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Impact of User-‐Generated Content on Retail Entities
by Victoria C. Gregory ICE Research Analyst
ICE — Interactive Communications Enterprises
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Table of Contents
I. Letter Proposal II. Executivie Summary III. Research Report a. Understanding User-‐Generated Content b. UGC: An Economic Phenomenon c. Roadmap to generate positive UGC i. Facebook ii. Twitter iii. SEO iv. Customer Reviews d. Case Studies
IV. Appendices and References
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ICE — Interactive Communications Enterprises Memorandum To: Jim Porter, President of ICE From: Victoria C. Gregory, Research Analyst Date: 13 March 2012 RE: A proposal for Victoria Gregory to research the economic impact of user-‐generated content (UGC) on retail businesses. I hypothesize that this research will demonstrate the heavy influence user-‐generated content has on a consumer’s purchasing behavior. Understanding and identifying this influence will allow ICE to show their clients how to propel positive UGC that will ultimately increase revenue and drive conversions.
Purpose & Significance
“A brand is not what we tell consumers it is, it is what consumers tell each other that it is. (Brant Barton)” The words of Brant Barton are relevant to retailers in the current marketing climate, now more than ever. Implementing UGC to boost sales and increase conversions has always been a strong desirable for retail companies. However, doing so is a tricky process. Many companies have had failed attempts, or worse, have been caught in illegal efforts to create UGC themselves. ICE strives to understand this relationship at the core, and offer a solution for companies to propel the quality and quantity of positive UGC relevant to their brand or retail entity. Web 2.0 has allowed for users to disseminate their thoughts about a product or brand; this technology produces either positive or negative repercussions for the retail company at hand. What holds to be important is to acknowledge the presence of UGC, and the fact that it will only quantify with time as social media platforms increase in number and gain a larger user base daily. Retailers need to understand how to increase the amount of positive UGC and decrease the amount of negative UGC. In essence, retailers must understand the intricate relationship between social exchanges (UGC) and economic exchanges (retail purchase in-‐store or eCommerce) in the online world (Ghose, 2).
Figure 1 This image chronologically shows the influence of UGC on purchasing behavior. In Social Media Marketing: The Next Generation of Business Engagement, this image is referred to as “The Social Feedback Cycle” (Evans, 5). “This loop – from expectation to trial to rating to sharing the actual experience – is now part of most
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every purchase or conversion process… What [it] really represents is the way in which Internet-‐based publishing and social technology has connected people around business or business-‐like activities” (Evans, 5). This new connection is what influences an end user to make a particular purchasing decision. Through this research project, ICE will understand this relationship, and thus find ways for retailers to see a greater amount of such end results. Deliverables
• Roadmap for retail companies to propel positive UGC. • Case studies of retail companies that have a rich amount of positive USG in
correlation with strong sales and conversion rates. • Implementation of accountability and measurability of retailer’s products. • Understanding UGC on several online platforms (i.e. eCommerce site,
Facebook, Twitter, Pintrest, etc.).
Client
The results of this research project are relevant to all retail companies. However, results are most applicable to retail companies with eCommerce and an established online presence in social media and LBS platforms.
Methodology/ Plan
Conduct secondary research through exploration of scholarly articles, white papers, published books, etc. to understand benefits and influence of UGC on retail companies. Research analyst will also conduct primary research of UGC on social media platforms and eCommerces sites. Examine retailers with strong UGC and compare findings with retail companies that have little to no UGC. Through primary and secondary research, research analyst will develop a roadmap for retailers to implement positive UGC that will lead to a boost in sales and higher conversion rates.
Qualifications • Professional experience in implementing eCommerce technology for retail companies.
• Social Media expert with professional experience in conducting tasks related to social for global brand Red Bull North America, startup Giftiki, and various clients of 451 Marketing.
• Personal consumer of online retail vendors. • Experienced researcher in the field of digital marketing and online
communications.
