IS SOCIAL MEDIA MARKETING REALLY WORKING?

ITS IMPACT ON THE RELATIONSHIPS AMONG MARKET ORIENTATION, ENTREPRENEURIAL ORIENTATION, AND PERFORMANCE
1. Introduction The rise of Online Social Networks (OSN) such as Facebook, Twitter, YouTube or LinkedIn, has changed the way that people communicate through the Internet. Companies have realized that their clients are part of the OSNs, and this awareness has increased the interest of marketers to explore OSNs as new marketing tool (Katona, Zubcsek & Sarvary, 2011). However, the strategic importance of OSN as a marketing tool still seems not clear given the novelty and the difficulty of measuring their impact on business performance. Marketers are so concerned, because there is a complex problem to monetize and measure the actions carried out in OSN (Clemons, 2009). Given the novelty of the phenomenon and its popularity, many firms have begun to use social media as a marketing tool, some of them even without any kind of strategy or plan. It is not clear if social media marketing could help firms to have better results, and our aim is to contribute with the crescent but still limited study of the use of social media as a marketing tool and their impact over business performance. This study takes the intensity of use of social media marketing as a moderating variable between market orientation (MO), entrepreneurial orientation (EO) and business performance. The remainder of this article is structured as follows. Firstly we review the literature on social media marketing, market orientation, entrepreneurial orientation and business performance relation. The second part focuses on the research methodology. The third section shows the main results from an investigation among 191 Spanish firms. Finally, the main conclusions, implications, limitations and future research are presented. 2. Literature Review, Theoretical Framework and Hypotheses. Online Social Networks, as a new communication system based on the Internet technology have become the most influent phenomenon in communication in last decades (Kaplan & Haenlein, 2010). OSNs offer to people new ways to build and maintain social networks, create relationships, share information, generate and edit content and participate in social movements through the Internet (Lorenzo, Constantinides & Alarcon, 2011). OSN are considered of great importance both for individuals and businesses, since they support the maintenance of existing social ties and the formation of new connections between users (Boyd & Ellison, 2007). Companies, seeing the rise of the OSN are using the tools they offer because the low cost and popularity, and have begun to use OSN within their marketing strategies (Harris & Rae, 2009). OSN have been considered as consumers global phenomenon, generating companys expectations on the way they can use them for achieving marketing goals. Firms are using OSN in different marketing strategies, and allow companies to address to end consumers in a quicker and direct way at a relatively low cost with higher efficiency than traditional tools (Kaplan & Haenlein, 2010). Even if companies could measure some interaction elements with customers, it is not clear whether the strategic or tactical impact is high yet. Indeed, OSN revenue models are based primarily on advertising, producing disappointing results (Katona, Zubcsek & Sarvary, 2011). There is a complex problem to measure and monetize OSN marketing activities (Clemons, 2009) and there is still no consensus on how to measure its performance. Although social

media marketing impact in business performance is still an unknown issue, there is no doubt that OSN will play a key role in the future of marketing (Harris & Rae, 2009). Dynamic capabilities such as MO and EO allow firms to integrate, build, and reconfigure competencies and align them to market changes (Teece, Pisano & Shuen, 1997) to obtain a better performance. A strong MO characterizes an organizations disposition to deliver superior value to its customers (Slater & Narver, 1994). This capacity precisely analyzes the company's ability to interact with their customers and competition, as well as the importance of marketing within the firm (Day, 1994; Kohli & Jaworski, 1990). An entrepreneurial orientation determines how companies identify new opportunities and respond to changes in the environment to achieve successful business results. EO is associated with the strategic direction of the firm, and is related to the innovation in product or process, the risk taking propensity of the firm, and evidence of proactiveness (Covin & Slevin, 1991; Lumpking & Dess, 1996). These characteristics are related to the use of social media marketing. Several studies have considered the relation between MO and performance (Kirca, Jayachandran & Bearden, 2005), and between EO and performance (Lumpkin & Dess, 1996). Also, some authors as Baker & Sinkula (2009) and Atuahene-Gima & Ko (2001) argue that the interaction between MO and EO is synergistic, as they have complementary approaches. The relationship between MO and performance, and EO and performance as well as being direct, may be mediated by control variables (Jaworski & Kohli, 1993), like new product development (Langerak, Hultink & Robben, 2007), innovation (Atuahene-Gima, 1996) and customer loyalty and satisfaction (Szymanski & Henard, 2001). Based on the literature review and previous qualitative research we propose a conceptual model that proposes that the intensity of use of social media marketing moderate the relation between MO, EO and business performance. It is widely recognized that marketing affects firm performance (Morgan, Vorhies & Mason, 2009; Hooley, Fahy, Cox, Beracs, Fonfara & Snoj, 1999). Notwithstanding the interest to study the effects of moderator variables among these concepts, there is a need for more studies focused on observing how dynamic capabilities relate to functional capabilities such a marketing, information technology, and R&D (Easterby, Lyles & Peteraf, 2009). In the present case, the moderating variable is the intensity of use of the OSN as a marketing tool. Previous qualitative research, as well as the dynamic capabilities framework, has led to the development of a conceptual model that reveals that the intensity of using social media marketing moderates the relationships among between MO, EO and business performance. Thus, our hypotheses are: H1: The intensity of use of social media marketing moderates the relationship between MO and business performance; H2: The intensity of use of social media marketing moderates the relationship between MO and EO; and, H3: The intensity of use of social media marketing moderates the relationship between EO and business performance. 3. Methodology 3.1. Sample and data collection A qualitative research phase preceded this study. The sample comprised Spanish firms that use social media marketing. Through LinkedIn, the world leader professional social network, we invited and added Spanish marketing chief officers, digital marketing directors and community managers to be part of the network, between February and October 2011. To address people to be part of the network, personal contacts, second level contacts and specialized groups in LinkedIn like Internet marketing Spain and Social media marketing Spain were used. To be eligible, the firms must have used at least one OSN as a marketing

