Effects of traditional advertising and social messages on brand-building metrics and customer acquisition

Voor de 'Insights Scientist van het jaar' award zijn de artikelen gebundeld in de publicatie MOA Topic of the Year 2018: Digital Advertising. Dit keer de studie1 van Lisette de Vries die gekeken heeft naar verschil in effecten van traditionele vormen van reclame en berichten op social media op het merk en op het verwerven van klanten.

Authors: Lisette de Vries, Sonja Gensler & Peter Leeflang

Abstract

This study examines the relative effectiveness of traditional advertising, impressions generated through firm-to-consumer (F2C) messages on Facebook, and the volume and valence of consumer-to-consumer (C2C) messages on Twitter and web forums for brand-building and customer acquisition efforts. The results show that traditional advertising is most effective for both brand building and customer acquisition. Impressions generated through F2C social messages complement traditional advertising efforts. Moreover, firms can stimulate the volume and valence of C2C messages through traditional advertising that in turn influences brand building and acquisition. The results can help managers leverage the different types of messages more adequately.

Introduction

Every year, Dutch firms invest about one billion euro in traditional advertising (e.g., television, radio, print, and outdoor) to build their brands and increase sales. Yet, empirical evidence suggests that firms are gradually shifting their traditional advertising investments to, for example, social media to pursue similar objectives. In particular, many firms have established a social media presence by operating pages on social networking sites such as Facebook. Firms post messages on these pages to interact with consumers by exploiting the network structure, and to ultimately build the brand and stimulate sales (de Vries, Gensler, and Leeflang 2012). We call these posts, which a firm originally initiates on social media, firm-to-consumer (F2C) social messages.

To leverage these messages, managers need to know how effective F2C social messages are for building the brand (impacting brand awareness, consideration, and preference) and influencing consumer behavior (customer acquisition). Previous research shows that F2C social messages have a positive effect on existing customers’ expenditures (e.g., Kumar et al. 2016). However, we lack knowledge about the effectiveness of firms’ social media activities in comparison to their traditional advertising investments. Moreover, we know little about potential complementary effects of F2C social messages and traditional advertising (Kumaret al. 2016). Such knowledge is, however, critical for managers to leverage and orchestrate traditional advertising and F2C social messages effectively. Additionally, previous studies focus on the impact of F2C social messages on existing customers’ behavior, but do not investigate the potential impact on new customer acquisition.

Next to a firm’s own efforts to build the brand and affect consumer behavior, it is well-known that messages initiated by consumers influence other consumers (e.g., Babić Rosario et al. 2016). Such messages can be product reviews but also messages posted on forums, microblogs (such as Twitter), brand communities and other social media sites. We call messages, which are initiated by consumers and targeted to other consumers, consumer-to-consumer (C2C) social messages. Managers need a clear understanding of the effects of C2C social messages on the brand and consumer behavior relative to the impact of their own efforts. Moreover, managers need to know whether their own communication activities affect C2C social messages since this would allow them to exert some influence on what consumers say about the brand. Some studies compare the effective-ness of traditional advertising and C2C social messages. The results of these studies indicate that C2C messages are more effective than traditional advertising at generating sales (e.g., Trusov, Bucklin, and Pauwels 2009). Moreover, C2Csocial messages and traditional advertising work complementary for enhancing sales (e.g., Fossen and Schweidel 2017). Overall, these studies suggest that C2Csocial messages may be more effective than traditional advertising in stimulating sales and acquisitions. Yet, we lack knowledge on the relative effectiveness of traditional advertising and C2C social messages to build a brand.

Very few studies consider F2C social messages ánd C2C social messages. Comparing F2C and C2C social messages, Goh, Heng, and Lin (2013) find that C2Csocial messages are more effective than F2C social messages for evoking apparel purchases. Kumar et al. (2013) show that F2C social messages lead to substantial more C2C social messages that in turn affect sales of an ice cream store. The study shows the viral capacities of F2C social messages, and that different types of social messages can enhance one another. Overall, the studies on F2C social messages provide scattered insights into the relative effectiveness of these messages on behavioral outcomes and do not provide any insights into the relative effects on brand building.

