ABSTRACT
Facebook, Twitter, Instagram and other social media sites have become part of the everyday life. To address the current trend, organizations are moving away from the traditional mode of marketing to manage their customers online, or to have a mix of both. The effectiveness of social media marketing cannot be understated as portrayed by the success of Starbucks; which went further to launch its own social media site – MyStarbucksIdea. Even though organizations have realized the need to use social media, they need to understand that the best approach is the customer generated content, where the customers engage in issues affecting the brand as the organization responds to their concerns promptly. This paper provides a summary of social media marketing and their implications on customer relations by analyzing Starbucks Corporation to give a relevant case on the success and challenges that might be faced. Further, it gives an analysis of the available content on three social media networks adopted by Starbucks. However, the research is limited to three sites – Facebook, Twitter and MyStarbucksIdea and the scope of the analysis looks at samples of the content available by backing it up with the existing literature review. Finally, the paper summarizes the recommendations that can be adopted by a company that would like to follow a similar path.
Social Media Marketing to Manage Customer Relationship: An Analysis of Beverage Industry – A case of Starbucks Corporation
Introduction
The concept of managing relationship has been in existence for nearly a century. However, in the late nineties, organizations realized the need to manage their customers better in order to improve sales (Soliman 2011). The current business environment is very competitive and, thus, it takes a good firm to maximize the benefits of a good customer relationship. The current customer management calls for a direct contact between a marketer and a customer, keeping customers and building long term relationships (Ismail et al. 2007). Further, the need for customer relationship management has necessitated firms to invent new ways of dealing with their customers and, therefore, making technological advances that ensure they are up to date with the needs of the customers (Jayachandran et al. 2005). Therefore, organizations have been forced to shift from the traditional marketing model where firms had the privilege of monitoring customer data by building a database of their current and prospective clients (Payne and Frow 2005) to a more interactive model by using the advancements in technology. At the center of these technological advancements is the use of social media. With a variety of social media platforms, firms have had to rethink how they relate to their customers as they no longer play a passive role. This is because of the recognition that organizations are fighting for the same customers who are informed on the available products on the market by a click of a button, say mobile phone and an informed society which can question and express opinions about an organization or product to a very large online audience and, thus, shape or break a company product or service (Schultz, Skiera, and Wiesal 2012, Gensler et al. 2013). Eventually, the marketing power is shifted to the customers (Labrecque et al. 2013). Nevertheless, social media offers companies a chance to maximize on the feedback from customers and sharing of product information even though customers have a challenge to voluntarily share information (Desouza et al. 2008).
In this paper, I will analyze the relationship between social media and customer relationship management by narrowing down to a marketing context. The analysis will focus on the beverage industry, with the application of Starbucks Corporation as a case study and pioneer in social medial marketing. The findings from this analysis will inform other companies on the benefits of social media as an effective marketing tool.
Literature Review
Customer Relationship Management (CRM)
Zablah & et al. (2004) discusses CRM in five aspects which include CRM as a process (engagement and relationship creation with the customers), CRM as a strategy (directing the company’s investment towards valuable customers), CRM as a philosophy (a long and well-thought process that puts the customer at the center of the organization), CRM as an ability (using the available and presented information about the customer to custom the organizational behavior to meet the expected customer needs) and CRM as a technology (integrating organizational systems to address customer needs. The systems include, among others, marketing, information and sales systems). These various points of view define CRM as an activity within the organization that takes care of the organization’s customers, its efficiency and the levels of knowledge management within the organization. Consequently, a good mix of these elements will ensure that the decisions made by the organization are in the best interest of the customers and, thus, improving its market share and the organizational performance at large.
Social Media
Kietzman et al. (2011) illustrate social media as a composition of the channels and the information disseminated when individuals and organizations interact. It is a technological product of the Web 2.0 that comprises of pictures, videos, text and networks that allow the creation and exchange of content generated by the user (Kaplan and Haenlein 2010). Having transformed a passive customer into a content generator, social media plays a significant role in marketing. In presenting this paper, I will limit the use of social media to micro-blogging services, enhancing social networks, customer and product location and forums for corporate discussions.
