NAME:AGBADAOLA OLABODE MATRICNO: 17100230594CHAPTER TWOLITERATURE REVIEW 2.0INTRODUCTIONThissection will review existing literature on the insurance industry in Nigeria,social media, branding and theories governing the study. Finally, it will look atpast studies on social media and its link to corporate performance. 2.
1 THE NIGERIAN INSURANCE INDUSTRYTheinsurance industry in Nigeria is regulated by the National InsuranceCommission, guided by constituted Acts likethe Insurance Commission Act 1997 and Insurance Act 2003. As an emergingindustry in Nigeria, there are said to be certain major players within thesector which are: the insurance company and reinsurance establishments whichunderwrite policies, the insurance brokers who play the role of theintermediary that connects the insurance or reinsurance companies and thecustomers, and the loss adjusters who, in the event of a claim, perform a propersurvey and estimate is to be done to determine the exact value of damage andcost implication to indemnify the insured for the loss. About1.5% of adults in Nigeria have an insurance policy today. This low level ofpenetration is partly due to a lack of faith of the public in insurancecompanies and the sector as a whole.
Another major factor contributing to thisis the lack of knowledge and proper understanding of the insurance sector onthe part of the people. As a way to increase sales and penetration, NationalInsurance Commission (NAICOM) in 2009, came up with the Market Development andRestructuring Initiative (MDRI), to further enforce certain insurance policiesalready made compulsory. Otheractions NAICOM has taken are, to instill the “no premium, no cover” rule,further increasing premium generation for insurance companies, as well asissuance of guiding principles released in December 2013 to guide microinsurance business. It has been observedby NAICOM that sales and distribution of insurance are mainly focused on metropolitan areas due to the target of compulsory insurance policies andcorporate accounts and that microinsurance cannot efficiently be accessedthrough usual channels. Thus other channels like cooperatives, non- governmentalorganizations and third party administrators such as bank branches, and retailoutlets among others, are patronized and trusted by the local population to actas intermediaries for access to micro insurance. Thereis a reasonable level of competition in the insurance industry, in Nigeria andcertain sectors in the insurance industry have been highlighted as competitive,from life to general insurance policies, with the big and reputable financialestablishments taking the lead.
The Nigerian insurance industry is currently madeup of about 57 registered organizations approved by NAICOM, compared to the 140registered in 1994.1 2.2 SOCIAL MEDIA (Kaplan & Haenlein, 2010) define social mediaas “a group of Internet-based applications that build on the ideologicaland technological foundations of Web 2.
0 and that allow the creation andexchange of user-generated content.” Social media differs from traditionalmedia in many ways, from the size of theavailable audience to the frequency with which it is used to its staying power. 2.
2.1 Social Media Marketing Role In order to improve organizational performance,companies should focus more time and resources on social media marketing as itcan boost performance in many ways, some of which are listed below; Brand awareness This can be defined as the extent to which a productor brand is known by existing and potential clients, and to which connectionscan be made accurately within the consumer group for the product. As posited byCarol Tice, (2012), brand-building can be effectively done through socialmedia, as it is one of the essential tools.
Via social media, you can how youwant your brand positioned, and also create knowledge of the services yourender. Through consistent post of great content, you can create awarenessabout not just your product, but also your company’s values, vision and missionstatements, as it relates to your product and the value it adds. Brand awareness is vital to how a company stands outalongside products and services that are similar in any way, Gustafson andChabot (2007). Increased awareness of a brand does a lot of good for organizationalgoals and objectives, whether these are the longor short term.
In essence, a brand that customers and prospectivecustomers are familiar with is more likely to be patronized than competingbrands or products. Social media marketing has a great impact in creating brandawareness by the exposure it gives to the goods and services of the company toa wide audience with different metricsthat can be calculated and optimized to suit the brand’s needs. This level ofexposure is mostly measured or known by the numberof subscribers, fans or followers on its social media platforms. Real-time communication Social media aids effective communication thus the useof social media by organizations has a rapid effect on customer engagement and feedback and reduces the time spent on creatingconsumer support feedback.
