-by. By the end of that day, our total sales were

boosted by 40%.‖ said (Laosinchai, 2011).



However, quantity does not mean quality. So far, there are no clear evidences

claiming the effectiveness of the ‗Like‘ tactics, in terms of both transactional and

relational. When it comes to CRM, marketers should be aware of what it means when

people ‗Like‘ their Facebook fan pages. Does it mean that they really like the page?

The brand? The product? Or they are just being curious? The following section will

look at what actually drives ‗Like‘ behaviour and to what extent is ‗Like‘ a sign of

accomplishment?




                                           48
4.2) Is ‘Like’ the Beginning of Brand Loyalty ?


After investigating how different beauty companies utilize Facebook for their

marketing purposes, it seems that this new marketing tool is very well-received

measuring by an increasing number of fans. However, to become a fan is just simply

clicking ‗Like‘ button, but does ‗Like‘ reflect what fans think or feel about the brand?



By looking at the previous section, most of beauty brands employ similar marketing

tactics to engage with target audiences. Although a continuous rise in number of fans

is basically a good sign, it does not necessarily mean that these people are loyal

customers. Without recognising the real motivations behind such behaviour, it is

impossible to realise what actually triggers this phenomena and thus follower counts

alone are a poor benchmark for determining whether a social media campaign is

really influential.



The recent study by Williamson (2011) found that there were other factors that mainly

motivated customers to ‗Like‘ a brand apart from an emotional attachment or loyalty.

Two out of the top three motivations are driven by discounts and other price

incentives (See appendix 4). What can be assumed from this finding is that the

majority of fans could easily be swayed by more competitive deals in price. This type

of ‗Like‘ is purely based on a transaction, not a relationship. This behaviour,

therefore, can be best described as spurious loyalty (Dick and Basu, 1994) or inertia

loyalty (Bloemer and Kasper, 1995; Schiffman and Kanuk, 2010).




                                           49
Figure 6.0 Number of brands that people follow on Facebook




Source : Wibbels (2011)



Mentioned by Chaffey et al (2009) at the beginning of literature review that in order to

be successful in this information-rich business environment companies should no

longer base on features like price and quality alone. Today it is more the perceived

experience a customer makes in various interactions with a company (i.e. how fast,

easy, efficient and reliable the process is). Moreover, the different study shows that

most of respondents do not particularly ‗Like‘ only one brand but approximately they

follow at least 2-5 brands on Facebook (See Figure 6.0).




                                          50
Figure 7.0 Motivations for ‗Liking‘ a brand‘s fan page on Facebook




Source : Self-conducted survey (2011)



Figure 7.0 represents the outcomes of a self-conducted survey. The results came out

quite similar to what had been done by Williamson (2011). Discounts and price

incentives still play a major role, still, it comes behind the fact that most of the

participants ‗Like‘ a fan page because they want to stay informed about the future

products and activities of the brand. Another common response found in this survey

is that many consumers will follow a brand if they are current customers.




                                           51
What can be drawn from this survey is that the ‗Like‘ activity is basically a way to

express interests in a brand no matter what the underlying motivations are.

Participants who ‗Like‘ a fan page, therefore, can be categorized as targets according

to the loyalty ladder by Mcdonald and Christopher (2003). Also, the author believes

that it is very likely that some of these targets might want to obtain more information

from the brand. Hence, they are becoming prospects. For those who described

themselves as current customers; either first-time or ex-customers, the author would

like to identify them as buyers.



Having looked back at the literature review, those three aforementioned rungs of the

loyalty ladder are listed under ‘customer catching‘ stage. This has proven that ‗Like‘

is now highly effective at a level of customer acquisition. So far, there is no guarantee

that this ‗Like‘ effect will last in the long-run. As a result of this analysis, the author

comes to the conclusion that the ‗Like‘ activity on Facebook is only the very

beginning of brand relationship.



To support the analysis, Laosinchai (2011), ELCA‘s brand general manager said that

―Facebook can serve as another good relationship building tool as it has a lot of

features that fits in with CRM. However, from my experience with this social media

tool, I would say that it is still at an infant stage and currently works best at acquiring

customers. To claim that it helps instill a sense of brand loyalty is just too early.‖



To briefly conclude, the amount of fans does not determine success. What tells us

about people who ‗Like‘ a fan page is that they implicitly signify their interest and

willingness to engage with future brand‘s communications. Nevertheless, to ensure


                                            52
that this relationship will last, it all depends on how effective companies utilize this

media channel. The subsequent section will further explore whether there is an

opportunity for brands to use Facebook as a medium to foster a deeper customer

relationship.



 4.3) Could Facebook help turning ‘Like’ to ‘Love’ ?


If ‗Like‘ is the beginning of brand relationship, what should companies do to ensure

that this relationship will be long-lasting? This section will find out whether Facebook

experience could help increase customer loyalty. Referring to the notion of loyalty,

the author will base all assumptions on the two-dimensional approach, proposed by

Day (1969), that a loyal consumer is the one who will keep repeatedly purchase the

brand and that behaviour must be accompanied by deeply held positive feelings.



The recent study pointed out that customers think more positively about companies,

where social media tool is in use (Universal Mccann International, 2008). However, it

is still a subject of concern whether that positive attitude would affect consumer

purchasing behaviour. Figure 8.0 demonstrates that approximately 97% of people

who have experienced with a certain brand online are likely to make a purchase with

that brand. A recent survey from Wibbels (2011) on ‗What happens when people

follow a brand?‘ confirms that online brand engagement has strongly influenced

people‘s buying decision. Over 40% said that they usually consider the brand when

in the market for product or even buy products from the brand. Besides, an increase

in sales, it also drives recommendations. About 40% of fans said that they usually

recommend the brand to others (See Appendix 6).

                                          53
Figure 8.0 The influence of online experience on purchasing behaviour




         Source : Wibbels (2011)



To test the above hypothesis, the author used self-conducted survey, aiming to

examine how likely it is that consumer‘s behaviour would change after engaging with

the brand on Facebook. Consequently, all participants were asked to respond to a

0-to-10 point rating scale on the question shown as follows;




                                         54
Assuming that you have participated with a certain brand’s activity on a

    Facebook fan page (e.g. ask questions, provide feedbacks/comments,

    play games/quizzes, etc.) and you have a satisfactory experience. How

    likely is it that you would do the following statements?


        A) Would you decide to make a purchase with the brand?

        B) Would you repurchase or buy more of the same product, if the need

            arose?

        C) Would you consider the same brand for future needs in different

            product categories?

        D) Would you recommend the brand to a friend?




To analyze a set of collected data, the author will mainly base an analysis on the

loyalty ladder model and partly incorporate with the customer loyalty metric ‗Net

Promoter Score (NPS)‘, developed by Reichheld (2003). The logic behind the NPS

calculation is that when customers respond to a 0-to-10 point rating scale, where (0)

is ‗not at all likely and (10) is ‗extremely likely‘, customers are categorized into one of

three groups; Detractors (0–6 rating), Passives (7–8 rating), and Promoters (9–10

rating). The meanings of these rating scores are shown below;




      Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer

       others, fuelling growth.

      Passives (score 7-8) are satisfied but unenthusiastic customers who are

       vulnerable to competitive offerings.



                                            55
   Detractors (score 0-6) are unhappy customers who can damage your brand

       and impede growth through negative word-of-mouth.



After calculating the data, the overall result turned out quite positive. The average

rating of four answer options levels at around 7 (See Figure 9.0). The detailed

explanations of each answer option will be demonstrated as follows;



Figure 9.0 A likely change of customer behaviour after having a satisfactory online experience

           on Facebook (using the NPS measurement)




Source : Self-conducted survey (2011)




                                            56
A) Would you decide to make a purchase with the brand?

   (Average rating = 6.7)

The final result for this answer option came at 6.7. The value, between 6 to

7, based on the scale of NPS measurement, can be in both detractors and

passives categories. However, the result of 6.7 is much closer to 7, this

makes the author believe that it can potentially fall into a passives

category. What the average rating score of 6.7 points out is that if

companies put an effort to create a satisfactory online experience, this can

eventually turn people who ‗Like‘ a brand to make an actual purchase.



Regarding to the loyalty ladder, if people who ‗Like‘ a brand, referred in a

previous section as targets and prospects, make their first purchase, they

are now becoming buyers. Therefore, this outcome has proven that

satisfactory online engagement could move consumers up to the higher

rung of the loyalty ladder.



B) Would you repurchase or buy more of the same product, if the

   need arose? (Average rating = 7.0)

The final score ended at 7.0. This once again falls into a passive category.

The author, thus, is reassured that online brand engagement can affect

repurchase decision.



Respondents who once decided to make their first purchase with the

brand, again, are likely to make a repeat purchase if they are still happy

with their experience on fan page. Consequently, online experience can


                                    57
potentially move the same group of people up to another higher step of the

loyalty ladder and buyers are now turning into customers.



C) Would you consider the same brand for future needs in different

   product category? (Average rating = 7.0)

The same mathematical result as the answer option B) occurred with this

alternative. What can be drawn from this positive figure is that if a brand

still can provide a fulfilling Facebook experience to customers at the level

where their need have been met or exceeded, they are likely to consider

the brand for future needs and even try a broader range of products.



Customers who consider buying greater lines of products, they are literally

taking another step closer to the top rung of the loyalty ladder and this

group of customers are now called clients.



D) Would you recommend the brand to a friend?

   (Average rating = 7.2)

The last answer option ended up with the highest average rating score at

7.2. This result indicates a likely chance that satisfactory online brand

engagement will trigger recommendations; a brand‘s ultimate goal in

accordance with the loyalty ladder.



At this point, the same satisfied clients who start to make a referral, are

now stepping towards the top of the loyalty ladder and becoming

advocates; people who keep consistently buying and trying products from


                                      58
the brand as well as talking positively about it. However, without

      necessarily being current customers, ex-users or those with preferential

      attitude and knowledgeable party who openly promote the brand are also

      considered loyal. The latter are called supporters.



After looking into the overall responses, the tested results proved that fulfilling

experience on fan page can help customers ascend towards the top of the loyalty

ladder or, generally speaking, flip their followers into loyal users. Therefore, it can be

predicted that elements of a brand‘s fan page on Facebook has a potential

performance to deepen relationship between fans and brands and eventually turn

‗Like‘ to ‗Love‘.



