1. INDIVIDUAL ASSIGNMENTBUSN32 Business Economics: Internet Marketing, Branding and Consumers29.02.2012 Who is companies` new customer in the Internet era? Judyta Pokrywka, Lund UniversityNumer of words: 29601

2. Table of Contents INTRODUCTION AND LITERATURE REVIEW ......................................................................................... 3 RESEARCH QUESTION .......................................................................................................................... 4 EMPIRICAL EXAMPLES, THEORIES AND MAIN CONCEPTS ................................................................... 5 DISCUSSION ......................................................................................................................................... 7 CONCLUSIONS ..................................................................................................................................... 9 REFERENCE LIST ................................................................................................................................. 11 2 3. INTRODUCTION AND LITERATURE REVIEW Paradigm shift is currently transpiring due to growing importance of social media andthe ubiquitous Internet. The shift genuinely influences the way business activities areconducted and alters ways of social interaction (Karakas, 2009; Van Zyl, 2008), therefore itsimportance is ample. Even for customer-focused organizations, this phenomenon stands forone of the biggest challenges facing businesses nowadays (Baird & Parasnis, 2011). Internet became the global arena, where users access company`s information, learnabout product prices, share recommendations and feedback (Pires et al., 2006). One of theterms used to describe the online reality is World 2.0 - an interactive, hyper-connected,digital ecosystem where users create knowledge, innovate, collaborate, entertain,communicate using mobile devices, write blogs, share photos, develop projects and expressthemselves to the world (Karakas, 2009, p.23). Interactions in World 2.0 are flexible, easy tomaintain and cost effective (Van Zyl, 2008). According to HsiuJu (2011) more and moreconsumers develop trust in information found in online thematic groups, compared toconsumption-related information shared offline. Such peer-to-peer networks changed themodel of communication from one-to-many to many-to-many (Stalnaker, 2008 cited inKarakas, 2009) and into multimodal conversations (Muniz & Schau, 2011). Online consumerstend to participate and communicate more than ever before, they are also more active andsocial (Kozinets, 1999 cited in Cova & Pace, 2006). Interaction takes place within groupsbuilt around a shared association or brand-relationship. Such community groups are amixture of proxy marketing and participants personal marketing (Cova & Pace, 2006,p.1101). The social software, or so called Web 2.0 tools (OReilly, 2005), not only haveencouraged a 24/7 collaborative world, but also popularized culture of sharing. Toolsadoption is quick, since they are intuitive and easy to acquaint with. They organize spacewhere seekers of knowledge and its keepers can interact (Boateng et al., 2010). Contemporary customers want to be influential rather than be passively influenced(Firat & Shultz, 1997 cited in Cova & Pace, 2006) and are adopting increasingly active rolesin marketing content co-creation. This eventually leads to consumer empowerment defined byWathieu (2002 cited in Cova & Pace, 2006) as giving customers control over tasks usuallyconducted by marketers. As a result, consumers have more control over the relationship theyhave with their favorite brands (Fournier, 1998; Deighton, 2002; Holt, 2004 in Cova & Pace,2006) and co-create everything, even promotional messages (Berthon, Pitt, McCarthy, &Kates, 2007 cited in Hanna et al., 2011). Ultimately, companies no longer administer 3 4. communication. They rather provide a communication arena for those empowered consumers(McWilliam, 2000 cited in Cova & Pace, 2006), nonetheless this must not mean laissez-faireapproach (Cova & Pace, 2006). World 2.0 brought about a new term Enterprise 2.0 (McAfee, 2006 cited inSchneckenberg, 2009), which stands for Internet technologies and business practices enablingemployees to collaborate and interact in order to produce and exchange knowledge ininformation affluent business contexts. There the Web 2.0 tools serve as building blocksfacilitating collaboration within or between companies. Aligning with this concept,implications for businesses and employees input will be addressed. Provided a short literature review and few empirical examples, this paper`s purpose isto investigate internal customers` role in the Internet era. Contribution to the field of researchconcerning methods of internal customer relationship management, interactivity in knowledgemanagement and online communities potential is intended.RESEARCH QUESTION Having introduced the shifting paradigm and virtual communities