Benefits Our clients will understand the importance of UGC and receive instructions from ICE on how to propel positive UGC. This will allow for several client benefits:
• Stronger brand loyalty • Higher conversion rates • Drive in sales • Acquisition of new users/consumers • Increase in brand awareness • Strong rapport between business and consumer • Reinforced image and culture of brand • Enhanced and organic SEM and SEO (natural results of having a greater
amount of UGC)
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Costs Aside from my own labor, this project is a zero budget effort. The deliverables will
be a result of research conducted, and will recommend actions for clients to take on.
Key Sources 1. Evans, Dave. (2010). Social Media Marketing : The Next Generation of Business Engagement. Hoboken, NJ: Sybex. 2. Ghose, Anyndya. (2008). The Economic Impact of User-‐Generated and Firm-‐Published Online Content: Drections for Advancing the Frontiers in Electronicd Commerce Research. (Doctoral dissertation). Retrieved from CeDER Published Papers. New York University: NY, NY. 3. Arnott, Grant. (27 August 2010). Brant Barton, BazaarVoice on User-‐Generated Content. Power Retail. Retrieved from http://www.powerretail.com.au/powerretail-‐tv/brant-‐barton-‐bazaarvoice-‐on-‐user-‐generated-‐content/.
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Executive Summary In today’s economic climate, retailers are desperate to boost sales and generate conversions more than ever. ICE can offer clients a cost-‐effect marketing solution tailored to current consumer shopping habits that will boost client sales, naturally improve SEO, build brand trust and awareness, and generate leads. These benefits are the result of understanding and strategically participating in user-‐generated content. While our client’s consumer is currently making off and online purchasing habits based on online customer reviews, blogs, forums, product review websites, and ratings on eCommerce websites, ICE Research Analyst, Victoria Gregory, has proposed to implement research of these platforms and their content to provide a roadmap that will allow ICE to make these benefits a reality for our clients. The relationship between user-‐generated content and a product or brand is more important than it has ever been, and will only continue to show stronger trends. As an innovative agency, ICE must be a pioneer in this emerging marketing platform and optimize our client’s presence and participation in UGC. A conversation is taking place online about our clients, and they need to be apart of it.
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Research Report A. Understanding User-‐Generated Content (UGC) “User-‐generated content comes from regular people who voluntarily contribute data, information, or media that then appears before others in a useful or entertaining way, usually on the Web—for example, restaurant ratings, wikis, and videos.”1 User-‐generated content is a growing trend and in tandem to its’ growth hails the value of its’ presence and exposure to potential consumers of a brand or retail entity. In the simplest words reflective of extensive research conducted by ICE Analyst, Victoria Gregory, UGC is media created by a user, free of advertising incentives. UGC varies greatly in medium and utilization, however, this research project focuses on its’ economic impact for a brand or retail entity. The emergence of UGC is ultimately reflective of emerging technologies that have become available and affordable to the general public. UGC arguably did not exist in the past because the digital communication platforms vastly used today were not available before the existence, development, and evolution of the Internet. Today, however, consumers are constantly generating content opinionative of a product or brand. Such content is available to other consumers contemplating similar purchasing habits. Thus, UGC can influence a new user to make a certain purchasing decision. This project aims to understand such UGC and how to implement and optimize it for a potential ICE client. A concrete definition of UGC has been debated by many researches like myself, but the Organization for Economic Co-‐operation and Development (OECD) has proposed three main characteristics: i) content made publicly available over the Internet ii) reflects a certain amount of creative effort iii) is created outside of professional routines and practices2 While UGC exists free of monetary or advertising incentives, many may question why it exists in the first place. THE OECD has also answered this question, as they define motivation factors to “include connecting with peers, achieving a certain level of fame, notoriety of prestige, and self-‐expression.”3 The people who post UGC were once end users of the particular product or brand to which the subject of their media is. Their
1 Krumm, John; Davies, Nigel; Narayanaswami, Chandra; , "User-‐Generated Content," Pervasive Computing, IEEE , vol.7, no.4, pp.10-‐11, Oct.-‐Dec. 2008 doi: 10.1109/MPRV.2008.85. URL: http://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=4653465&isnumber=4653458 2 “Participative Web: User-‐Created Content.” Organisation for Economic Co-‐operation and Development. 12 April 2007. pp. 1-‐74. http://www.oecd.org/dataoecd/57/14/38393115.pdf. 3 OECD, pp.4
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reasons for posting such media vary greatly. However, understanding these incentives can allow a brand or retail entity to optimize positive UGC and enable its’ existence. While the producer of UGC is most often a common end user with a miniscule digital presence, such producers can also be end users with an established audience. The “well-‐connected homemaker, or the hobbyist blogger, or anyone else with a defined passion and a basic command of social media publishing can amass a real audience and can exert real influence within it”.4 Clearly, the majority of UGC that will have an economic impact on a retailer is going to be a social media platform. While UGC exists in a wide variety of forms, social media is a key platform in which persuasive UGC exists, effects purchasing habits, and can me measure and understood. For these reasons it is a key focus of the economic impact UGC can have. B. UGC: An Economic Phenomenon Once ICE understands the existence and producers of UGC, we will have to show our clients the economic impact UGC can have. The statistics below show the value of UGC and its influence on purchasing decisions. Such information will be communicated to ICE clients wishing to generate sales leads through understanding and implementing UGC.