However, the situation mentioned above will never happen unless brands can deliver

what their customers actually want. In reality, things rarely go like how ones want it to

be. Another question was conducted in order to gauge an attitude towards current

marketing activities of beauty brands on their fan pages and it clearly shows that only

35.9% said that they found the current contents useful and interesting, while the rest

have neutral feeling and even worse, they don‘t bother looking at it (See Figure 10.0).




                                           59
Figure 10.0 People‘s attitudes towards cosmetic brands‘ Facebook marketing




      Source : Self-conducted survey (2011)




Most of respondents who answered ‗Don‘t bother looking‘ found that Facebook

marketing is just another form of commercial advertisement, while some said it lacks

of engagement and contains bad contents. Moreover, about 80% of total

respondents said that they log on Facebook multiple times a day, of which over 40%

visit a fan page only once a month or less (See Appendix 7 & 8).




                                          60
This statistical data reveals that current Facebook marketing campaigns fed to

customers do not have wow factors as it fails to keep fans coming back to a fan page

more often. There are several reasons that could contribute to this rather

disappointing result. The author believes that one of the main reasons stems from the

brands themselves that they cannot provide relevant contents to their audiences.

Due to the Facebook bandwagon effects and its simplicity, marketers might rush to

enter Facebook without having clear objectives and might oversimplify this extensive

network. Being lured by massive number of potential customers, marketers might

overlook some essential steps such as to clearly specify their targets and hence they

cannot tailor the offers that suit their needs. So to speak, the brands do not know

their community thus they cannot approach them in the right way. Without any

appealing contents, fans are now playing the role of passive consumers who once

clicked ‗Like‘, just to stay informed and hope that one day there might be some

interesting contents popping up in their news feed.



ELCA brand general manager, Laosinchai (2011), responded to these unpleasant

figures ―I have to admit that it is not good news. However, it is too costly if we don‘t

jump on this bandwagon. Like what I have mentioned earlier, Facebook marketing is

still at its infancy and there are still a lot of lessons to learn. The best that we can do

now is trying to understand what customers want out of this media channel and

create marketing offers in accordance with the changing needs‖



In order to successfully turn ‗Like‘ to ‗Love‘ or cultivate a sense of loyalty, Williamson

and Maul (2011) suggested that company should use ‗Like‘ wisely by aiming to drive

more engagement, not just collecting fans. Instead of ―pushing‖ information to fans


                                            61
and hope that they might like it, companies should be ―pulling‖ information and what

is expected from them. By serving what accommodates consumer preference, this

will keep fans coming back to a fan page more often and that will eventually convert

passive fans into active fans who will contribute more of their time mingling with the

brand. Through continuous interactions, a sense of community will be ultimately

established. The author believes that the element which is important to ensure a

successful presence on Facebook is that brands and fans form a like-minded

community where all benefit from each other.



What can be drawn from this section is that Facebook can potentially help nurture a

brand loyalty among consumers in cosmetic industry. Still, what brands are currently

doing with their Facebook marketing do not deliver the desirable results. So as to

improve the situation, the author believes that companies should strive to understand

consumer preference. The last section will discover the mind of consumers and

various elements which could probably make a brand‘s fan page more appealing.




                                         62
4.4) What are the Key Elements to Ensure Success ?


Without understanding the mind of consumers, companies will not only waste time,

but also money doing what is not right. In the previous section, the survey shows that

the majority of fans are not fascinated with their experience on fan page. This brings

up another key question: what should marketers do to encourage ongoing

involvement once a consumer has ‗Liked‘ a brand?



Williamson and Maul (2011) suggested that the company should always be

responsive and available to cater customers round-the-clock (e.g. ensure that all

questions/requests have been answered or responded). Exclusive price deals still

cannot be ignored. Rather than giving away high-value offers, although it encourages

initial ‗Like‘, companies should try to lower their offers as smaller discounts promote

loyalty among current fans. Additionally, providing a fan with a sense of exclusivity is

also recommended.



Moreover, asking simple questions that generate participation to get customers

thinking about the brand is a good start. It is also advised that a mix in the use of

other media channels helps engage. Video testimonials are particularly useful in

making content personal and building trust (Indvik, 2011).



In order to find out the hidden needs, participants were questioned in the survey so

as to explore what customers actually want to see on fan page. As shown in Figure

11.0, what actually interests fans the most turned out to be product reviews and




                                          63
rating. Unsurprisingly, discounts and price deals came second and followed closely

by exclusive contents.



         Figure 11.0 Popularity of each activity on cosmetic brands‘ fan page




         Source : Self-conducted survey (2011)




To a certain extent, Williamson and Maul (2011) were right. Freebies and discounts

will still be one of the primary drivers boosting traffic and sales. Still, the impact of

friends and fans should not be overlooked. Research published by Harvard Business

School professors, Gupta et al, (2009) proved that friends influence purchasing



                                           64
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)
Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)

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Dissertation : A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry)

