The Impact of Social Media and Networks on Marketing

The idea of the wisdom of crowds… a group on average it will consistently come up with a better answer than any individual could provide.
The Wisdom of Crowds, James Surowiecki, 2004

The ‘Social Web’

The importance of social media and networking has revolutionised over time, causing significant implications for how consumers, channels, and companies perform. User-generated content includes social networking, user reviews, blogging, photo and video sharing, etc. The ‘Social Web’ was commercialised by Tim O’Reilly and Dale Dougherty at the O’Reilly Media Web 2.0 Conference in late 2004.

Shirky, 2008 described it as a tool to;

increase our ability to share, to co-operate, with one another, and to take collective action, all outside the framework of traditional institutional institutions and organizations.


User Contribution System

Cook, S., 2008 The contribution revolution: Letting volunteers build your business
Users include consumers, potential consumers, and employees. Their contributions can be active or passive. The system processes inputs and converts them into useful outputs in real time with little or no intervention by the company. It creates value for a business as a consequence of the value it delivers to users – information such as new personal or business relationships, personalized purchase recommendations, and connections between buyers and sellers of hard-to-find items.


Feedback such as ratings and reviews are received and processed in a variety of forms, and the forums in which it is provided. In regards to social media settings, consumers provide online product reviews visible to other consumers and agents, channel partners, competitors, and stockholders, which can highly influence potential customers and their decision to purchase goods or services.

The immeasurable characteristics of online social media environments have made it extremely complex for marketers, making managerial practice difficult. This raises a range of concerns for companies, such as managing their reputation, protecting their brand, brand awareness, brand promotion, brand protection and engagement (the conversation).


Key findings

The Journal of Marketing, July 2014

  • Consumer’s ratings

Sridhar and Srinivasan, 2012 found that consumers’ ratings are not only influenced by the quality of their personal experience, but also by other online ratings. This suggests that social influence can act as a double-edged sword, aggravating the negative effect of failure and increasing the benefit of failure recovery.


  • Effects on consumer conversion rates

Ludwig et al.’s findings in 2012 suggest that managers should recognise the most influential reviews in any given product category and promote them, as it would provide a basis on which other reviewers will be stimulated to write powerful reviews, adapting their own style of editorial reviews to the relevant product category.


  • Effects on consumer purchase intentions

Naylor, Lamberton, and West, 2012 found that the demographic characteristics of a brand’s online supporters can have an influence on target consumer’s brand evaluations and purchase intentions. This should be taken into account when deciding whether the identities of their online supporters should be revealed or, to preserve ambiguity and not disclose them.


  • Effects on product sales

Supporting Ludwig et al., 2012; Ho-Dac, Carson, and Moore, 2012 found that online customer reviews do in fact affect sales (Blu-Ray and DVD players). There is a strong correlation between positive / negative online customer reviews and an increase / decrease of sales of weak brands. No effect was found on sales of strong brands.


  • Value of a product in a network

Oestreicher-Singer et al., 2013 found that a virtual online network has been created where products influence one another’s sales, suggesting that companies should not simply focus on revenue alone, but also adopt value-related measures to gain a better understanding when product networks relating to marketing are concerned.


  • Effects on firm value

Chen, Liu, and Zhang, 2012 findings suggest that third-party product reviews build expectations about the potential of a new product’s sale. Companies can build form value through actively using and tracking these to help develop and introduce products.



Meikle and Young, 2012 criticized the revolution of social media for blurring the;

distinction between personal communication and the broadcast model of messages sent to nobody in particular.

Andrew Keen, an internet entrepreneur and journalist, commented in his book The Cult of the Amateur in 2007 on how social media has destroyed professionalism. Stating further, that the quality of journalism has been reduced due to blogging and free listing sites.



To conclude, using online social media as a means of marketing does not only impact the development of markets and firms, but it can also be used to change the dynamics of them. The effects and implications resulting from this recent stream of research are valuable to senior marketing executives tasked with the management and leveraging of their firms’ social media programs.

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