• More than half (55%) of consumers report that a product with a high rating will increase their likelihood of purchasing.5
• Nearly two-thirds of consumers (61%) use search engines to help them in their product research decisions leading up to purchase.6
• Three-‐quarters (75%) of young people (18-‐26) use recommendations on social sites to help them research products prior to purchase.7
The following statistics have been cited from several different resources from Power Reviews8
• 97% of UK consumers are willing to trust online reviews, and over two thirds rated product ratings and reviews as the most helpful feature when researching products to buy online or on the high street.
• 75% of the reviews posted on review websites are positive.
4 Evans, Dave. (2010). Social Media Marketing : The Next Generation of Business Engagement. Hoboken, NJ: Sybex. pp. 140. 5 Tornquist, Stefan, and Jake Hird. “How We Shop in 2010: Habits and Motivations of Consumers.” Econsultancy. 18 April 2012. Online. July 2010. http://econsultancy.com/us/reports/habits-‐and-‐motivations-‐of-‐consumers. 6 Tornquist, 1. 7 Tornquist, 1. 8 “Social Commerce Stats.” Power Reviews. 18 April 2012. Online. 2000-‐2012. http://www.powerreviews.com/resources/social-‐commerce-‐stats.
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• 92.5% of adults said they regularly or occasionally research products online before buying them in a store.
• According to a survey of 2,445 US online consumers, 82% considered user-‐generated reviews “extremely valuable or valuable.”
• Customer Reviews have a 15% increase in product page views within 30 days. • The number of user-‐generated content creators will grow by similar proportions,
reaching 114.5 million in 2013, up from 82.5 million in 2008. That will translate to 51.8% of US Internet users in 2013, up from 42.8% in 2008.
• Facebook, blogs, Twitter and customer reviews are considered the most effective tactics for mobilizing consumers to talk up products online.
• About one in five (24%) of all American adults have commented on or reviewed a purchase online.
• Close to 83% of online shoppers admitted that product reviews submitted by users on different websites are one of the main influences on their purchase decision.
• Traffic to the top 10 review sites grew on average 158% [in 2009]. • By 2013, half of retail transactions will take place online or be influenced by what
consumers see on the web. • Consumers are 67% more likely to buy from the brands they follow on Twitter.
figure 1.0 reveals that consumers of all ages are participating in user generated content.9 The statistics above reflect the importance of UGC. Online product reviews, conversation about products or a brand on social media, and comments about products on blogs and review websites are all forms of UGC that are highly influential in a
9 McCarthy, Pat. “Social Data: The New Currency.” Word of Mouth Association. 16 January 2012. Online. http://womma.org/researchdigest/?tag=online-‐retail.