  • 1. EUROPEAN BUSINESS SCHOOL LONDON A Critical Analysis of Facebook as an Effective Loyalty-Building Tool (A study in Cosmetic Industry) by Wansiri Supsrisanjai Dissertation submitted in partial fulfilment of the requirements for the degree of Master of Arts September 2011
  • 3. ABSTRACT Increasing customer loyalty, to the company, should be the primary objective in today‘s increasingly competitive business environment. Every company relies mainly on its fixed customers and endeavours to increase the number of such clients as many researches confirm that loyal customers will generate lucrative returns. With the help of advanced technology and the internet, customer relationship management technique is implemented through more diverse media channels; including the newly popular social networking portal - Facebook. The paper is aimed to examine the performance of Facebook as an effective relationship strengthening tool to create brand loyalty among target audiences in cosmetic industry. Like other businesses, beauty brands have started to create the online presence on Facebook with the purpose of reaching out for amassing numbers of potential customers and tightening a relationship with their fan base. To provide answers to the prime research question, the research is carefully planned and various data collection methods are employed to obtain relevant information. This research project combines quantitative (questionnaire survey) and qualitative (interview) methods to retrieve reliable outcomes. The findings have shown interesting results. Facebook‘s unique features offer both simplicity and flexibility to connect and communicate with their audiences and can obviously be another good relationship building tool, yet companies are not able to manage to reach their ultimate goal; the loyalty. One key problem highlighted here is I
  • 4. that what companies currently offer to their targets is irrelevant to their preference, thus they fail to keep ongoing engagement with their fans. Based on research conducted, it is imperative for companies to set a clear objective before implementing any marketing campaigns on Facebook so as to ensure the content relevance for their target audiences. Continuous interaction between fans and brands is vital but it is important not to bombard fans with unnecessary information. II
  • 5. ACKNOWLEDGEMENTS This dissertation would not have been possible without the guidance and the help of several individuals who in one way or another contributed and extended their valuable assistance in the preparation and completion of this study. First and foremost, my utmost gratitude goes to Mr. Richard Mannix, my supervisor, whose encouragement, patience, guidance and support from the preliminary to the final level enabled me to develop an understanding of the subject and to successfully carry out this project. Also, I am truly indebted and thankful for Khun Nunthawan Laosinchai, who sacrificed her precious time giving me the opportunity to conduct interview and provide me a valuable richness of information. Moreover, it is a pleasure to thank all my friends and those who took part and completed the survey. Without this kind cooperation and support, this project could not have been conducted successfully. Lastly and most importantly, I would like to thank my father and my mother for their faith in me, allowing me to be as ambitious as I wanted and always encouraging me with their best wishes. III
  • 6. TABLE OF CONTENTS 1) INTRODUCTION .................................................................................................. 1 1.1) Background ................................................................................................... 1 1.2) Research Objectives...................................................................................... 2 1.3) Research Justifications .................................................................................. 4 1.4) Dissertation Structure .................................................................................... 4 2) LITERATURE REVIEW ........................................................................................ 7 2.1) Customer Relationship Management ............................................................ 8 2.2) Customer Loyalty : Behaviour or Attitude ?................................................. 13 2.3) The Loyalty Ladder ..................................................................................... 18 2.4) Facebook and Customer Relationship Management .................................. 21 2.5) Summary .................................................................................................... 26 3) RESEARCH METHODOLOGY .......................................................................... 28 3.1) Research Philosophy .................................................................................. 28 3.2) Research Approach .................................................................................... 30 3.3) Time Horizons ............................................................................................. 32 3.4) Data Collection ........................................................................................... 32 3.4.1) Primary Data ................................................................................... 34 3.4.2) Secondary Data ............................................................................... 39 3.5) Samplings ................................................................................................... 39 IV
  • 7. 3.6) Limitations and Constraints......................................................................... 41 3.7) Summary .................................................................................................... 42 4) ANALYSIS AND FINDINGS ............................................................................... 43 4.1) The Role of Facebook in Cosmetic Industry ............................................... 44 4.2) Is ‗Like‘ the Beginning of Brand Loyalty ? ................................................... 49 4.3) Could Facebook help turning ‗Like‘ to ‗Love‘ ? ............................................ 53 4.4) What are the Key Elements to Ensure Success ? ...................................... 63 4.5) Summary .................................................................................................... 68 5) CONCLUSION .................................................................................................... 70 6) RECOMMENDATIONS....................................................................................... 73 7) BIBLIOGRAPHY ................................................................................................ 78 8) APPENDICES ..................................................................................................... 88 Appendix 1 - Survey questionnaire (Section 1) ................................................... 88 Appendix 2 - Survey questionnaire (Section 2) ................................................... 89 Appendix 3 - Survey questionnaire (Section 3) ................................................... 90 Appendix 4 - Motivations for ‗Liking‘ a brand on Facebook ................................. 94 Appendix 5 - The Net Promoter Score (NPS) Measurement............................... 95 Appendix 6 - Behaviour of customers after following a brand ............................. 96 Appendix 7 - Frequency of Facebook log-ons by users ...................................... 97 Appendix 8 - Frequency of fan page visits by fans .............................................. 98 V
  • 8. LIST OF FIGURES Figure 1.0 The evolution of social customer relationship management ................. 12 Figure 2.0 The loyalty ladder ................................................................................. 19 Figure 3.0 Social networking users by generation ................................................. 22 Figure 4.0 MAC Cosmetics Facebook fan page .................................................... 45 Figure 5.0 Example of different cosmetic brands‘ fan page on Facebook ............. 46 Figure 6.0 Number of brands that people follow on Facebook .............................. 50 Figure 7.0 Motivations for ‗Liking‘ a brand‘s fan page on Facebook ...................... 51 Figure 8.0 The influence of online experience on purchasing behaviour ............... 54 Figure 9.0 A likely change of customer behaviour after having a satisfactory online experience (using the NPS measurement) .......... 56 Figure 10.0 People‘s attitudes towards cosmetic brands‘ Facebook marketing ...... 60 Figure 11.0 Popularity of each activity on cosmetic brands‘ fan page ..................... 64 Figure 12.0 Example of a cosmetic brand‘s fan page advertisement ...................... 66 VI
  • 10. 1) INTRODUCTION This chapter will give a brief introduction, outline the main research objectives and states the purpose of the study as well as how the paper will be structured. 1.1) Background Facebook is a social networking website. It allows users to create profiles, connect with friends, send messages, share photos/contents, play games, etc. Organizations as well as individuals can have a presence in Facebook by creating pages. A profile and a page are designed to meet different Facebook needs. Facebook page have been optimised for a business‘ need to share information, interact with their fans, and capture new audiences (Facebook Help Center, 2011). To better comprehend the research topic and analysis, it is crucial for readers to understand the following terms. The author has listed the most important terms below.  ‘Like’ or the ‘Like’ button [ ] - is a way for Facebook users to give positive feedback and connect with things they care about.  Facebook page, or so called ‘fan page’ - is a public profile that enables companies/brands to share their business and products with Facebook users. 1
  • 11. Over the past few years, the phenomenal growth in such a social network site has attracted the attention of companies to tap into these potential benefits. Many businesses have created their fan pages and added Facebook ‗Like‘ widget to both on their Facebook pages and other websites outside of Facebook in hope to make connections with enthusiasts on this social media platform and that the companies have the ability to publish updates to the users. Additionally, the ‗Like‘ button not only enables users to connect to a fan page but also share content back to their friends as a link of the fan page or website will appear in the user‘s friend‘s news feed and it shows that their friends have already ‗liked‘ it (Trusov et al., 2009). With the prominent features of Facebook are to stay in touch and share experiences with people you know, it is quickly becoming the new marketing tool for digital marketers for the purpose of developing a closer relationship with their customers. For this reason, the author has come up with a question to challenge the idea of how effective the strategic use of Facebook can establish deeper customer relationships. 1.2) Research Objectives Following the discussion in the previous section, the central research question for this dissertation has been formed below; Can and how might Facebook be used to nurture brand loyalty? The aim of the research presented in this dissertation is to investigate and evaluate the effectiveness of the world‘s most-visited social networking portal ‗Facebook‘, 2
  • 12. serving as another supportive relationship building tool to create a brand loyalty among target audiences. This paper will limit its focus on cosmetic industry and look at how likely it is that Facebook can be used to optimize the stated marketing purpose. So as to direct the author to tackle the main research question posed above, the following set of issues has been automatically addressed below;  What does ‘Like’ mean to business? To acknowledge the business implications of ‘Like‘ marketing for companies in the focused industry.  Is ‘Like’ the beginning of brand loyalty? To find out real motivations behind the ‗Like‘ activity so as to determine a level of accomplishment.  What are customers’ attitudes towards Facebook marketing campaigns? To discover how customers feel and think about current marketing campaigns on a brand‘s fan page.  How does Facebook experience affect customer behaviour? To observe a likely change of customer behaviour after experiencing and participating with marketing activities on Facebook. By carrying out this research, the main research question will be answered and various key points will be highlighted throughout the research. 3
  • 13. 1.3) Research Justifications This paper aims to provide practical guidance which could be beneficial for companies regardless of the sizes and sectors; either are using, or will use Facebook as a medium to communicate with their target customers. Constructive recommendations will be proposed on what companies should do in order to get the maximum benefit out of this social media channel. 1.4) Dissertation Structure In order to facilitate the readers‘ comprehension, this paper will be structured by its logical flows of arguments. This dissertation is, therefore, divided into 6 chapters as follows; Chapter 1 : Introduction This chapter gives an introduction to the research, identifies research objectives and research questions as well as the dissertation structure. Chapter 2 : Literature Review This chapter draws an overall picture of what the research is all about and gives an insight into the subject of studies. Firstly, it looks at a background and an evolution of customer relationship management. Moreover, major theoretical explanations of the notion of loyalty and analytical framework; the Loyalty Ladder, are explored. Lastly, various studies carried out by previous researchers on the subject of Facebook and its opportunity for marketing is examined. 4
  • 14. Chapter 3 : Research Methodology This chapter shows how the research was planned and constructed relating to different research philosophies and research approaches. The methods employed to obtain both relevant quantitative and qualitative data are explained. Also, the major limitations and constraints during the investigation are addressed. Chapter 4 : Analysis and Findings This chapter describes all findings and in-depth analyses with an attempt to answer the prime research question. Various past and current Facebook marketing campaigns from major beauty brands are explained here in order to have an overview of the social media marketing environment in the cosmetic industry. The results of the survey (quantitative) and the interview (qualitative) are analyzed and applied to a theoretical framework; the Loyalty Ladder. Additionally, the comparison is made to present the feasibility and the derivations of what have been found in the previous studies on the subject of the performance of Facebook as a relationship building tool. Finally, an outline of possible implications for companies in light of utilizing this social networking portal is demonstrated. Chapter 5 : Conclusion This chapter provides a brief summary of what have been achieved from this research. The summary will look back at the beginning of the 5