The discussion of previous studies shows that there are two major gaps in the literature: (i) no simultaneous assessment of the relative effectiveness of traditional advertising, F2C, and C2C social messages, and (ii) a lack of knowledge of the effects of these messages on brand-building metrics. The aim of this study is to close these gaps by contributing to the extant literature in two ways. First, we consider traditional advertising, impressions generated through F2C social mes-sages, and C2C social messages simultaneously. This allows us to compare their effectiveness relative to each other, and to elaborate on the complementary effects of and interrelations among traditional advertising, F2C impressions, andC2C social messages. This is important as these different types of messages are omni present today and are likely to affect consumers simultaneously. Second, we take both brand-building and behavioral metrics into account to assess the effectiveness of the different messages over time. Current studies only consider behavioral performance measures thereby simply treating intervening processes as a black box (Srinivasan, Vanhuele, and Pauwels 2010). Accounting for brand-building metrics, however, allows examining both indirect and direct effects of messages on customer acquisition (Bruce, Peters, and Naik 2012). Considering brand-building metrics next to behavioral metrics helps managers to get a better understanding of the full effects of the different messages. Using brand-building and behavioral metrics allows for addressing current calls for considering multiple performance metrics at different levels to derive more insightful managerial implications (Katsikeas et al. 2016).

Accordingly, our study is more comprehensive compared to previous studies and allows for richer insights that help managers to orchestrate the different messages effectively. Since previous studies only provide scattered insights into the relative effectiveness of the different messages, it is difficult to provide expectations beforehand. We, thus, refrain from formulating propositions. We rather provide empirical insights into the relative effectiveness of the different message types (i.e., traditional advertising, F2C, and C2C social messages) on brand building and behavioral outcomes, and the interrelations among these messages.

Empirical application

We collected a unique data set from a European telecom firm (which maintains contractual relationships with consumers) and Nielsen, containing weekly data on traditional advertising, F2C, and C2C social messages over 119 weeks. We also have weekly information about brand-building metrics and customer acquisition. The data period ranges from week 30 in 2011 to week 44 in 2013, with all data reported on a weekly basis. Table 1 contains a detailed overview of all variables, their descriptions, measures, and sources.

The traditional advertising measure comprises the firm’s joint expenditures on television, radio, print, and outdoor advertising. F2C social messages are represented by the number of impressions of firm-initiated messages on Facebook based on likes, comments, and shares of the firm’s original messages. The impressions provide information about the spreading of a firm’s message. We consider Facebook since it is the firm’s main social media platform to communicate with consumers. C2C social messages consider the number (C2C volume) and valence (C2C valence) of messages initiated by consumers about the firm on Twitter and the most popular forums in the country the focal firm operates. By taking C2C social messages on Twitter and forums into account, we cover the majority of C2C social messages about the focal firm. A third-party organization gathered data on different brand-building metrics related to the brand: unaided brand awareness, consideration, and preference. Customer acquisition is the number of newly acquired customers per week.

Several other factors could also affect the brand-building metrics and customer acquisition. Namely, we consider promotions, media and buzz events, holidays, and competition as control variables.

Table1DescriptionofVariables

Econometric model

We are interested in the effects of traditional advertising, F2C impressions, andC2C social messages on both brand building and customer acquisition over time, and the interrelations among them. Thus, we need to employ a method that allows for considering these complex (inter)relations. We use a vector autoregressive model with exogenous variables (VARX). We focus on the cumulative effects (i.e., short- and long-term effects) of the different messages over time and compute elasticities with impulse response functions. This way, we are able to compare the relative effectiveness of traditional advertising, F2C impressions and C2C social messages.

Results

The results show that the different messages are effective in building a brand, in terms of awareness, consideration, and preference, and enhancing customer acquisition (see Table 2). Table 2 shows the elasticities as well as the week in which the effect first occurs (wear-in) and when the effect dies out (wear-out). When comparing traditional advertising, F2C impressions and C2C social messages, we find that traditional advertising is most effective in creating awareness (elasticity = .024) and consideration (elasticity = .022) (see Table 2). A potential reason for traditional advertising’s effectiveness with respect to awareness might be that traditional advertising is broadcasted via many different channels what contributes to its large reach (Tellis 2004). Combined with its large reach, traditional advertising seems to inform consumers about the brand and its offerings. Consumers are able to evaluate whether the brand or product fits their needs and in this way traditional advertising influences consumers’ consideration sets. We, furthermore, find that F2C impressions are effective in creating consideration but the effect is much smaller than the one of traditional advertising (elasticity =.007 versus .022 for traditional advertising). Consumers seem to consider the brand simply because people they know talk about it.