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consumer’s purchasing behavior. While the majority of the above statistics are cited from Power Reviews, the original data came from credible sources such as Econsultancy, Pew Internet & American Life Project, Forrester Research, The National Retail Federation, GSI Commerce International, ABI Research, and Lightspeed Research among several other sources. Realizing this impact of these UGC platforms and communicating it to our clients will be key in helping them adapt to the new climate of marketing. It is clear that UGC does have an economic impact and can ultimately boost sales. C. Roadmap to generate positive UGC “Social media begins with an understanding of what consumers and influencers are saying about your brand, product, or service and then builds on that through participation (yours and theirs) for the purpose of encouraging higher forms of engagement, up to and including collaboration.”10 Social Media should be the first focus for our clients in finding the economic power of UGC. Rather than directly advertising to consumers persuading them to purchase your product, our clients should be engaging with our current consumers and participating in areas of UGC in which our brand or product already is conversed about. This way, the client becomes a participatory element in an environment where their potential consumer already exists. How do clients communicate on UGC platforms? Consumer Business Consumer Consumer Consumer Employees 1. Facebook
• Create a business page on facebook • Focus on generation of “likes” (this allows for consumers to trust your brand)
o Platforms such as PowerReviews allow consumers to verify their review by like the brand’s facebook page. This should be our clients!11
2. Twitter ICE clients must first listen to relative UGC on twitter, and participate or respond to these already present conversations. Platforms, such as Hootsuite can be used to monitor key words relative to our client’s brand or product. Monitoring and engaging in conversation that is relevant to the clients brand will build a larger consumer following and generate direct consumer engagement that will lead to sales conversions. 3. Allow UGC to naturally boost your SEO
10 Dave, 166. 11 Kirkpatrick, David. Marketing Sherpa. 18 April 2012. Online. 13 June 2011. http://www.marketingsherpa.com/article.php?ident=31808#.
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New content on a clients website or social media platform will allow for their sites to rank more efficiently in google searches, as the algorithm favors websites with constant new content. A boost in SEO is a natural byproduct of constant engagement with users. Engaging with the consumer is key. If applicable, implement a Q&A area in which consumers can ask your brand questions about a product and you can respond quickly. Such engagement may be achieved through twitter. Answer consumer questions will reduce return rates, build brand loyalty, and increase conversions (while naturally boosting SEO). 4. Consumer Product Reviews “Product reviews are the most searched for mobile shopping content, and an e-‐commerce site with strong social media integration -‐-‐ such as utilizing the Facebook "like" button -‐-‐ allows consumers to generate content and immediately publish that unique content throughout the Web on the e-‐commerce site itself, Facebook, Twitter and other social media platforms.”12
12 Kirkpatrick
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References Evans, Dave. (2010). Social Media Marketing : The Next Generation of Business Engagement. Hoboken, NJ: Sybex. Kirkpatrick, David. Marketing Sherpa. 18 April 2012. Online. 13 June 2011. http://www.marketingsherpa.com/article.php?ident=31808#. Krumm, John; Davies, Nigel; Narayanaswami, Chandra; , "User-‐Generated Content," Pervasive Computing, IEEE , vol.7, no.4, pp.10-‐11, Oct.-‐Dec. 2008 doi: 10.1109/MPRV.2008.85. URL: http://ieeexplore.ieee.org/stamp/stamp.jsp?tp= &arnumber=4653465&isnumber=4653458. McCarthy, Pat. “Social Data: The New Currency.” Word of Mouth Association. 16 January 2012. Online. http://womma.org/researchdigest/?tag=online-‐retail. “Participative Web: User-‐Created Content.” Organisation for Economic Co-‐operation and Development. 12 April 2007. http://www.oecd.org/dataoecd/57/14/38393115.pdf. “Social Commerce Stats.” Power Reviews. 18 April 2012. Online. 2000-‐2012. http://www.powerreviews.com/resources/social-‐commerce-‐stats. Tornquist, Stefan, and Jake Hird. “How We Shop in 2010: Habits and Motivations of Consumers.” Econsultancy. 18 April 2012. Online. July 2010. http://econsultancy.com/us/reports/habits-‐and-‐motivations-‐of-‐consumers.
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