concept, thecustomer`s characteristics shall be further investigated. Researchers examine the phenomenonof consumers acting as partial employees of online communities (HsiuJu et al., 2011, p.90),yet for the purposes of this paper I would like to take it a step further. I would like to extendthe already existing concept of employees as internal customers. According to Mohr-Jackson(1991) internal customers create products, services and generate customer satisfaction, whichare critical facets in any business. Each employee simultaneously is company`s customer anddue to social media revolution this approach became stronger than ever. The meaning ofinternal customer is re-newed and re-defined by adding new online aspect to it. Thus theresearch question is: as a marketer, how to successfully evolve with new internal customers inthe Internet era? I will analyze real life examples in order to come up with a relevant answer.4 5. EMPIRICAL EXAMPLES, THEORIES AND MAIN CONCEPTS Companies have to face and appreciate social forces that influence their customers.They must show strategic agility (Doz & Kosonen, 2008) and make use of collectiveintelligence of people both inside and outside the organization (Nambisan and Sawhney, 2007cited in Karakas, 2009). Therefore companies establish relationships with internal customersto build vibrant new business ecosystems (Tapscott and Williams, 2006 cited in Karakas,2009, p.24), instead of relying solely on R&D resources. This enables them to benefit fromthe vast pool of talent and ideas, stimulates creativity and enhances innovation. Many companies` R&D return of investment has declined, sometimes followed byintroduction of products that are not fulfilling users` expectations due to poor customerinsights. To overcome that, some firms started using open-source strategies and crowdsourcing, reaching internal and external users. Procter & Gamble leveraged its R&D expensesvia network of customers, employees and experts aiming at finding ways to increaseproductivity and spread innovation (Bughin, 2012). A common objective united variousgroups, making internal customers one of the parts of solution and benefiting from onlineenovronment. Another example is Best Buy, which engaged 2,500 employees to connect withcustomers via Twitter (Bernoff, 2011). This strategy would not have been feasible withoutpersonally engaged employees who had been given access to and enticed to use social mediawithin their workplace, which is not a common practice. Intel also realized the potential ofinternal customers and came up with a creative campaign Sponsors of Tomorrow (Intel, 2010)inspired by its employees` insights. Each movie commercial shows employees duringeveryday tasks, yet with a fun twist. USB inventor is revered like a rock star, engineers duringa party do not behave like ordinary guests or employees` jokes completely differ from arandom person`s jokes. This campaign was a success since it rapidly went viral online,integrated internal customers and managed to stimulate online discussions between Intel usersand Intel employees. It also appreciated employees and encouraged them to speak up withfeedback and new concepts. Personally, I believe that featuring real employees in the clipsfructified with their eagerness to brag about it online, thus strengthened Intel`s brandrecognition and its perception as technology innovators and fun individuals. Following Grant`s (2011) argument, employees tend to contribute more once they areput in customer`s shoes. This was the case of my previous employer Hilton Worldwide where each staff member who successfully completed three month probation period couldspend a complimentary night in the hotel and benefit from all onsite services. This helps5 6. employees see things from customer`s perspective and as a consequence gives them personalguidance of what is valued and expected from them. Having experienced service personally,employees develop a propensity to stand out in their efforts and better understand customers`concerns. This policy benefits all customers are satisfied, employees focus on providinghigh-quality service, and Hilton capitalizes on customers` spending. Taking employeespositive input out of the equation, the whole system falls short, negatively influencing allareas crucial for hospitality business. Keeping in mind that guests often rate hotels in onlineportals, this is a smart move to make in order to ensure satisfactory results and receivepositive feedback by utilizing already existing resources. Hilton does not forget thatemployees as well share their work experiences online, which is why in 2011 the companylaunched Hilton 360` platform, uniting employees from all over the world and encouragingthem to share their ideas, acquaint with job-related stories or organize charity events. Thanksto this strategy company`s presence online is holistically designed and executed. Hiltoncreates a concise brand image, which is confirmed by