First, the most famous among the population, is the use of micro posts (status updates, messages and commentaries) (Gao et al 2012). Through social sites like Twitter and FriendFeed, users air their views freely without any constraint in correspondence as they use a structure where one follows another (Kwak et al. 2010). Second is the social networking sites which are defined by Ellison et al. (2007) as structured services that are provided in a closed system where users update and share their profiles among a list of other users whom they share a common interest (Gunawardena et al. 2009). Good examples of these services include Facebook and Myspace that organizations and consumers have found useful in their day to day mainstream interactions. Third, the rapid development of internet-enabled mobile devices has led to the provision of location-finder services that enable users to receive information tailored to their context and environment (Dhar and Varshney 2011). These services enabled by Google and Foursquare have changed the way mobile business works (Junglas and Watson 2008). Finally, Lopez-Nicolas and Molina-Castillo (2008) defined forums used for corporate discussions and analysis as channels organizations use for specific discussions and, thus, giving users an opportunity to analyze products and services (Maswera et al. 2006). Further, the forums act as an electronic word of mouth (Hennig-Thurau et al., 2004).
Social Media and its Impact on CRM
Regardless the generalization, the popularity and the sociability of social media, some people choose not to actively engage in Web 2.0 websites. There are limited studies in examining the reasons for not participating but on the other hand, one empirical research from Al-Dubai et al. (2013) found that the value gained from participation further leads to a continued participation of the users. The same positive result is shown in the study of interdependence between Facebook’s usage and students’ life satisfaction and social trust of students (Valenzuela, Park, & Kee 2009).
Further studies have indicated that it is important to ensure that trust is maintained between the organizations and its customers. With the uncertainty, easy accessibility and the entry of the internet, (e-commerce) there is a perceived risk that social media is an unreliable, manipulative and dishonest marketplace or platform, which further address the importance of developing trust among customers. There is a further suggestion that consumers will not pay attention to everything the company promotes and claim and eventually turn away when there is an issue in trusting a brand from its social media performance and, thus, it is important for a brand to communicate sincerely and transparently. With the study concerning loyalty, Reichheld & Schefter (2000) recommend that a company should act in customers’ best interests in order to earn trust. It has to carefully consider and be aware of the posts uploaded. To put this, the company should ensure realistic communication and make a lot of information available which could be verified in real term as promised, like providing a real product image with truthful description, on its media sites to show their reliability of every post on social media site and to engage customers as they are better informed. A research by Mangold & Faulds (2009) indicates that consumers would discuss the brand more when they are well informed and are confident with its trustworthiness. Moreover, research by Grönroos (2000) suggests that effectively and sincerely responding to customer complaints and inquiries, as well as asking consumers about their preferences and views on the social media platforms, is crucial in leading to the development of trust and hence long-term relationship and, thus, a company should deal with customer feedback actively. According to Reichheld & Sasser (1990) and Thatcher & George (2004), when a long-term relationship is successfully grasped, both consumer loyalty and the likeliness of them advising the brand within their network increase.
According to Statistica.com (2015), there are 1.79 billion users of social media, with the United States having 73% of its population connected to a social media site. With roughly 1.5 billion Facebook users and 307 monthly tweets, social media has embedded its essence in the current marketing environment. Therefore, organizations have been faced with a good platform to get to and manage their customers, increase revenue and efficiency and reduce costs. Social media. As the findings in this paper will show, organizations that are effectively utilizing social media have everything to gain and, therefore, the research will address this question: How can firms manage the customer relationship online better? What are the benefits and challenges?
Methodology
The focus of this study is on qualitative data developed by scholars in the field that analyze how social media has helped Starbucks develop and maintain its relationship with its customers and, thus, being a market leader in the coffee segment. According to Stake (1995), qualitative data allow for a rich analysis of the available data. Further, I will analyze the available content on Starbucks use of social media (Facebook, MyStarbucksIdea and Twitter) and relate it to its use and effectiveness over time in enhancing customer relations. Similarly, I will employ the SWOT (strengths, weaknesses, opportunities and threats) that are faced by Starbucks in their quest to maintain its social media presence and, thus, manage customer relationships appropriately.
The use of Starbucks as a case study was necessitated by the online presence of as the best beverage company that effectively employs social media to relate to its customers. According to a study conducted by Phase One in 2012, Starbucks was ranked as the best socially-engaged company. Further, studies by Dachi Group ranks Starbucks as the 36th most effective company within the U.S in the use of social media. The distinction between Starbucks and other companies is that whilst other companies use social media as a marketing tool, Starbucks uses it to enhance customer relationship and experience and, thus, is guided by the following ten principles: listen, be transparent, use authorities, timely information sharing, being human, offering personal attention, being humble, not preaching, fans have full access and without spam.
In reviewing the presence of Starbucks on the social media networks, I will record the observed content and then analyze then randomly analyze the engagement between Starbucks and the customers, with a leaning towards customer responses. Further, I will use the available content in terms of numbers and nature of information shared by both parties to review the relationship between the company and the customers. However, the methodology has a limitation as it will use data that seems relevant in enhancing the customer relationship and data available in English.