Being quickto respond to clients improves their level of satisfaction with the brand andwill further increase retention rates as well as improve brand reputation.Social media and mobile communication platforms can beused for studying and collecting information on problems and issues faced bycustomers and consumers (Shih, 2009). This, when combined with research intothe relevant market, will help create a clear direction for the organizationand also help deal with customer issues before they get out of hand and causereputational damage. Repeat ExposureThere is an old marketing adage that says it takes sixto eight exposures to a product before a customer decides to buy.
A clearbenefit of social media is constant exposure as organizations have theopportunity to remind their target audience repeatedly about their offeringswhich can also lead to shortened sales cycles and quicker profits. (Tice, 2012).This can also be a method of measuring the range ofthe social media activities of an organization as the numbers of followers,impressions and subscribers an organization has on their social pages can betracked. All this can help the company to build a community that is not onlyinterested in their offerings, but also in spreading the company ideals and keymessages. To maximize reach, companies would need to have a presence wherepeople are constantly updating themselves on the content they produce (Halligan& Shah, 2010) as more exposure equals an increase in the chances ofconsumers interacting with the brand.
CompetitiveAdvantage Competitiveadvantages are company assets, attributes, or abilities that are difficult toduplicate or exceed and which provide a favourableposition over competitors in the long run (Faulkenberry, 2012). Itis the ability of a company to deliver their products, services or benefits,either at a better rate than other players in the same industry be it throughlower costs or product availability. Social media gives organizations whoincorporate it into their marketing strategy a competitive edge as it providesreal-time feedback from customers. As the company provides rapid responses tocustomers, they gain an advantage over competitors who have not incorporatedsocial media into their marketing strategy (Baines et al 2010). Anothercompetitive advantage that social media offers is the ability for organizationsto monitor and measure brand performanceand perception. Social media enables companiesto follow the conversations thatcustomers are having about their product and effect any changes or deal withany issues if necessary and in a timely manner.
Tracking programs like GoogleAnalytics or Row Feeder, help the company identify the demographic profiles oftheir followers, customize their products and market them accordingly (Mangold& Fauld, 2009).2.3 CONCEPT OF BRANDING(Kotler & Armstrong, 1996), were of the viewthat a brand can be taken as a name,term, sign, symbol, design or a combination of all, that is associated with aproduct or service with the intention of identification in any circumstance byconsumers. Czinkota and Ronkainen (2001) wrote that a company with a strongbrand name provided freedom to exploit a fresh market or different marketcategory.Abrand can, in essence, be defined as the promise of certain anticipated attributesthat someone buys in order to experience satisfaction later on. Theseattributes can be rational or emotional, tangible or invisible (Ambler & Styles, 1997). Furthermore, Kalu(1998) wrote that a brand is anything that can identify the goods and servicesof a seller or group of sellers and which can differentiate them from those ofcompetitors.
Baker (1992) described a brand as a good or service with a set ofcharacteristics which clearly and readily differentiates it from all otherproducts, acting as an identifier to potential customers.2.3.
1The Four Components of Brand Value ReputationValue Froman economic point of view, a brand acts as a container for a company’sreputation. Customers are taking a risk whenever they purchase a product,whether it is marketed as perishable or long-lasting. So when there is a risk inherent in a product, customers areusually willing to pay to reduce risk.
Branding that is well-done acts as amechanism to increase customers’ confidence that the product will live up toits marketed quality. RelationshipValue Brandsalso provide assurance that the firm producing the product can be trusted to attendto the customers’ needs and concerns as needed. A significant aspect of productvalue is the perception that the firm will respond as the customers’ desire, tounforeseen issues. ExperientialValue Froma psychological perspective, the brand can shape perception about the product,highlighting certain benefits delivered by the product. This guides consumersin choosing products and also influences how they make use of the product.
Hence, firms often seek to brand their products as particularly effective indelivering on a single benefit desired by customers. SymbolicValue Brandsalso act as symbols, allowing consumers to express their values and personalidentities. Historically, humans have depended upon material items (clothes,homes, craft goods, etc.) as symbols for self-expression.