tool in its strategy. A total of 784 contacts were linked with the profile, making possible to communicate directly through LinkedIn, avoiding non appropriate responders. A LinkedIn message indicating the existence of an academic research was sent to the network. A webplatform survey system (SurveyMonkey) was used to collect responses, receiving 277 responses (35,3%). Finally, 191 complete responses (24,3%) were available for the analysis. 3.2. Measures and scale reliability We generated a set of items for measuring the MO, EO and business performance constructs using the literature review, and previous qualitative research for the intensity of social media marketing. For measuring the constructs we used a seven-point Likert scale. For MO we used an adaption of the MKATOR scale by Narver & Slater (1990), which consists of three subscales reflecting the behavioral components of customer orientation, competitor orientation and inter-functional coordination. For EO we used the Covin & Slevin (1989) scale, measuring firm innovativeness, proactiveness and risk taking. In order to measure the business performance, we adopted the construct proposed by Hooley, Greenleya, Cadogana & Fahy (2005), which consists of subscales about customer, market and financial performance. The social media marketing intensity were calculated using the following method. Firms were asked about: which OSN normally used as a marketing tool; number of Facebook fans and Twitter followers; number of YouTube videos; frequency of social media marketing activities; the use of OSN in marketing strategy; the existence of a community manager; the social media marketing team size; the existence of a digital marketing agency; and the percentage of the marketing budget dedicated to digital marketing and social media marketing. Then, depending of the nature of the variables, some were recoded using quartiles, to generate 5 groups of classification (null, low, means, high, very high), in order to use all variables in a Multi Correspondence Analysis (MCA). This method quantifies multi-variate categorical data and affords a graphical representation of the data structure (Hoffman & Franke, 1986). Using the most discriminative variables, three categories were created: High, Medium and Low intensity. Each observation was classified using the X and Y scores. As a result, 75 firms (39%) were classified as High, 49 (26%) as Medium and 67 (35%) as a Low intensity. This variable allow to do a multi group analysis using Structural Equations (SEM). High intensity firms are characterized with having a huge number of followers and fans in Facebook and Twitter; doing more than one social marketing activity per day; having big social media marketing management teams; and having a high budget for digital marketing and social media marketing strategies. Medium intensity firms are characterized basically with a lower strength of mentioned variables. Low intensity firms are characterized to use just a few OSN, they have neither a strategy nor a budget for social media marketing, and probably use OSN due the novelty of the phenomenon or because their customers use OSN. To refine the measures and assesses the reliability and validity of constructs we used an exploratory factor analysis using SPSS for the MO, EO and business performance constructs. After excluding some variables, Cronbachs alpha (which measures the internal consistency of a scale) was calculated for each construct. For MO sub constructs we obtained coefficients between 0,751 and 0,855; 0,798 for EO; and for performance sub constructs between 0,791 and 0,906. Following Peterson (1994), a value smaller than 0,7 shows a low internal consistency of the scale, so these results are satisfactory. A Confirmatory Factor Analysis (CFA) using AMOS v.18 through a SEM was conducted and confirms these results. 4. Results We used Structural Equation Modeling (SEM) in this study, an established component of the methodological repertoire of marketing researchers (Baumgartner & Homburg, 1996). This

technique, a combination of CFA and multiple regressions, allow researchers to analyze the relations between observed and unobserved variables or constructs (Schreiber, Nora, Stage, Barlow & King, 2010). A structural model displays the interrelations among latent constructs and observable variables. We estimated a model including MO, EO and performance. The overall fitness indices of the model suggest a good fit for the construct model. 2=417,370 (308 d.f.) (p<,001); 2/df = 1,355. The relative chi-square (2/df) is an index of how much the fit of data to model has been reduced by dropping one or more paths. Using ratios as low as 2 indicate a reasonable fit (Marsh & Hocevar, 1985). In our case 1,355, shows a good model fit. Furthermore, our sample meets the minimum size required to accept at the 0,01 level a model with this chi-square statistic and this number of degrees of freedom. Our sample size is 191 and Holters critical N for a for a significance level of 0,01 is 168. Additionally, the CFI index (Comparative Fit Index) of 0,956 indicates again a good model fit, because when these values are close to 1 data validate the theoretical model. RMSEA (Root Mean Square Error of Approximation) is 0,043, below the acceptable level of 0,05, which indicates a close fit of the model in relation to the degrees of freedom. The SEM results (Table 1) shows the following facts four our sample: i) the positive and direct effect of MO on business performance, supporting the notion about this relation (Shoham, Rose & Kropp, 2005); ii) the positive and direct effect of MO on EO according previous studies (Atuahene-Gima & Ko, 2001); and iii) that there is no evidence for supporting the direct effect of EO on business performance, which is indirect through other variables according to Lumpking & Dess (1996). One of these variables could be the MO itself (Atuahene-Gima & Ko, 2001) argue that firms that combine EO and MO show higher performance results than firms that only develop one orientation). Table 1. SEM estimates. Relation MO Performance MO EO EO Performance