The Case: Starbucks
A coffee house that humbly started in Seattle in 1971, Starbucks has grown and is still growing, with a current estimate of 21,366 stores across the globe (Statista 2015). At some point, before 2008, Starbucks had weekly visitors of 60 million across its outlets. However, without a good strategy, there was a likelihood of dipping sales (Michelli 2007) which later came to be as York (2010) highlights Starbucks’ reduced earnings for the period April – June 2008. This red flag was Starbucks’ waking point. Therefore, in the second half of 2008, and with the rising competition from other food and beverage companies like MacDonald’s and Dunkin’s (Schultz and Gordon 2011), Starbucks launched itself on social media as a way to create connection with its customers. That’s when MyStarbucksIdea was launched which later won the award from Forrester Groundswell (Bernoff 2008).
Findings: Starbucks’ Social Media Presence and Content Analysis
Allowing organizations to connect with current and prospective customers through discussions, events, wall posts and polling, Facebook is the most popular social media site worldwide. For instance, Starbucks’ Facebook page has over 36 million likes and as of February 11, 2016, close to 350,000 people were having a conversation about Starbucks. Starbucks and Facebook share a mutual benefit, that is;
1) Starbucks engages a Megaphone function by using Facebook to communicate and share content with the public. The content shared includes, but not limited to, updates fans via a users’ news feed, including promotions (e.g., Free Pastry Day), cause marketing (e.g., Love Project, Day of Service), firm-posted videos and images, discussions on topics Starbucks wants to encourage, provides a platform to share photos, video, and news of upcoming events and shares a link where patrons an upload an update their credit card details;
2) Starbucks uses Facebook to attract new customers and initiate dialog between the existing ones by using a function called Magnet and, which, draws praise, complaints, support requests, and product suggestions, focuses attention on the firm’s wall, where content can be managed, lets customers comment on Starbucks’ messages in user news feeds and provides an easy way for customers to opt-in to Megaphone messages;
3) Finally, Starbucks uses Facebook to monitor the social media behavior of the consumers, bringing to its own attention different interactions of the consumers. It manages to mediate those interactions both in public and private, depending on their nature. Further it measures exposure, showing user activity and demographics, and demonstrating campaign-related actions (e.g., click-throughs, page visits or “Likes”), indicates trends involving users who ignored content or who have chosen to stop following as a fan, catalyzes consumer-to-consumer conversation, with “Likes” and news feed comments visible in a fan’s friend base, generating more conversation and stimulates discussion among users where everyone can see and comment on the wall posts that are made within the forums. Further, to ensure Startbucks engages its customers fully, it lets them participate in the introduction of some of their new products or packages as illustrated in the figures below.
Figure 1
Figure 2
Figure 3
In using the knowledge from customers on Facebook, Starbucks will understand the behavior of customers, their preferences and expectations and how the customers react to new products (The Nikkei Weekly 2010).
A very popular microblogging site, Twitter allows for real time sharing and responses as it limits the number of characters one can post. This ensures that whatever an organization posts, it has to determine its relevance and, thus, the most important point is likely to be highlighted. The current Starbucks Twitter account (February 11, 2016) has 11.5 million followers, more than 59 thousand tweets and 100 thousand people following (Starbucks 2016). Such a massive reach gives Starbucks an opportunity to utilize this site to their advantage, which they have. The customers are well engaged through the presentation of recipes, new and improved products and services. Also, satisfied customers have the opportunity of sharing (retweeting) their experience with the company. Similarly, Twitter has got everyone talking about Starbucks, with an average of 10 tweets per second mentioning the brand. Also, the personalized messaging on their cups has had everyone talk about it, posting pictures and re-sharing tweets. Rumors and speculations have also been brought forth to Starbucks through Twitter as York (2010) indicated, Starbucks was rumored to fund the war in Israel. However, no amount of response, though having been good from Starbucks, has been able to let the rumor fade as people are still talking about it as illustrated in the figure below.
Figure 4
The above speculation, though dismissed as a rumor, has dogged Starbucks for more than 5 years now and, therefore, posing a challenge of bad negativity and, in extreme cases, boycott of the brand.
MyStarbucksIdea
MyStarbucksIdea is a corporate discussion site launched by Starbucks in 2008 as a channel for question asking, offering new ideas and venting out any frustrations that customers may be harboring. In its first 2 months, customers contributed 41,000 ideas (York 2010). Customers who contribute frequently are encouraged through a reward system (Sigala 2012). MyStarbucksIdeas has been used as a good case study and a success story in crowdsourcing. To date, 170,000 ideas have been submitted, reviewed and analyzed, with 300 of them adopted by Starbucks. This site qualifies as an effective marketing tool and a customer relationship management tool that strives to put the customer first. The figure below shows some of the ideas already adopted by Starbucks.