  • 15. research and highlight various important aspects as well as assessing briefly whether the project aims and objectives have been met. Chapter 6 : Recommendations This chapter addresses the possible opportunities for beauty companies to implement their marketing strategies within this social media platform. Various key success factors are proposed based on the undertaken research and findings; including what could motivate and de-motivate ongoing customer engagement. Also, other interesting areas that deserve further investigation are highlighted. 6
  • 17. 2) LITERATURE REVIEW The literature review is a crucial aspect of a research study. It enables the researcher to look into past studies and get an insight into what has already been done and allows researchers to build on previous findings and studies. To ensure and facilitate the reader‘s comprehension about the dissertation topic, this chapter will cover the following aspects; ● The background and the development of customer relationship management - Why this strategy has increasingly become one of the most important elements in modern marketing and how companies implement this strategy in the digital age. ● The major theoretical explanations of loyalty – To gain an insight into different types of studies on the concept of loyalty and to find out whether it is an attitude or a behaviour. ● The Loyalty Ladder – An analytical framework which guides companies to determine and develop a deeper relationship with customers step-by-step. ● The role of Facebook for customer relationship management – To examine how Facebook fits itself nicely with customer relationship building opportunity and identify the problems that marketers are likely to face when company´s marketing is interfering with the community‘s environment. 7
  • 18. 2.1) Customer Relationship Management Over the past decade or so, it became increasingly difficult to differentiate from competitors by only serving general product needs (Doole et al, 2005). Some believe that the growth of internet has made information completely transparent and that has put customer firmly back in control (Seybold, 2001). Now customers expect individual attention and companies have shifted their focus to customer orientation (Sharma and Sheth, 2004). In this customer-centric environment, all companies are adjusting to a new era of deeper customer engagement and seeking the new way to provide long-term value to customers rather than focusing on a day-to-day transaction. Research has proven that retention with the current customer base delivers highly desirable results; both by improved turnover and reduced costs, as clearly acquisition costs are usually far higher than maintenance costs (Chaffey et al, 2009). In recent years, the main focus has been moved away from customer acquisition to customer retention and the need to build up loyalty among these existing customers (Goodwin and Ball, 2003). To retain current customers, the idea of relationship marketing should be taken into account. Harker (1999) proposed a definition of relationship marketing as follows ―An organization engaged in proactively creating, developing and maintaining committed, interactive and profitable exchanges with selected customers (partners) overtime.‖ So to speak, relationship marketing is a strategy designed to foster customer loyalty, interaction and long-term engagement (Harridge-March and Quinton, 2009). However, to be able to do this, companies 8
  • 19. need to know who its important customers are and what their needs are. This is where the technique of customer relationship management fits in. Kotler and Armstrong (2010) believe that customer relationship management is perhaps the most important element of modern marketing. As defined by Srivastava et al (1999), ―Customer relationship management (CRM) is a core organizational process that focuses on establishing, maintaining, and enhancing long-term associations with customers.‖ To simplify this, Fitzgibbon and White (2004) described that the fundamental purpose of CRM, however, is to understand customers better and to effectively build relationship with them. Essentially, the ultimate goal of an overall process is to increase customer loyalty (Kincaid, 2003). Mentioned by Chaffey et al (2009) that the benefit of loyal customers is that they are less price-sensitive (they are satisfied with the value they receive). From the business point of view, it means that less incentives are required to maintain customers, which, in turn, directly leads to the positive bottom-line profits. Moreover, loyal customers tend to recommend the company to others (referrals). In this digital era, companies are engaging with their customers in more meaningful ways. With the help of new technology and the advent of internet, it provides a relationship building opportunities for marketers by incorporating more interactive approaches that help build two-way communication rather than relying on the traditional one-way media messages. New tools for socializing include everything from e-mail, blogs, websites to online communities and social networks (Kotler and Armstrong, 2010). 9
  • 20. Over the past two years, that evolution has only accelerated. More and more consumers are spending more time on their PC and smartphones screens rather than TV screen; using digital video recorders to fast-forward through TV commercials and consuming video content on Web sites such as YouTube and on mobile devices. Billboards alongside train lines and bus routes struggle to capture the attention of people. Shih (2009) suggested that marketers should be aware of where customers are and choose to communicate with them through their preferred channels. This, therefore, includes actively taking part in the newly popular social networking avenue ‗Facebook‘; a focused medium of communication for this dissertation. There is no doubt that social media and social networking have changed the way people connect and communicate. As these technologies are being adopted by people of all ages, all over the world, whole new audiences can now easily connect with anyone through internet access and e-mail address regardless of geographical boundaries. For business especially, social networking has forever changed the way they communicate with their customers (Shih, 2009). The impact of an explosive growth of social networking portals has transferred the control over customer/company relationship to a firm grip of customer. Through social networking channels, consumers can openly discuss about and gain more information from their friends or other participants who had experience with the brand. More importantly, they find this information more trustworthy than the company marketing messages (Greenberg, 2009). This transformation in social communication has sparked the need for a new breed of CRM which is called ‗Social Customer Relationship Management (SCRM)‘. 10
  • 21. Greenberg (2009) defines Social CRM as ―a philosophy & a business strategy, supported by a technology platform, business rules, workflow, processes & social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted & transparent business environment. It‘s the company‘s programmatic response to the customer‘s ownership of the conversation.” Another theoretical definition also comes from Michael Fauschette: ―Social CRM is the tools and processes that encourage better, more effective customer interaction and leverage the collective intelligence of the broader customer community with the intended result of increasing intimacy between an organization and its prospects and customers. The goal is to make the relationship with the customer more intimate and tied to the company by building a public ecosystem to better understand what they want and how they interact with the various company touch points like sales, customer service etc.‖ (Cited from Ogneva, 2010). 11
  • 22. Figure 1.0 The evolution of social customer relationship management Source : Wibbels (2010) To simplify this concept, social CRM is all focused on the idea that customers have changed and the company has to tackle these changes in customers (See Figure 1.0). The expectations of that customer are different, the way they consume information is different, whom they trust is different, how they communicate is different and what constitutes success with that customer is different. In social CRM, the customer is actually the focal point of how an organization operates. Instead of marketing or pushing advertising messages to customers, brands now communicate and collaborate with customers to solve business problems, empower customers to shape their own experience and build customer relationships, which will hopefully turn them into customer advocates (Greenberg, 2009). 12
  • 23. However, it is very important to bear in mind that social CRM is not a new thing that is going to replace CRM, it is simply an extension of what CRM has always been. ―Although it has a dramatic change in what it adds to the features, functions, and characteristics of CRM but it is still based on the prime principle that a business needs loyal customers‖ said Greenberg (2009). To successfully develop such a strategy, it is useful to acknowledge the concept of loyalty. The following section will further examine the synthesis of the notion of loyalty and explore its major theoretical explanations in order to offer readers a comprehensive understanding of customer loyalty. 2.2) Customer Loyalty : Behaviour or Attitude ? Historically, in the marketing literature, numbers of researches have been attempting to clarify the concept of loyalty (Cunningham, 1961). Since the acknowledgement of positive effects of loyalty on a company‘s success, it has been a pivotal reason for the sustained interest and popularity (Bennett and Rundle-Thiele, 2005; Davis- Sramek et al, 2009; Dowling and Uncles, 1997). Nowadays, there are still some misconceptions and partial truths about what defines customer loyalty. Javalgi and Moberg (1997) proposed that it appears to be two main strands of thought on the essence of loyalty; behavioural and attitudinal. To define customer loyalty, people might have approached it from one of two different directions. Although each of these directions is valid, they have different implications and lead to very different prescriptions for businesses. 13
  • 24. Behavioural terms - This measure is usually based on observable, factual behaviours such as quantity purchased, the frequency of such purchases and any brand switching. Attitudinal terms - This measure are concerned with consumers‟ preferences and disposition towards brands and their purchase intentions. To further clarify, the behavioural definition of loyalty is solely concerned with a customer's actual conduct (repurchase activity), regardless of any favourable attitudes or internally held preferences that underlie that conduct. By this definition, a customer is considered "loyal" to a company, if they buy from it and then continue to buy from it (Sheth, 1968). Since the behaviourist approach of loyalty emphasizes on measurable and observable customer behaviours, particularly in customer relationship database, these are the fundamental basis of sales figures and profits. For business, this aspect of loyalty is probably viewed as the most important element (Lichtlé and Plichon, 2008). A company wanting to increase customer loyalty, in this sense, will focus on whatever tactics that will in fact increase the amount of repurchase behaviour. This might include a loyalty scheme where various incentives are offered to generate repeat purchase or to sell more products (Fitzgibbon and White, 2004). However, without realising the motivations behind such behaviour, this behavioural measurement is becoming increasingly technical and cannot always be a precise 14
  • 25. predictor of future behaviours (Lichtlé and Plichon, 2008). Some researchers argued that there could be many other reasons for repeat patronage other than loyalty; for example, lack of other alternatives, habit, low income, convenience, etc. (Hart, et al, 1999). This repeated purchase without emotional attachment to the brand is referred as spurious loyalty (Dick and Basu, 1994) or inertia loyalty (Bloemer and Kasper, 1995; Schiffman and Kanuk, 2010). Thus, it can be implied that simple repeat patronage alone is not enough to guarantee loyalty. Additionally, some of behavioural researchers believe that brand loyalty results from an initial product trial that is reinforced through satisfaction, leading to repeat purchase (Schiffman and Kanuk, 2010). Many people might equate customer satisfaction with loyalty. However, customers who may have a high degree of satisfaction, are not necessarily loyal. Reichheld (1996) measured and showed the relationship between customer satisfaction and loyalty are independent factors. A customer can be very satisfied and still be indifferent as to which products he buys; for instance, shopping only for the best deal (Kincaid, 2003). Satisfaction, therefore, is necessary but still not a sufficient condition for customer loyalty (Griffin, 1995). As explained earlier, the behaviourist approach still has several limitations due to the lack of concern on situational variables and personal motivation. Hence, the attitudinal approach has been proposed to offset the drawbacks of behavioural theory. In particular, it highlights customer motivation. The attitudinal definition of loyalty, on the other hand, implies that loyalty is a state of mind. By this definition, a customer is considered "loyal" to a brand or a company if 15
  • 26. they have a positive, preferential attitude towards it. They like the company, its products or its brands, and they therefore prefer to buy from it, rather than from the company's competitors (Siemieniako et al, 2010). Cognitive researchers emphasize the role of mental processes in building brand loyalty. They believe that consumers engage in extensive problem-solving behaviour involving brand and attribute comparisons, leading to a strong brand preference and repeat purchase behaviour (Schiffman and Kanuk, 2010). From this perspective, loyalty is the end result of a psychological evaluation and decision making process with clear cognitive and emotional undertones (Jacoby and Kyner, 1973). Some research shows that attitudinal loyalty also contributes to a greater tolerance of negative experiences and lower price sensitivity (Yoo et al, 2000). This infers the reduced need for incentives to generate repeat patronage, which leads to more profitable customers. Besides, customers who have a positive emotional attachment with a brand are more likely to generate word-of-mouth advertising than those who are loyal only on a behavioural basis. This offers added benefits from a customer acquisition perspective (Chaudhuri and Holbrook, 2001). Despite all the advantages of attitudinal perspective, it is also likely that a customer with favourable attitudes towards a company or brand may not express their preference in behaviour; so to speak, no purchase but strong attachment and predisposition towards the brand. Dick and Basu (1994) referred to this positive attitude without purchasing activity as latent loyalty or covetous loyalty (Schiffman and Kanuk, 2010). 16