both internal and external customers.This results in trust and customer loyalty to the brand, but also builds Hilton`s strong image asa reliable and respected employer. Having analyzed those examples, it can be stated that the key components in ensuringemployees` positive input are mutual trust, engagement on all corporate levels and culture ofsharing (Graham and Hall, 2004; Smith and Kollock, 1999 cited in Van Zyl, 2008). Sincecompany-employee relationship is volatile, loyalty and appreciation play a vital role in settingthe ground for successful cooperation for both sites of the agreement. One of the adequatestrategies proposed is targeting HEROes - highly empowered and resourceful operatives.They are play a vital role in conducting business activities in the age of individuals directlyparticipating in online company`s presence (Bernoff, 2011). HEROes are critical forspreading the e-word of mouth since they operate in the digital world where they interact withcompany`s external customers. Their performance affects others perception about givencompany. Company cases I have used as examples seem to have identified their internalHEROes and successfully built on their personal input. 6 7. DISCUSSION The marketing dynamics shifted and company-employee interaction vastly differsfrom how it worked even few years ago. Today, internal consumers are brand e-ambassadors,directly influencing company`s messages and their meaning. As a result, employee`s inputonline became the new aspect in contemporary organizational communication (Miles et al.,2011). Technological breakthroughs provided employees with new channels to express theirviews about the employment or working conditions that were not previously accessible. Therise of digital world has altered the environment from passive Web 1.0 to interactive Web 2.0,where users are simultaneously information initiators and recipients (Hanna et al., 2011).Platforms like Facebook, YouTube, LinkedIn or Twitter connect employees withgeographically unlimited audiences where they can share messages not necessarily desired bythe organization (Miles et al., 2011) or on the other hand can come up with creative ideas andsignificantly boost company`s reputation. Online communication is as a double-edged sword,since employees might publish anything starting from ambitious and noble initiatives tonegative and risky opinions. Examples provided in the previous part of this paper focused on one perspective,which covers positive aspects of customer empowerment, which shall be addressed in theconclusion part of the paper. The second perspective on the other hand represents the newgeneration of employees (and therefore customers) differing in job mindset compared toprevious generations. The job is no longer sacrosanct, and it is no longer for keeps (Mishra,2011, p.110). Young managers will continue working in a given position only until the theirjob fulfills their professional ambitions. The so called Facebook generation shares theirexperiences online without clear distinction to personal or professional sphere, redefiningprivacy and ways of information flow (Mishra, 2011). This entitles companies to actbeforehand or react when needed, since no reaction is the worst possible strategy in the era oftransparency and swift information flow. Nevertheless it has to be stressed that raisingconcern online is the highest level of escalation being an end result, not an immediate reactionto malfunction (Mishra, 2011). That kind of behavior never is employee`s preferred choicedue to risk of public exposure, however there are tools to successfully overcome this barrier.For instance blogs or discussion fora offer an anonymous channel for expression, whichcannot be controlled by companies, reaching current and possible future customers. Badpublicity quickly spreads over the Internet and there are no best-practice guidelines on how to7 8. overcome that. When a negative, first-hand information goes online, it is almost impossible toerase and its consequences from the web. According to Quinton & Harridge-March (2010) marketers and companies need torealize why and how employees` online engagement may impact their business. ForresterResearch (2007, cited Quinton & Harridge-March, 2010) shows the importance of collectiveindividualism and online communities` role in creating a changing dynamics businessenvironment. Due to increasing online involvement and its impact on who the customers trustor whom they ask for feedback, relationships developed via social media can be powerful(Quinton & Harridge-March, 2010) and must not be undervalued. World 2.0 shows also athreat to any organization which underestimates the power of online internal customers. Due to more participative customer`s role and new technological capabilities,companies need to introduce new practices. Boateng et al. (2010) suggest three steps whichmake the new framework functional for a company. Firstly, understand the Web 2.0 with