Estimate Estimate Std. ,254 ,399 ,484 0,648 ,098 ,115

Std. Error ,087 ,131 ,116

Critical Ratio 2,941 3,704 ,845

P ** *** n.s.

Notes: *** p< 0.001; ** p< 0.05; n.s.: Not supported.

To test our general hypothesis, the intensity of use of social media marketing moderates the relations between capacities and business performance; we applied a multiple group technique. Using AMOS v.18, the data were divided considering the Intensity categorical variable (Low, Medium and High Intensity of social media marketing use), calculated from the MCA. SEM estimates were calculated for each group. To check if there are differences between the groups we used a tool developed by Gaskin (2011), which evaluates the differences by the critical ratios method. A matrix of every possible parameter value in the model compared against both groups is obtained with AMOS. The tool calculates the z-score for the difference among the estimates in the comparison. Table 2. Multi group comparison between social media marketing intensity. Low Med. Med. High Hypothesis Relations Est. Est. zscore Est. Est. zscore results MO Perf ,323 ,103 -,736 ,103 1,112 2,017** H1 - Confirmed MO EO ,647 1,071 1,065 1,071 ,033 -2,399** H2 - Confirmed EO Perf ,113 ,067 -0,187 ,067 -9,318 -,113 H3 Not confirmed
Notes: ** p < 0.05; Est.: Estimate.

Our results show that H1 is confirmed: the intensity of use of social media marketing moderates the relationship between MO and performance. There is a significant difference between Medium and High intensity. However, there is no significant difference between Low and Medium intensity. H2 is also confirmed: the intensity of use of social media marketing moderates the relationship between MO and EO, but only comparing Medium and High intensity. No significant differences were found for Low and Medium. Finally, H3 is not confirmed: the intensity of use of social media marketing does not moderate the relationship between EO and performance. 5. Conclusions, Future Research and Implications Several findings emerged from our study. First, the results confirm for Spanish firms that use social media marketing the previous findings about the direct and positive relation between MO and performance; and between MO and EO. Our results agree with previous studies that did not find evidence for supporting the direct effect of EO on business performance. Second, the results show that firms must use OSN in an intensive way to potentiate the relation between MO and performance. Just if the firms participate actively in OSN, really develop a social media marketing strategy, invest in social media marketing and have a community manager or a digital marketing agency; they could take profit of the potential of OSN as a marketing tool. This is coherent with the MO construct theory, because manage and knowing the customers and the competence through OSN could improve performance (Shoham, Rose & Kropp, 2005). Results show that there is not enough with having some OSN profiles and do some basic social media marketing actions. A dedicated and strong effort in social media marketing is needed to observe a real impact in performance. Third, the results prove that firms must use OSN in an intensive way to moderate the relation between MO and EO. Hence, an increased customer awareness and competence through the OSN, and the articulation of social media marketing in strategy allows firms to have an innovative attitude and proactive (Atuahene-Gima & Ko, 2001). Fourthly, there is no evidence to support that a higher intensity in the use of the social media marketing moderates the EO - performance relation. Probably it is not enough of being innovative, proactive and to take risks through the use of social media marketing to impact on performance. This result agrees with mentioned literature and open future research about the indirect effect that EO has over performance through other variables. Summarizing, only a high intensity in the use of social media marketing could help to moderate the MO effect over performance, and the MO effect over EO. Having a real and intense social media marketing strategy, investing in social media marketing actions, is needed for success. It is not enough to be a social media marketing amateur: firms must be professionals or even geeks to take profit of this emerging and growing marketing tool. This study is limited by several factors that should be addressed in future research. Future analysis could include variables like size, sector, location or marketing budget. Several variables were including for measuring the intensity of use of social media marketing. Therefore, future research should compare and contrast this construct to capture a more exact picture of social media marketing intensity for business. Finally, this study suggests several implications. Managerial: marketing managers should understand the emerging OSN phenomenon to take advantage of its potential. Policy makers: the agencies promoting entrepreneurship and enterprise development should take note of the phenomenon for developing training courses, and tell success stories to serve as inspiration for new and existing businesses, especially for entrepreneurs and SME. Academy: We believe that the academic community should know what is happening around social media marketing.

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