  • 27. Therefore, in order to accurately measure and manage brand loyalty, Day (1969) proposed a two-dimensional vision of loyalty (mixed or composite approach). To simplify this concept, it can be described that a loyal consumer is the one who will keep repeatedly purchase the brand and that behaviour must be accompanied by deeply held positive feelings. After having investigated several explanatory theories for loyalty, the author believes that rather than relying on the use of only one theory or another, it is better to take both behavioural and attitudinal approach into account when looking at particular context. Therefore, the author agrees with Day (1969) that the two-dimensional perspective is the most comprehensive approach to define the word loyalty for this dissertation. In order to cultivate a long-lasting relationship with customers, companies should recognize the needs of different customers and know how to communicate with them. One analytical framework that could help recognise and identify different levels of relationship between companies and customers is called ‗The loyalty Ladder‘. The following section will focus on how this model works and why it can be useful for companies. 17
  • 28. 2.3) The Loyalty Ladder If customer relationship management is all about engaging in collaborative activities with customers to create mutual advantage which leads to a formation of loyalty, it is important to know who your customers are and what their needs are so as to provide them useful information (Doole et al, 2005). However, among those target customers, there is possibly a mix of varied types of customers. Thus, in order to build a long-lasting customer relationship, it is important to look at how to retain or cultivate customers at different stages (Griffin, 1995). Mcdonald and Christopher (2003) outlined the ‗Loyalty Ladder‘ in order to categorize consumers according to their level of behavioural loyalty. Generally speaking, the higher the customers move up the ladder, the higher the level of loyalty they display through their behaviour towards an organization. Based on the preceding discussion on the essence loyalty, the author recognizes that every behavioural activity is underpinned by attitudinal influence. As both behaviour and attitude are interconnected, the author, therefore, assumes that focusing on behavioural loyalty will automatically include preferential attitude and these will drive brand recommendation and increase consumer retention. 18
  • 29. Figure 2.0 The loyalty ladder Source : Mcdonald and Christopher (2003) Figure 2.0 shows the main steps in the process of attracting and retaining customers. If long-term customer relationships are to deliver increasing value to both parties, the aim is to keep profitable customers and move them up the loyalty ladder (Doole et al, 2005). Starting from the bottom rung of the ladder;  Target : After segmenting the market, target is a group of individuals whom marketers believe would benefit from offered products.  Prospect : Having shaped the marketing mix to target this set of customers, individuals who respond positively, indicating they want to talk more with the company/brand, these are called prospects. 19
  • 30. Buyer : After engaging in dialogue with the prospects, Those who decide to buy the products become buyer. However, buyer will only have performed one transaction with the company. After sending out marketing message to get a set of customers interested in the company‘s products and work hard to convert them to a buyer, this process is known as „customer catching‟. But as this ladder shows a long way to go above simply being a buyer, the company, if it sees this relationship being profitable, it will certainly want to help buyers ascend towards the top of the loyalty ladder in order to gain their loyalty. Thus, from this point upward, it is all about enhancing and developing a closer relationship; known as „customer keeping‟ process.  Customer : If all marketing efforts work and a buyer makes a repeat purchase, he/she is considered to be a customer.  Client : The customers, who stay loyal and are likely to buy a greater and broader range of goods if their need have been met or exceeded, become clients.  Supporter : Ex-users or interested and knowledgeable party who may have influence over others without necessarily being a current customer, called supporter.  Advocate : The very satisfied client who will actively support and openly promote the organization becomes an advocate. 20
  • 31. Obviously, an advocate is the company‘s ultimate goal. To have customers raving about and telling everyone about the company is a great place to be. What can be done to move people up the ladder is to actively communicating with customers in order to find out what they actually want. If their need have been satisfied, it is likely that a strong ongoing relationship has been formed and that makes them immune to the pull of competition (Griffin, 1995). The succeeding section will examine the role of Facebook as a customer relationship building tool for today‘s businesses. Also, the author will investigate how relationship via the world‘s most popular social network platform is developed and how it influences customer behaviour as well as how companies can capitalize from this phenomenon. 2.4) Facebook and Customer Relationship Management In recent years, social networking sites have experienced explosive growth over the internet and revolutionized the way people communicate and share information with one another in today‘s society. Figure 3.0 shows that across all generations, more people than ever are now using social network; especially those between 18-33 year- old (Millennials), representing the fastest growing rate of all age segments (Williamson, 2011). According to the Nielsen Company (2010), the world‘s most- visited social networking destination was Facebook, with over 500 million active users and 67% of global social networkers accessed to the site during each month. 21
  • 32. Figure 3.0 Social networking users by generation Source : Williamson (2011) Apart from its typical purpose of keeping in touch and connecting with long lost friends, lovers and family, currently various companies see this great market potential and are tapping into this growing social network site to reach more customers (Trusov et al., 2009). One of the main reasons is simply the behaviour of the users as well as its size. When logging on Facebook, people usually look through everything posted on their news feed and this is considered a great opportunity for companies to have their marketing information exposed to their target audiences. Additionally, Facebook users tend to enjoy content sharing and this has usually been done through the relationship network of users. This means Facebook‘s fast content 22
  • 33. distribution feature allows companies to get their messages transmitted to other potential customers by using their current customers as a medium of communication. Besides making personal connections, Facebook is a place where buying decisions are influenced through group interactions (Lee, 2010). So far, it appears that the popularity of Facebook gives the companies a good opportunity to address their information to more precise target groups due to the high amount of information customers are publishing about themselves on their profile pages (Usha, 2009). Also, online social networks help connect like-minded people which make it easier for companies to target and to tailor their market offerings and communications to the special preferences and behaviours of target segments. This could eventually lead to a form of stronger customer relationship (Philips et al., 2010). Szmigin et al. (2005) mentioned that the advent of this popular social network platform allows companies to enhance their performance of relationship marketing in two ways. Firstly, it offers an opportunity for interaction with potential prospects and secondly companies can observe and gain deeper understanding with the nature and content of community through such interactions. Companies, thus, can better extract wants and needs and the potential uses of the product so that they eventually create marketing offers expected to meet the needs of those members accordingly. Moreover, it is believed that brand communities not only provide marketers with insights about consumers but also contribute to new customer acquisition, loyalty reinforcement and increase demand for products (Muniz and Schau, 2007). 23
  • 34. What strengthens online brand communities in social networking sites like Facebook is its interactive communication; either between like-minded people, guest experts and beginners, or buyers and brand‘s managers. Apart from building relationship, interactive communication also gives members access to abundance of exclusive and free contents. These combinations are what keep and draw consumers back to the site on a frequent and regular basis (McWilliam, 2000). The intentions of members to revisit a certain brand‘s fan page could, thereby, be expressed as a form of loyalty (Shen et al, 2010). The recent study pointed out that customers think more positively about companies, where social media tool is in use as it provides another platform for the customers to express their opinions and feedbacks (Universal Mccann International, 2008). As one of its prominent features is a platform for people to share their views, preferences, and experiences, companies are not only able to gain feedbacks and ideas via such customer interaction but this platform also provides an advantage of ‗word-of-mouth (WOM)‘ marketing (Trusov et al., 2009). Word of mouth has always been the most effective form of marketing as people tend to trust their friends‘ opinions (Kozinets et al, 2010). The study of Harrison-Walker (2001) has proven the fact that customers prefer to be guided by information from friends and other personal contacts rather than a company‘s formal promotion mix. Accordingly, the nature of Facebook offers itself nicely in line with that WOM marketing purpose by catering a convenient way for suggesting other members and sharing information. Recent research shows that social networking people are more 24
  • 35. likely to ask for their friend‘s or other‘s opinion than ordinary internet users (Lee, 2010). Via a peer-to-peer interaction, it creates interpersonal ties which, in turn, influence members to commit to an organization (Kim et al, 2008). As conceived by Berry and Parasuraman (1991) and Morgan and Hunt (1994), ―Commitment is a necessary condition for developing ongoing long-term relationships‖. The relationships, developed among those within social networks, results in social and emotional bonds being formed and that create a sense loyalty. Sheth and Parvatiyar (2002) suggested that strong social bonds are difficult to be replicated by competitors. This relationship creates an entry barrier and potentially leads to sustainable competitive advantage. However, effectiveness of this new social media marketing option also depends on level and frequency of how the companies interact with customers. Despite all the advantages, using social networking sites can be a double-edged sword. Expert warned that it could backfire if the companies overused this communication channel. Arun Sundararajan, a professor of information, operations and management sciences at New York University once mentioned ―There is a fine line between giving people a steady stream of useful information and bombarding them. If you do the latter you are in danger of turning customers off‖ (Prentice, 2009). 25
  • 36. 2.5) Summary To briefly summarize, in today‘s fiercely competitive business environment, companies are adjusting their marketing strategies to be more focused on building a long-term partnership and loyalty as proven by many studies that loyal customers produce more profitable bottom-line profits. The marketing technique that is employed so as to deliver this ultimate result is called customer relationship management (CRM). With the advent of new digital technology and the internet, the channel of communication between companies and customers has been drastically changed. More and more customers seek for more information about the products of their interest through internet. Marketers, therefore, need to approach their targets through this preferred channel. Over the last few years, one of the promising medium that has become a centre of attention is Facebook; where a large and growing portion of some of the most valuable demographics are spending more of their time on . Facebook‘s simple feature of connecting and sharing with friends present a great opportunity for companies to develop promotional strategies that are more of a personal conversation with customers. Therefore, it is believed that strong customer relationships, in this case loyalty, can be established through the strategic use of this media channel. The notion of loyalty can be broadly defined into two terms; behavioural and attitudinal. Behavioural perspective only determines loyal consumer by his/her repurchasing activity while attitudinal approach emphasizes more on a psychological influence behind such 26
  • 37. actions. This research will focus on both theoretical explanations by describing that a loyal customer is the one who keeps repeatedly buying products from a brand and such behaviour must be underpinned by preferential attitude. To assist the analysis, an analytical framework; called The Loyalty Ladder, will be in use. By attempting to resolve the research question, it is important to have a defined research plan and appropriate methods to obtain relevant data as well as being fully aware of potential obstacles that might occur. Those aforementioned issues will be looked at in the following chapter. 27
  • 38. Chapter 3 RESEARCH METHODOLOGY
  • 39. 3) RESEARCH METHODOLOGY This research is aimed to investigate, analyze and develop an evaluation of the performance of social networking site ‗Facebook‘; serving as an effective marketing option to instill a sense of brand loyalty among targeted audience in cosmetic industry. The purpose of this chapter is to explain how the research is designed and the methods employed to collect relevant data as well as mentioning the limitations and constraints that either hindered or intervened with the result of data collection. 3.1) Research Philosophy This research began with a simple question: Can and how might Facebook be used to nurture brand loyalty among consumers in cosmetics industry? When undertaking a research, it is important to consider different research paradigms and matters of ontology and epistemology. Since these parameters describe perceptions, beliefs, assumptions and the nature of reality and truth (knowledge of that reality), they can influence the way in which the research is undertaken, from design through to conclusions. A research philosophy is a belief about the way in which data related with a phenomenon should be gathered, analysed and used. Three major research philosophies have been identified according to Saunders et al (2009), namely positivism, interpretivism and critical realism. 28