Only C2C valence (ratio for positive and negative messages) affects preference significantly (see Table 2 – elasticity = .042). The reason might be that C2C social messages target consumers who are interested in a product category and search for product information (Lu et al. 2014). C2C social messages usually emphasize consumers’ product experiences, which support evaluations of different alternatives (Lu et al. 2014). The higher credibility and the unique type of information that is provided compared to traditional advertising and F2C impressions, might make C2C social messages more helpful for consumers to evaluate and assess the brand and its offerings and to impact preference (Gilly et al.1998). A potential reason for the insignificant relation between traditional advertising, F2C impressions and preference might also be that consumers are less receptive to these messages since they primarily follow different activities; such as consuming a movie while watching TV or connecting with friends on social media. They might be less likely to deeply elaborate on the messages, which might limit their impact on preferences.

Our study shows that traditional advertising is most effective in generating acquisition (see Table 2 – elasticity = .202 versus .103 for F2C impressions, and.056 for C2C volume). Traditional advertising’s reach and the provided information seem to help consumers to make their final purchase decision (Sethuraman,Tellis, and Briesch 2011).

Moreover, we find indeed that different types of messages affect one another. The interrelations among traditional advertising, F2C impressions, and C2C social messages are presented in the lower part of Table 2. We find that an increase in F2C impressions increases traditional advertising in the subsequent weeks (see Table 2 – elasticity = .223), whereas an increase in traditional advertising decreases F2C impressions (see Table 2 – elasticity = -.345). These results suggest that the times series of traditional advertising and F2C impressions move asynchronously; peaks in traditional advertising follow peaks in F2C impressions. Personal conversations with marketing managers of the focal firm actually confirmed this firm behavior. As one marketing manager mentioned in a personal conversation, the focal firm coordinates its marketing activities across the different channels (i.e., social media and traditional advertising) based on their understanding of the market. Another marketing manager exemplified that they believe that social media is very effective for the target group and might influence the effectiveness of traditional advertising positively. Therefore, they initiate marketing campaigns on social media followed by investments in traditional advertising. We moreover find that traditional advertising positively affects C2Cvolume (see Table 2 – elasticity = .037), confirming previous research showing that a firm’s advertising messages spur online messages among consumers (e.g., Fossen and Schweidel 2017; Hewett et al. 2016). Hence, the firm’s advertising stimulates consumers to talk about the firm to others. Moreover, consumers who do talk tend to react favorably to traditional advertising as traditional advertising increases the valence of C2C social messages (see Table 2 – elasticity =.096). Additionally, we find a negative elasticity from valence of C2C social messages to F2C impressions (-.265). There might be multiple explanations for this effect (e.g., no spillover effect between platforms, the firm does not react to favorable C2C social messages in their F2C social messages). Unfortunately, we cannot explore the specific reason based on our data.

table2cumulative

We also find evidence for some feedback effects and discuss the most interes-ting ones (results are not reported in Table 2). Improvements in acquisition leadto more F2C impressions (a 1% increase in acquisition leads to .239% moreimpressions), which could be caused by increases in the number of consumerswho like the brand and become active user of the page – at least temporarily.Moreover, awareness positively affects the volume and valence of C2C socialmessages; a 1% increase in awareness leads to .028% increase in C2C volumeand a .129% increase in C2C valence. This result suggests that traditional adver-tising also indirectly affects the volume and valence of C2C social messagesthrough awareness.

Managerial Implications

This study offers four important managerial implications. First, traditional adver-tising is still an effective medium to build a brand and to enhance customeracquisition. If managers consider shifting marketing investments from traditionaladvertising to other types of messages, they should take its costs but also effec-tiveness into account. Our results further suggest that F2C social messages cancomplement traditional advertising efforts if they spread through the social net-work. Overall, traditional advertising and the firm’s social media page are powerful means for brand building and customer acquisition. Thoroughly orchestratingtraditional advertising and F2C social messages might improve a firm’s perfor-mance. Second, investments in traditional advertising prompt more and morefavorable C2C social messages. The positive impact of traditional advertising onthe volume and valence of C2C social messages allows managers to exert greaterinfluence on the ‘echoverse’ and, finally, on critical performance metrics (Hewettet al. 2016). Third, the positive feedback effect of customer acquisition on F2Cimpressions suggests that newly acquired customers engage with the brandthrough social media and leverage the firm’s marketing efforts. Fourth, for mana-gers it is useful to track the effects of traditional advertising, F2C impressions,and C2C social messages on both brand-building and behavioral metrics. Moni-toring brand-building and behavioral metrics leads to insights that help mana-gers to orchestrate and leverage different types of messages more adequately.

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1.This is a short version of the article: Effects of Traditional Advertising and Social Messages on Brand-Building Metrics and Customer Acquisition by Lisette de Vries, Sonja Gensler & Peter S.H. Leeflang (Journal of Marketing, 2017)

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