The term “consumerculture” is an indicator of how consumer goods have dominated current marketeconomies. In particular, brands have become markers of aspirational socialidentities from status to lifestyle. 2.4 THEORETICAL FRAMEWORK2.4.1 THEORY OF CRITICAL MASSThe theory of critical mass supposes that aninnovation needs to be adopted by a certain number of people within a socialstructure so that the rate of adoption reaches a point where it happensautomatically and becomes self-sustained. Factors influencing critical mass mayinvolve the size, interrelatedness and level of communication in a society or anyof its relevant subcultures. In the same lightsocial media creates critical mass for organizations so that a large number ofpeople can adopt the brand.
With social media, companies can build a criticalmass, that critical mass is what then goes on to get other members of thepopulation to adopt the brand or innovation. Insurance companies can use socialmedia to build a critical mass for their product so that the early adopterswill then influence their social network to also buy into insurance. 2.4.2 THEORY OF SOCIAL NETWORKAsocial network is a structuremade up of individuals or organizations called “nodes”, which are connectedby one or more specific types of interdependency, such as friendship, kinship,common interest, prestige and so forth. Inits simplest form, a social network is a map of specified ties, such asfriendship, between the nodes being studied. Nodes are the individual actorswithin the networks, and ties are the relationships between these actors.
Forexample, the nodes to which an individual is connected are the social contacts of that individual. Socialnetworks play a critical role in determining the way problems are solved, how organizationsare run, and the degree to which individuals succeed in achieving their goals. Peoplein a network share information and communicate. One’s network will includefriends, colleagues, schoolmates,alumni’s, family, and friends of friends. People who are in the same clique ornetwork are able to get their network to share the same information.
Forexample, friends can get each other to buy the same insurance policies from thesame company. So with social media, insurance companies can get into thenetworks of established networks and only need one person in the network to adoptthe idea. Members of the same network are likely going to adopt an idea or payattention to reference, remarks or testimony shared by a member of theirnetwork than, than testimony or reference shared by a stranger.Graph of a social network 2.5 EMPIRICAL REVIEW(Chen, 2001) in his researchstudy assessed the claim that e-commerce will spell the end of brand managementas we know it. The paper dispelled this scenario by identifying certain factors.First, there are still other variables that have not been affected bye-commerce which still relies on other factors such as product and type ofpurchase for sales to be made.
The impact of the Internet depends on the rolethat the brand is playing in the consumer’s buying process. Secondly, there isa vast offering of Internet technologies which will affect brands in differentways. Thirdly, the Internet is leading to some secondary effects in the marketstructures that affect brands. The combination of these factors, far from leadingto the death of brand management, will in many cases lead to an increased rolefor brand management. (Corcoran & Feugere, 2009) in their study reported that more brands andretailers are embracing social media and use it to boost sales and brandawareness. According to New York University professor of marketing ScottGalloway, luxury brands are now engaging with customers through Facebook andeven building their own social networks, implementing user reviews into theirbrand decision making, and selling their products online. Also,Dutta and Soumitra (2010) in their study showed that socialmedia is changing the traditional methods of doing business and perception ofleadership.
They further showed that although businesses are creatingcomprehensive strategies in the area of social media, it is yet to be adoptedas comprehensively and strategically by corporate leaders. According to theirstudy, today’s corporate leaders must embrace social media for three reasons.First, social media provides a low-cost and easily accessible platform on whicha personal brand can be built, which can also communicate company identity. Second,it allows for rapid engagement with relevant stakeholders from peers tocustomers, allowing them the chance to foster better relationships.
Third, itgives companies an opportunity to learn from instantfeedback. HoweverAula (2010), in his article, focused on the threat and risk of social media tothe reputation of businesses. He cited examples of events showing how negativepublicity on social media led to a negativeimpact on organizational reputation. He further noted that social mediasuch as Facebook and Twitter are popular for corporate social media activitiesbut that they expand what the scope of reputational risk and boost chances ofrisk to companies. (Hunt, 2010) stated in their articlethe vital role social media plays in staff recruitment in organizations. Itfurther makes known that the social media platforms are not limited tosocialization, but can be an important tool that aids information aboutavailable jobs and subsequent staff employment.
They further showed thatcompanies that do not embrace social media as a recruitment tool might losequality candidates. An example is the LinkedIn social/business platform thatbrings the employer and the prospective employee in the same space, allowingthem to interact and foster a potentially lucrative relationship.