  • 40. Beginning with positivism, positivist relates to the philosophical stance of natural scientist. This entails working with an observable social reality and the end product can be law-like generalizations (Saunders et al, 2009). Although it allows researchers to use an existing theory in order to develop a hypothesis which then will be tested through various quantifiable methods, it does not discover the meanings people attach to social phenomena and understand social interactions. Positivists believe that knowledge can be described by the traditional scientific approach and consists of verified hypotheses that can be regarded as facts or laws. In this paper, the author aims to investigate a current phenomenon of Facebook marketing and people‘s attitude towards it. Thus this approach is considered inappropriate for this dissertation. Unlike the object, human behaviour is constantly changing over time, the end result could not deliver generalised conclusions as expected by positivistic approach. On the other hand, interpretivism argues that the social reality is far too complex to lend itself to theorising by definite laws in the same way as physical science. Interpretivists believe that knowledge does not only rely on observable phenomena, but also on subjective beliefs, values, reasons and understanding. It emphasizes the difference between conducting research among people rather than objects (Saunders et al, 2009). This approach allows researchers to explore an insight through various qualitative methods which the author finds it, somehow, works on certain aspects of this dissertation, especially to find out how and why Facebook marketing has become increasingly popular and people‘s feeling/opinion towards this current phenomenon. However, the author was aware that the truth is the conclusion of mind and prejudice of individuals. To be able to make this dissertation more 29
  • 41. convincing and credible, the need of firm statistical and other quantifiable data are still a major subject of concern. To be able provide a comprehensive knowledge to the research question, the author sought for an approach which gives way both quantitative and qualitative methods. The last standpoint, critical realism, believes that it is impossible for humans to truly perceive reality with their imperfect sensory and mental capacity and researchers can identify what we do not see through practical and theoretical processes. Also it is quite similar to positivism in that it assumes a scientific approach the development of knowledge (Saunders et al, 2009). Therefore, the philosophy that the author viewed as the most appropriate for this dissertation is critical realism because it involves the need for and possibility of critically evaluating existing theories. At the same time, this perspective acknowledges the human perception towards social reality. 3.2) Research Approach The research question posed above influences on choices of research approach as it will serve as a plan of how the paper will be carried out to answer the proposed research question. According to Saunders et al (2009), there are two broad methods of reasoning - inductive and deductive. An inductive approach works from specific observations to broader generalizations and theories. In this approach, the researcher would begin with specific observations and measure in order to detect patterns and regularities, formulate some tentative hypotheses that could be explored, and finally end up developing some general 30
  • 42. conclusions or theories (Saunders et al, 2009). Generally speaking, an inductive approach is aiming at theory building. However, the purpose of this dissertation is not building theories but more on testing theories. Hence, an inductive approach cannot be applied to the conduct of this dissertation. In contrast, a deductive approach works the other way, moving from the more general to the more specific. In this approach, the researcher would create a hypothesis based on theories and then develop a research strategy which would allow for the testing of hypothesis. Conclusion, thus, follows logically from premises (available facts) (Saunders et al, 2009). So to speak, a deductive approach is aiming at theory testing. Therefore, the methodological approach used in this dissertation will be deductive. The research began with the literature review, which consisted of academic articles, journals and theories to have an overview of what studies had been conducted and what the outcomes of those studies were. This therefore allowed the author to generate some research questions. Once the research questions had been decided upon, the following step was to decide on what the approach and the method would be when tackling the data. Finally, the author attempted to answer the research question by employing various data collection techniques to allow for better results obtained. 31
  • 43. 3.3) Time Horizons When planning a research project, there are two types of time horizons to choose either between cross-sectional studies or longitudinal studies. The first horizon is often referred as a ―snapshot‖ because the research is made at a particular point of time. This method is commonly used for research projects that have a time limit. The longitudinal time horizon is also known as the ―diary‖ perspective which observes people or events over time (Saunders et al, 2009). This dissertation follows the first horizon; cross-sectional studies, mainly because of the time limits that does not allow for a study over a period of time. Hence, the author would like to describe this research work as a ―snapshot‖. 3.4) Data Collection The research topic will determine what types of data are necessary for the study. Broadly speaking, there are two types of data; quantitative and qualitative (Saunders et al, 2009). To simplify these two terms, brief explanations are shown as follows; 32
  • 44. Quantitative (Establishing statistical reliability) This process utilizes detailed questionnaires often distributed to large numbers of people. Quantitative research collects a huge amount of data, which can often be generalized to a larger population and allow for direct comparisons between two or more groups. It also provides statisticians with a great deal of flexibility in analyzing the results. Qualitative (Gathering insights) This is typically a one-on-one process in which a researcher poses questions directly to an individual. The questions often ask not only for information and opinions but also allow the interviewer to probe the richness of emotions and motivations related to the topic. In order to solve the research question, the multiple methods will be in use. The quantitative data will be collected by a self-completion online survey, which will emphasize on the consumer´s perception about companies using Facebook as a new medium of communication, whereas, the qualitative data will be gathered through in-depth interviews with some marketers and managers in leading cosmetic companies. The interviews will mainly focus on how effective Facebook is to enhance customer relationship. By combining the two approaches, it will allow for some of the quantitative answers to be backed up by the qualitative answers, which in turn will give the researcher a better understanding of the research topic. Additionally, extensive use of internet and online database will further provide supporting information 33
  • 45. to this research. To further clarify the details of how all data will be collected for this dissertation, it can be categorized by the sources of information as follows; 3.4.1) Primary Data The primary data will mainly be collected through semi-structured interviews (qualitative) and a self-completion online questionnaire (quantitative). 1) Interview Interviews can be classified as followings; structured, semi-structured and unstructured. Structured interviews use a standardised set of questions in every interview conducted. This type of interview is more suitable for quantifiable data hence it is also called quantitative research interviews (Saunders et al, 2009). For this dissertation, the author aims for a qualitative outcome, thus structured interview is considered unsuitable. By comparison, semi-structured and unstructured interviews are less attached to the set of questions and often referred to as qualitative research interview. In a semi- structured interview, usually the interviewer would have a list of topics that should be covered. This type enables more flexibility and interaction between interviewer and interviewee, while unstructured interview is informal and allows interviewer to explore a more in-depth in an area of interest with no predetermined list of questions (Saunders et al, 2009). The problem with an unstructured interview is that there are no prepared questions. The author was unsure that the interviewee would be able to give a precise answer 34
  • 46. to the research question or to what the author were looking for. Hence, the semi- structured interview seems to be the most appropriate method. A list of questions to be covered is prepared beforehand as a guideline for the interview although additional questions may be required and these may vary from interview to interview. Managers and marketers from major cosmetic companies will be contacted and interviewed. The focus of the interviews will be on their past experience and attitude towards Facebook as a marketing tool for their relationship marketing campaign and to what extent this marketing technique delivers any satisfied outcomes and provides extended opportunities for their businesses. 2) Survey According to Saunders et al (2009), the survey technique is usually associated with the deductive approach and is most commonly used to answer who, what, where, how much and how many questions. To further analyse the research hypothesis, a self-completion online questionnaire will be sent out to the author‘s network community in Facebook and those who join online beauty communities. The content of the survey will mainly emphasize on the consumer‘s perception towards a company‘s new way of communication and to what extent their attitude and behaviour has been influenced by an experience through such virtual interactions. The questionnaire will be created and the data will be analysed through online survey software; surveymonkey.com. 35
  • 47. The survey was developed by looking at the literature review and relevant findings then channelling all the thoughts into what the research questions were to be. Once these were decided upon, they were broken down into different headings, allowing for certain questions to be grouped together in order to get a consistent flow throughout the survey. The survey was divided into 3 sections as follows; (For further information, see Appendix 1-3)  Section 1 : Personal Data This section is where the demographical details of respondents are collected. These include gender and age. The chosen age range (18-33) presented in this section is based on the proven facts by Williamson (2011) in literature review that it is the fastest-growing group of all age segments. This section aims to define gender and age groups related with the research which allows for comparison and reference.  Section 2 : Facebook usage This section looks at the frequency and purpose of respondents when using Facebook. The questions asked in this section were based on the followings; o Frequency of logins o Time spending o Activities that users are likely to do when logging on 36
  • 48. By asking questions along the lines of the above, it would be a way of getting to know exactly what users tend to use Facebook for and whether any of the above reasons stand out for a particular group of individuals.  Section 3 : Consumers’ awareness, motivation and attitude towards Facebook marketing This is the final section of the survey and will give participants the ability to address their views and perceptions on various aspects as follows; o Awareness of cosmetic brands‘ fan page on Facebook o Motivations for ‗Liking‘ any cosmetic brands‘ fan page on Facebook  List of answers is mostly based on the previous survey (Appendix 4) conducted by Williamson (2011). Thus this question allows for testing if the results would come out similarly to the original one. Participants who respond to this question also can be identified at which the level of the loyalty ladder they are. o Elements/activities of a fan page that interest fans (Ranking scale)  Some of the answers are based on Williamson and Maul (2011)‘s suggestions about what would drive more engagement between fans and brands while the rest of the choices test subjective norm. All participants were obliged to scale from 1st (the most interesting) to 7th (the least interesting). Each number is allowed for only one answer. 37
  • 49. This question is expected to find out which of the activities that would effectively engage customers the most. The outcomes can be used to support and prove whether the suggestions are accurate as well as to propose the future recommendations. o The likely changes of consumer‘s behaviour (Rating Scale)  This question aims to identify how likely it is that consumer‘s behaviour would change after engaging with the brand on Facebook. Respondents were asked to rate their agreement with the statements using likert scale from 0 (not at all likely) to 10 (extremely likely). The levels of involvement are categorized accordingly to the loyalty ladder (Mcdonald and Christopher, 2003). This allows the author to test if any interactions between brands and customers occur, it would get them move up to the higher level of the loyalty ladder, linking to Williamson and Maul (2011) who suggested that more engagement will drive a personal attachment between fans and brands. To compare the overall rating, the author adopted the measurement called ‗Net Promoter Score (NPS)‘, developed by Reichheld (2003), in order to gauge the loyalty of a firm‘s customer relationships (See Appendix 5). o Overall attitudes towards Facebook marketing. 38
  • 50. By answering all sections of this survey correctly, it is expected to generate a lot of interesting findings which can be quantified into charts and others to get a full grasp of to what extent Facebook can help cultivate a sense of brand loyalty between fans and brands. 3.4.2) Secondary Data To find secondary data, the author will use the internet extensively. Google.co.uk will be used as the main search engine to filter and find relevant websites on the internet. However, the author is well aware of the authenticity and validity problem of the data found on the internet and will therefore only use websites that the author deem credible. Furthermore, the author will use online databases such as Datamonitor and Emerald as well as online journal databases to find supporting information for this dissertation. 3.5) Samplings By undertaking a questionnaire survey, it is important to employ appropriate techniques to collect relevant data. With limited time and budget constraints, it was impracticable to collect data from the entire population. Therefore, a small, but carefully chosen sample can be used to represent the population. The sample reflects the characteristics of the population from which it is drawn. Sampling methods are classified as either probability or non-probability. 39