itsfunctions and outcomes. Secondly, understand the learning process which is a natural part ofonline interaction and discover how it can be accessed. Identify which tools support thelearning process and internally seek for individuals or groups of people, who can give thecompany an additional performance boost. Lastly, each company needs to developunderstanding of factors applicable for itself and its context. These steps are crucial fordeveloping a way to learn and benefit from the already existing base of loyal internalcustomers` knowledge. All in all, traditional focus on linear and broadcast mass-media communication isreplaced by non-linear and feedback-allowing approach (Rowley, 2004). Emergence of theInternet and social networks gave a power boost to open innovation and knowledge exchangeonline (Bughin, 2012). Marketers became technologists, since they have to be familiar withlatest online advancements. Empowering them to embrace their skills in professionalenvironment gives companies great benefits, like for instance solution development byutilizing customer opinions (Bernoff, 2011) or ideas that could be easily transformed intomarketing campaigns. Realizing what role employees play in this setting is a crucial stage fordeveloping strategic decisions concerning for instance social media strategies.8 9. CONCLUSIONS Social media became a natural part of our lives and made people communicate onlineon a daily basis. The hierarchy of communication has been reversed from top-down tobottom-up due to the rise of the Internet era and transparency it entitled. The balance of powerin meaning-making shifted from marketers to consumers (Deighton & Kornfeld, 2008). Thiscan be seen as a source of valuable insights, however this may also pose a threat to companiesnot prepared for instant reactions, when as a result even minor issues may have majoroutcomes (Mishra, 2010). Having this said, it is apparent that the marketing landscape has been changed and thatonline platforms created spheres of influence that made marketers change their practices(Singh, 2005; Walmsley, 2010 cited in Hanna et al., 2011). World 2.0 has profoundlyaccelerated globalization and might also significantly improve organizational efficiency.Globally spread socio-technological innovations lead to personalized, yet collective learning,of which companies should take advantage of. Once realized that the radical change inconducting business is inevitable and eventually new behavior will become norm, thepotential threat can be transformed into a win-win situation. Accessing these opportunitiesfrom a organizational learning perspective, appreciation of the fact that employees views arecritical for growth and development, enhances company`s chances on the competitive market. Online transparent communication should be taken into account when setting futurestrategies, for it certainly impacts the company`s image and performance. Albeit managers areaware of the importance of online customers, employees seem to be an overlooked group inthe context of sharing and creating online. Following Bernoff`s (2011) reasoning, companiesmust react to communities growing power and one of the best methods is to engageemployees in the process. Acknowledging that company`s staff are the innovators is amilestone for setting new corporate mindset. Online communities and open communication stimulate collaboration (Tapscott andWilliams, 2006, cited in Van Zyl, 2008), create a culture of sharing, increase personalsatisfaction and develop productivity (IBM, 2007 cited in Van Zyl, 2008). Such approachprevents defensive actions and enables employees to extend their ideas in cooperation withother users. Given that companies learn and create through dynamic interactions between staff(Nonaka and Takeuchi, 1995 cited in Boateng et al., 2010), this might be enhanced bycooperating in the environment which is preferred by Internet users. However the main facetis enhancing technology innovation and preventing chaos. Once employees get familiar with9 10. the collaborative work culture, they will feel more secure and efficient in using Web 2.0 toolsat work. In case of absence of that culture, lack of trust or willingness to share employeeswill not partake or in the worse scenario will start publicly fighting and depreciatingcompany`s image (Schneckenberg, 2009). Smartly used Web 2.0 tools can leverageorganizational learning and knowledge exchange, but it is dependent of company`s openness,freedom of initiative and employees` empowerment. Summing up, World 2.0 has the potential to resolve differing interests of company`sfunctioning with individual`s views, by using the assets that the company already possessesand overlooks - employees. It also provides valuable ways of sharing ideas and administeringpools of knowledge. Web 2.0 tools harness collective intelligence, which can be used forsolving common organizational goals. 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