Figure 5
Discussion
From the above analysis, it is clear that Starbucks is a major player in the beverage industry thanks to the effective use of social media. In deploying a wide range of social media tools to maximize the customer experience and relationships, Starbucks not only produces the best for its customers, but also ensures that the customer needs and ideas are taken care of. By virtue of having dedicated staff to manage social relationships in these media platforms, Starbucks rates ahead in its monitoring mechanism and, thus, gets to know matters affecting customers on the ground and in real time (Castellanos et al. 2011; Salomann et al. 2005). This integrated approach towards social media further enhances the impact (West 2012). Further, Starbucks has changed the traditional perception of a customer – from the passive customer to an active one whose innovative ideas are considered (Sigala 2012). This kind of a work-together attitude enhances the customer loyalty (Chua 2011). Ideas as illustrated above and others like
The introduction of products like the “Mocha Coconut and Coconut Cre`me Frappuccino blended beverages” and “Have a Starbucks Calendar available on the website to let us know about” are some of the innovative ideas that have been driven by the customers. Other than the relationship created, Starbucks has been able to expand its business and, therefore increasing its revenue.
Furthermore, the success story in Starbucks social media influence and leadership in customer relationship and experience can be attributed to the following factors:
1) Starbucks prides itself in building on current relationships as a satisfied customer is able to influence another in the long run. Such emphasis on customer service, together with good online engagement helps influence the customer market.
2) Starbucks active online participation encourages customers to share good experiences and promotions and, therefore, putting the organization more visible from the perspective of the clients. The many likes and shares on Facebook and Twitter spill over to reach new customers.
3) Starbucks’ reward system further promotes customer experience and relationship as a customer can be rewarded for sharing a Starbucks moment online.
4) All Starbucks updates are shared across the social media networks and, therefore, provides an opportunity to reach different groups of customers further promoting and marketing the brand and giving customers a reason to use their products.
5) Starbucks’ engagement with its customers is also on a social responsibility front. For instance, the “one campaign (one person, one cup and one neighborhood)” is a social media campaign geared towards uplifting the society and, thus, bringing the element of societal care.
Implications and Recommendations
Social media allows organizations to take advantage of the large online community to gain a business advantage by looking at the success of other players within the industry. A firm interested in social media marketing can compare the success by using the available online data on their competitors’ social media pages over time to gauge the response and analyze the successes (and challenges). With this in mind, organizations should be able to have the internal capacity, even by having a social media department, that will monitor the trends and come up with creative ways of engaging people online. Further, the same department will be in charge of maintaining the organization’s online (social media) presence. In this regard, for an organization to ape its peers in the beverage industry, the following recommendations should be put into practice:
a) For social media to be a success, an organization should thrive to diversify in its social media networks by riding on existing channels (e.g. Facebook and Twitter) and building their own internal social media networks to encourage online discussions.
b) Working with the customers to create a brand is essential in maintaining customer relationships. This is because ideas generated by the customers and adopted by the company not only increases the organization’s revenue but also diversity in brand.
c) A customer is not the everyday walk in customer whose data a company collects and tries to figure out, through a trend analysis, what improvements are required, but rather engaging the same customer to influence both internal and external branding.
d) Monitoring of the social media content and providing instant feedback to the customers is essential in managing customer relationships.
e) Daily and relevant updates full of infographics help create a discussion online, which is promptly monitored will help an organization gain an edge in its pursuit for better customer relations and, therefore, improved output.
Conclusions
It is not easy to separate social media from the customers and, therefore, it is up to the organizations interested in improved marketing to manage social marketing appropriately in order to increase customer base and, consequently, the revenue. The current customer is not passive, but rather one who should be engaged to drive the company forward; a strategy that Starbucks has employed to maintain its lead in social media marketing in the beverage industry.
The scope of this paper is limited to the benefits and some challenges that Starbucks has faced in its social media marketing (only on Twitter, Facebook and MyStarbucksIdea). Further, the paper is limited given the amount of data collected from the aforementioned social media networks. However, the literature available and discussed within the study shows a trend that social media marketing, if applied properly has more benefits than challenges. Therefore, it is important that organizations in the beverage industry to re-analyze their marketing strategies, specifically the social media strategies to ensure customer relationships are well managed as they will drive their growth.