  • 51. With probability sampling, the chance, or probability, of each case being selected from the populations is known and is usually equal for all cases (Saunders et al, 2009). In this dissertation, the author was not able to know the total population, thus a probability sampling seems not to be most appropriate technique. On the other hand, non-probability sampling allows researcher to select a case from the total population which is not known and members are selected from the population in a non-random manner (Saunders et al, 2009). Non-probability method includes various types of sampling. Ones that the author employed to conduct this dissertation are shown as follows;  Purposive sampling : enables researcher to select the sample based on judgment (Saunders et al, 2009). The author chose cases that are considered best to answer the research question by manually selecting and sending out the survey to people in her Facebook network.  Convenience sampling : involves selecting those cases that are easiest to obtain for samples (Saunders et al, 2009). To get a gross estimate of the results, the author also picked ones that appeared to have the ease of filling out the survey. Once the questionnaire was distributed to all chosen cases, the sample selecting process is continued until the required sample size was reached.  Snowball sampling : relies on referrals from initial subjects to generate additional subjects (Saunders et al, 2009). The sense of sharing on Facebook enables members to easily share contents with one another and so does this 40
  • 52. survey. The author found that some of the primary respondents also passed the questionnaire along to friends in his/her Facebook network. 3.6) Limitations and Constraints The author has mostly faced several limitations and constraints during the process of primary data extraction. As the majority of respondents are expected to be Thai, the obvious limitation could possibly be the fact of language barrier. When completing the online survey, respondents might either be short in time or do not fully understand all questions. Thus they might not fill in the survey properly or might leave the survey without entirely completing it. This could affect the validity of information obtained by this internet survey. However, the author was well aware of this potential problem and in order to avoid it, the author has put the Thai translation in brackets next to all questions and answer options. Also, time constraint was considered a main obstacle. Due to a time limitation, the author was only able to find a limited number of responses which would be a threat to reliability. Another potential problem was the distance interview with experts. As, the author had no personal relationship with any of interviewees, it was expected that they were not likely to share any negative aspects of using this marketing tool or would say what they thought their superior wanted them to say, described by Saunders et al (2009) as the ‗good news syndrome‘. This political bias could influence the credibility and reliability of the outcomes. 41
  • 53. Moreover, ethical issues are also needed to be taken into account, especially when conducting a research related to personal ego. The author realised that some of the questions might be intrusive as they could identify a social class of respondents or level of income. For example, the question that asked respondents to choose the current cosmetic brands they use. Some respondents might not have chosen or answered the real brand that they currently use, instead they distorted the facts by selecting a mid-high label brands listed in available alternatives so as to reflect their high social status and luxurious personal taste. To minimize this limitation, the author provided additional comment field where respondents could put their own answers. Another example could be when participants responded to the question that asked for their motivations for ‗liking‘ a certain brand. Some might hesitate to admit that they became a fan of the brand, only for discounts or freebies, but opted for other choices that sounded less economically-driven. These ethical issues might affect the quality of outcomes. 3.7) Summary In this chapter, the author has stated how the research is approached. This includes looking at different research philosophies, research approaches and time horizons. Both quantitative and qualitative data are obtained in order to provide a firm support for further analysis. The means of data collection employed in this dissertation involve a survey questionnaire and semi-structured interviews with experts. Also, possible limitations and constraints are highlighted. The effectiveness and outcomes of methods applied will be shown in the next chapter. 42
  • 55. 4) ANALYSIS AND FINDINGS The purpose of chapter is to investigate and evaluate the effectiveness of Facebook as a relationship building tool. The results obtained from the author‘s own research and relevant findings will be used to critically analyze and ultimately answer the research question: “Can and how might Facebook be used to nurture brand loyalty?” This chapter will be divided into 4 sections;  The role of Facebook in cosmetic industry – To review how different major cosmetic companies utilize this social networking platform for their marketing purposes and how this online channel helps businesses to achieve their objectives.  Is ‘Like’ the beginning of brand loyalty? – To investigate the hidden motivations why people ‗Like‘ a brand‘s fan page and what the possible business implications are behind this ‗Like‘ activity.  Could Facebook help turning ‘Like’ to ‘Love’? – To examine whether Facebook has a likely opportunity to deepen a relationship between fans and brands and to what extent the current Facebook marketing activities help companies reach the ultimate goal.  What are the key elements to ensure success? – To explore the mind of consumers so as to discover what customers actually want out of this media channel and eventually offer practical solutions. 43
  • 56. 4.1) The Role of Facebook in Cosmetic Industry Nowadays, businesses still continue to utilize the world‘s most popular social media site; Facebook, as a part of their advertising campaigns. In fact, they are likely to designate more time, effort and even funds towards developing strong social media presence (Philips et al., 2010). Those businesses include leading beauty brands as well. Although it is very typical for cosmetic brands to hugely invest in traditional media and their own website - flipping through any women‘s magazines, it is inevitable not to bump into tons of beauty advertisements and free samples - Facebook has increasingly played a major role in their marketing, e-commerce and customer service strategies (Indvik, 2011). According to a recent report from Brand Keys; a world leader in customer loyalty and engagement metrics, showed that almost 75% of the top 50 loyalty leader came from three categories, which one of them is cosmetics (O‘Leary, 2010). As mentioned earlier, cosmetic and beauty consumers tend to be very brand loyal, as equally when it comes to online communities, site should have loyal followers and fans as well. Since 2008, major cosmetic brands have started to set up their fan page on Facebook. One of the marketing managers was interviewed about its expansion into Facebook, she said ―Our expanding Facebook community provides us with an engaged consumer group that understands our products and wants to learn about the future of our brands.‖ (Dey, 2010). 44
  • 57. Figure 4.0 MAC Cosmetics Facebook fan page Source : MAC Cosmetics Facebook (2011) One of the early leaders that has been voted as no. 1 cosmetic brand on Facebook is MAC Cosmetics (Dey, 2010). MAC global marketing manager said ―At present, Facebook is a platform for engagement and a community building, not sales‖. Currently, MAC is running at almost 2.2 million fans. The company frequently launches news alerts and articles about their new collections as well as interacts with their supporters to cultivate a sense of community on its fan page (MAC Cosmetics Facebook, 2011). (See Figure 4.0) 45
  • 58. Also there are some other leading cosmetic brands, which already created its presence on Facebook. Here are a few examples as follows (See Figure 5.0); Figure 5.0 Example of different cosmetic brands‘ fan page on Facebook Source : Benefit Cosmetics Facebook (2011) Smashbox Cosmetics Facebook (2011) Bobbi Brown Cosmetics Facebook (2011)  Benefit Cosmetics : Currently having almost 250,000 fans, Benefits often holds contest for its fans as well as receives rave or rant on any of their products (Benefit Cosmetics Facebook, 2011). 46
  • 59. Bobbi Brown : Bobbi Brown sporadically invites beauty bloggers for makeovers, workshops and product launches. Visitors can learn tips and tricks plus how to apply makeup in the Bobbi Brown way and participate in real-time live chat. (Bobbi Brown Cosmetics Facebook, 2011).  NARS : New products and upcoming events are frequently updated and posted in its fan page. Also the site offers online makeup tutorials and tips on how to replicate celebrities‘ looks (NARS Cosmetics Facebook, 2011).  Smashbox Cosmetics : Get trend alerts, how-to techniques, product launch info, free gifts and samples by visiting their Facebook page and signing up on their main website (Smashbox Cosmetics Facebook, 2011). For customers to interact with the brand and get access to all those exclusive contents, they only have to click the Facebook‘s ‗Like‘ button on a fan page. This ‗Like‘ widget represents a big opportunity. Apart from earning media exposure, it drives traffic, and earns consumer validation for the brand. When users click on the ‗Like‘ button, a few things happen beyond affinity being established. Their pages are added to their interests section of their Facebook profile, the page is shared out to the news feeds where it is visible to all of the user‘s friends, and now brands gain the ability to send updates to the user via their news feed. Social media marketers in general are fond of garnering more ‗Likes‘ for their Facebook fan pages, in hopes of either providing social proof through sheer number of fans or amassing subscribers to be fed announcements, promotions, offers, and contests. Nunthawan Laosinchai, brand general manager at The Estee Lauder Companies (Thailand), (Laosinchai, 2011), gave an example of the brand, Clinique, and 47
  • 60. explained how Facebook strategy works for her company. Clinique launched one of its bestsellers; the 3-step skincare, program via its fan page on Facebook. By clicking ‗Like‘ on the brand‘s fan page, registered fans were appointed to pick up their free samples at specific retail counters. In turn, they were also asked to fill out the follow- up survey with full contact details in order for the brand to keep individual records for its future customer base. Laosinchai (2011) said ―Sampling is not a new technique, but implementing it through Facebook, it provides the brand an ability to hear what people really think.‖ Also it helps bridging the gap between online and offline channels by turning those who participated online to join offline activities. And of course, it helps generate buzz marketing. After fans register, they can invite friends to do so as well. ―We experience a massive number of our online fans queuing up over our retail counter. This creates a strong spill-over effect on our potential customers and passers-by. By the end of that day, our total sales were boosted by 40%.‖ said (Laosinchai, 2011). However, quantity does not mean quality. So far, there are no clear evidences claiming the effectiveness of the ‗Like‘ tactics, in terms of both transactional and relational. When it comes to CRM, marketers should be aware of what it means when people ‗Like‘ their Facebook fan pages. Does it mean that they really like the page? The brand? The product? Or they are just being curious? The following section will look at what actually drives ‗Like‘ behaviour and to what extent is ‗Like‘ a sign of accomplishment? 48
  • 61. 4.2) Is ‘Like’ the Beginning of Brand Loyalty ? After investigating how different beauty companies utilize Facebook for their marketing purposes, it seems that this new marketing tool is very well-received measuring by an increasing number of fans. However, to become a fan is just simply clicking ‗Like‘ button, but does ‗Like‘ reflect what fans think or feel about the brand? By looking at the previous section, most of beauty brands employ similar marketing tactics to engage with target audiences. Although a continuous rise in number of fans is basically a good sign, it does not necessarily mean that these people are loyal customers. Without recognising the real motivations behind such behaviour, it is impossible to realise what actually triggers this phenomena and thus follower counts alone are a poor benchmark for determining whether a social media campaign is really influential. The recent study by Williamson (2011) found that there were other factors that mainly motivated customers to ‗Like‘ a brand apart from an emotional attachment or loyalty. Two out of the top three motivations are driven by discounts and other price incentives (See appendix 4). What can be assumed from this finding is that the majority of fans could easily be swayed by more competitive deals in price. This type of ‗Like‘ is purely based on a transaction, not a relationship. This behaviour, therefore, can be best described as spurious loyalty (Dick and Basu, 1994) or inertia loyalty (Bloemer and Kasper, 1995; Schiffman and Kanuk, 2010). 49
  • 62. Figure 6.0 Number of brands that people follow on Facebook Source : Wibbels (2011) Mentioned by Chaffey et al (2009) at the beginning of literature review that in order to be successful in this information-rich business environment companies should no longer base on features like price and quality alone. Today it is more the perceived experience a customer makes in various interactions with a company (i.e. how fast, easy, efficient and reliable the process is). Moreover, the different study shows that most of respondents do not particularly ‗Like‘ only one brand but approximately they follow at least 2-5 brands on Facebook (See Figure 6.0). 50
  • 63. Figure 7.0 Motivations for ‗Liking‘ a brand‘s fan page on Facebook Source : Self-conducted survey (2011) Figure 7.0 represents the outcomes of a self-conducted survey. The results came out quite similar to what had been done by Williamson (2011). Discounts and price incentives still play a major role, still, it comes behind the fact that most of the participants ‗Like‘ a fan page because they want to stay informed about the future products and activities of the brand. Another common response found in this survey is that many consumers will follow a brand if they are current customers. 51
  • 64. What can be drawn from this survey is that the ‗Like‘ activity is basically a way to express interests in a brand no matter what the underlying motivations are. Participants who ‗Like‘ a fan page, therefore, can be categorized as targets according to the loyalty ladder by Mcdonald and Christopher (2003). Also, the author believes that it is very likely that some of these targets might want to obtain more information from the brand. Hence, they are becoming prospects. For those who described themselves as current customers; either first-time or ex-customers, the author would like to identify them as buyers. Having looked back at the literature review, those three aforementioned rungs of the loyalty ladder are listed under ‘customer catching‘ stage. This has proven that ‗Like‘ is now highly effective at a level of customer acquisition. So far, there is no guarantee that this ‗Like‘ effect will last in the long-run. As a result of this analysis, the author comes to the conclusion that the ‗Like‘ activity on Facebook is only the very beginning of brand relationship. To support the analysis, Laosinchai (2011), ELCA‘s brand general manager said that ―Facebook can serve as another good relationship building tool as it has a lot of features that fits in with CRM. However, from my experience with this social media tool, I would say that it is still at an infant stage and currently works best at acquiring customers. To claim that it helps instill a sense of brand loyalty is just too early.‖ To briefly conclude, the amount of fans does not determine success. What tells us about people who ‗Like‘ a fan page is that they implicitly signify their interest and willingness to engage with future brand‘s communications. Nevertheless, to ensure 52
  • 65. that this relationship will last, it all depends on how effective companies utilize this media channel. The subsequent section will further explore whether there is an opportunity for brands to use Facebook as a medium to foster a deeper customer relationship. 4.3) Could Facebook help turning ‘Like’ to ‘Love’ ? If ‗Like‘ is the beginning of brand relationship, what should companies do to ensure that this relationship will be long-lasting? This section will find out whether Facebook experience could help increase customer loyalty. Referring to the notion of loyalty, the author will base all assumptions on the two-dimensional approach, proposed by Day (1969), that a loyal consumer is the one who will keep repeatedly purchase the brand and that behaviour must be accompanied by deeply held positive feelings. The recent study pointed out that customers think more positively about companies, where social media tool is in use (Universal Mccann International, 2008). However, it is still a subject of concern whether that positive attitude would affect consumer purchasing behaviour. Figure 8.0 demonstrates that approximately 97% of people who have experienced with a certain brand online are likely to make a purchase with that brand. A recent survey from Wibbels (2011) on ‗What happens when people follow a brand?‘ confirms that online brand engagement has strongly influenced people‘s buying decision. Over 40% said that they usually consider the brand when in the market for product or even buy products from the brand. Besides, an increase in sales, it also drives recommendations. About 40% of fans said that they usually recommend the brand to others (See Appendix 6). 53
  • 66. Figure 8.0 The influence of online experience on purchasing behaviour Source : Wibbels (2011) To test the above hypothesis, the author used self-conducted survey, aiming to examine how likely it is that consumer‘s behaviour would change after engaging with the brand on Facebook. Consequently, all participants were asked to respond to a 0-to-10 point rating scale on the question shown as follows; 54
  • 67. Assuming that you have participated with a certain brand’s activity on a Facebook fan page (e.g. ask questions, provide feedbacks/comments, play games/quizzes, etc.) and you have a satisfactory experience. How likely is it that you would do the following statements? A) Would you decide to make a purchase with the brand? B) Would you repurchase or buy more of the same product, if the need arose? C) Would you consider the same brand for future needs in different product categories? D) Would you recommend the brand to a friend? To analyze a set of collected data, the author will mainly base an analysis on the loyalty ladder model and partly incorporate with the customer loyalty metric ‗Net Promoter Score (NPS)‘, developed by Reichheld (2003). The logic behind the NPS calculation is that when customers respond to a 0-to-10 point rating scale, where (0) is ‗not at all likely and (10) is ‗extremely likely‘, customers are categorized into one of three groups; Detractors (0–6 rating), Passives (7–8 rating), and Promoters (9–10 rating). The meanings of these rating scores are shown below;  Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fuelling growth.  Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings. 55
  • 68. Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth. After calculating the data, the overall result turned out quite positive. The average rating of four answer options levels at around 7 (See Figure 9.0). The detailed explanations of each answer option will be demonstrated as follows; Figure 9.0 A likely change of customer behaviour after having a satisfactory online experience on Facebook (using the NPS measurement) Source : Self-conducted survey (2011) 56
  • 69. A) Would you decide to make a purchase with the brand? (Average rating = 6.7) The final result for this answer option came at 6.7. The value, between 6 to 7, based on the scale of NPS measurement, can be in both detractors and passives categories. However, the result of 6.7 is much closer to 7, this makes the author believe that it can potentially fall into a passives category. What the average rating score of 6.7 points out is that if companies put an effort to create a satisfactory online experience, this can eventually turn people who ‗Like‘ a brand to make an actual purchase. Regarding to the loyalty ladder, if people who ‗Like‘ a brand, referred in a previous section as targets and prospects, make their first purchase, they are now becoming buyers. Therefore, this outcome has proven that satisfactory online engagement could move consumers up to the higher rung of the loyalty ladder. B) Would you repurchase or buy more of the same product, if the need arose? (Average rating = 7.0) The final score ended at 7.0. This once again falls into a passive category. The author, thus, is reassured that online brand engagement can affect repurchase decision. Respondents who once decided to make their first purchase with the brand, again, are likely to make a repeat purchase if they are still happy with their experience on fan page. Consequently, online experience can 57
  • 70. potentially move the same group of people up to another higher step of the loyalty ladder and buyers are now turning into customers. C) Would you consider the same brand for future needs in different product category? (Average rating = 7.0) The same mathematical result as the answer option B) occurred with this alternative. What can be drawn from this positive figure is that if a brand still can provide a fulfilling Facebook experience to customers at the level where their need have been met or exceeded, they are likely to consider the brand for future needs and even try a broader range of products. Customers who consider buying greater lines of products, they are literally taking another step closer to the top rung of the loyalty ladder and this group of customers are now called clients. D) Would you recommend the brand to a friend? (Average rating = 7.2) The last answer option ended up with the highest average rating score at 7.2. This result indicates a likely chance that satisfactory online brand engagement will trigger recommendations; a brand‘s ultimate goal in accordance with the loyalty ladder. At this point, the same satisfied clients who start to make a referral, are now stepping towards the top of the loyalty ladder and becoming advocates; people who keep consistently buying and trying products from 58
  • 71. the brand as well as talking positively about it. However, without necessarily being current customers, ex-users or those with preferential attitude and knowledgeable party who openly promote the brand are also considered loyal. The latter are called supporters. After looking into the overall responses, the tested results proved that fulfilling experience on fan page can help customers ascend towards the top of the loyalty ladder or, generally speaking, flip their followers into loyal users. Therefore, it can be predicted that elements of a brand‘s fan page on Facebook has a potential performance to deepen relationship between fans and brands and eventually turn ‗Like‘ to ‗Love‘. However, the situation mentioned above will never happen unless brands can deliver what their customers actually want. In reality, things rarely go like how ones want it to be. Another question was conducted in order to gauge an attitude towards current marketing activities of beauty brands on their fan pages and it clearly shows that only 35.9% said that they found the current contents useful and interesting, while the rest have neutral feeling and even worse, they don‘t bother looking at it (See Figure 10.0). 59
  • 72. Figure 10.0 People‘s attitudes towards cosmetic brands‘ Facebook marketing Source : Self-conducted survey (2011) Most of respondents who answered ‗Don‘t bother looking‘ found that Facebook marketing is just another form of commercial advertisement, while some said it lacks of engagement and contains bad contents. Moreover, about 80% of total respondents said that they log on Facebook multiple times a day, of which over 40% visit a fan page only once a month or less (See Appendix 7 & 8). 60
  • 73. This statistical data reveals that current Facebook marketing campaigns fed to customers do not have wow factors as it fails to keep fans coming back to a fan page more often. There are several reasons that could contribute to this rather disappointing result. The author believes that one of the main reasons stems from the brands themselves that they cannot provide relevant contents to their audiences. Due to the Facebook bandwagon effects and its simplicity, marketers might rush to enter Facebook without having clear objectives and might oversimplify this extensive network. Being lured by massive number of potential customers, marketers might overlook some essential steps such as to clearly specify their targets and hence they cannot tailor the offers that suit their needs. So to speak, the brands do not know their community thus they cannot approach them in the right way. Without any appealing contents, fans are now playing the role of passive consumers who once clicked ‗Like‘, just to stay informed and hope that one day there might be some interesting contents popping up in their news feed. ELCA brand general manager, Laosinchai (2011), responded to these unpleasant figures ―I have to admit that it is not good news. However, it is too costly if we don‘t jump on this bandwagon. Like what I have mentioned earlier, Facebook marketing is still at its infancy and there are still a lot of lessons to learn. The best that we can do now is trying to understand what customers want out of this media channel and create marketing offers in accordance with the changing needs‖ In order to successfully turn ‗Like‘ to ‗Love‘ or cultivate a sense of loyalty, Williamson and Maul (2011) suggested that company should use ‗Like‘ wisely by aiming to drive more engagement, not just collecting fans. Instead of ―pushing‖ information to fans 61
  • 74. and hope that they might like it, companies should be ―pulling‖ information and what is expected from them. By serving what accommodates consumer preference, this will keep fans coming back to a fan page more often and that will eventually convert passive fans into active fans who will contribute more of their time mingling with the brand. Through continuous interactions, a sense of community will be ultimately established. The author believes that the element which is important to ensure a successful presence on Facebook is that brands and fans form a like-minded community where all benefit from each other. What can be drawn from this section is that Facebook can potentially help nurture a brand loyalty among consumers in cosmetic industry. Still, what brands are currently doing with their Facebook marketing do not deliver the desirable results. So as to improve the situation, the author believes that companies should strive to understand consumer preference. The last section will discover the mind of consumers and various elements which could probably make a brand‘s fan page more appealing. 62
  • 75. 4.4) What are the Key Elements to Ensure Success ? Without understanding the mind of consumers, companies will not only waste time, but also money doing what is not right. In the previous section, the survey shows that the majority of fans are not fascinated with their experience on fan page. This brings up another key question: what should marketers do to encourage ongoing involvement once a consumer has ‗Liked‘ a brand? Williamson and Maul (2011) suggested that the company should always be responsive and available to cater customers round-the-clock (e.g. ensure that all questions/requests have been answered or responded). Exclusive price deals still cannot be ignored. Rather than giving away high-value offers, although it encourages initial ‗Like‘, companies should try to lower their offers as smaller discounts promote loyalty among current fans. Additionally, providing a fan with a sense of exclusivity is also recommended. Moreover, asking simple questions that generate participation to get customers thinking about the brand is a good start. It is also advised that a mix in the use of other media channels helps engage. Video testimonials are particularly useful in making content personal and building trust (Indvik, 2011). In order to find out the hidden needs, participants were questioned in the survey so as to explore what customers actually want to see on fan page. As shown in Figure 11.0, what actually interests fans the most turned out to be product reviews and 63
  • 76. rating. Unsurprisingly, discounts and price deals came second and followed closely by exclusive contents. Figure 11.0 Popularity of each activity on cosmetic brands‘ fan page Source : Self-conducted survey (2011) To a certain extent, Williamson and Maul (2011) were right. Freebies and discounts will still be one of the primary drivers boosting traffic and sales. Still, the impact of friends and fans should not be overlooked. Research published by Harvard Business School professors, Gupta et al, (2009) proved that friends influence purchasing 64