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Social Network Marketing for Small Businesses A SOCIAL NETWORK MARKETING FOR SMALL BUSINESSES A THESIS Presented to The Faculty of the Department of Economics and Business The Colorado College In Partial Fulfillment of the Requirements for the Degree Bachelor of Arts By Austin Martinson May 2010 SOCIAL NETWORK MARKETING FOR SMALL BUSINESSES Austin Martinson May, 2010 Mathematical Economics Abstract Social network marketing is an emerging channel of marketing. It could playa large role with small businesses in their marketing strategies. This thesis looks at the factors that affect the implementation of social network marketing for small businesses. Using models and theories surrounding other forms of direct marketing, this thesis fulfills a role in a marketing media with very little research. Relying on eight interviews with a variety of small business owners in Colorado, this thesis analyzes the advantages and disadvantages of social network marketing. KEYWORDS: (Social Networks, Marketing, Small Businesses) ON MY HONOR, I HAVE NEITHER GIVEN NOR RECEIVED UNAUTHORIZED AID ON THIS THESIS Signature ACKNOWLEDGEMENTS I would like to thank my thesis advisor Julie Chesley for all of her guidance and aide with this thesis. Julie was always supportive with her positive attitude and valuable advice. Aju Fenn was also helpful with the completion of this thesis. His words of encouragement, and his faith were welcomed, and appreciated. I would also like to thank all of the participants who donated their time to my study. I learned about entrepreneurship, marketing, and small businesses from these individuals. Without the help of Julie Chesley, Aju Fenn and my participants this thesis would not have been possible. TABLE OF CONTENTS ABSTRACT 11 ACKNOWLEDGEMENTS iv INTRODUCTION 2 THEORY 9 Direct Marketing ....... ........................................................ 10 Viral Marketing................................................. ................................................. 12 Direct Mail. .. .. .. ................ ........................................ .............. ............... 16 Telemarketing. .. ............................................. .......................... ...................... 19 Internet Marketing............................................................................................. 21 Social Network Marketing.................. ......................................................... 23 3 METHODOLOGY 29 Research Design.. ..... ........ .. .................. ........... ......... .............. 29 Population.... .. ... .. .. ..... ... .................... ........ .. ......... ............ 30 Interview Questions..................................................................... 33 Expected Outcome.................................................................... ... 35 4 RESULTS 37 General Marketing Strategy........................................................ .... 38 Online Marketing........................................................................ 40 Social Network Marketing........ .. ........................ ........ ................. 42 Social Networking Sites. ........ .................... ......... ......... ............. 43 Website Maintenance.................................................................. 46 5 CONCLUSION 49 LIST OF TABLES 2.1 Tenninology.......................................................................... 9 3.1 Small Business Owners .......... .. .. .. .. .. ... .. .. .. .. .. .. .. .. .. ... 31 3.2 Profile of Interviewees. .. .. ......................................................... 32 3.3 Interview Questions................................................................... 34 4.1 Responses Regarding What Small Business Owners do to Spur Sales......... 39 4.2 Online Marketing Budget..... .......................... ......... .................... 41 4.3 Social Networking Site Benefits..................................................... 44 LIST OF FIGURES 1.1 ADVERTISING COST COMPARISON CHART............................... 4 2.1 THE REPLICATION OF A VIRAL MESSAGE................................... 15 CHAPTER I INTRODUCTION Social network marketing is a current, barely researched marketing channel. It is a method that has come from the invention of social network sites, such as Twitter, Facebook, Myspace, Linkedln, OneWire, and Buzz. These sites allow vast numbers of users to congregate and socially interact. This media has evolved from early forms of direct marketing. It is important to see exactly how direct marketing has changed since its inception, and to evaluate the effectiveness and efficiency of each medium available to marketers. Primarily, these marketing methods will be discussed with regards to small businesses. Background Since man began communicating, barter and trade came into existence. There is always something that each person wants or needs, yet doesn't have. Value on a good or service is more subjective than objective, yet always existent. The early form of commerce dates back 150,000 years I. In order to barter, one must know what is wanted, and what is offered. The act of describing an object, or even intrinsically deciding its 1 Watson, Peter. Ideas A History of Thought and Invention, from Fire to Freud. New York: Harper Collins Publishers, 2005. 1 2 value, is directly related to what today is called the marketing mix, which includes 2 pricing, promotion, place, and product • Many years ago, ancient traders had to use a basic form of pricing. Deciding if one good was worth another good is the earliest form of marketing. Each seller had to value their own good, and compare it to the value, or price, of the offered good. Bartering was (and still is) very difficult, and societies of the past evolved to invent currency to compensate for this problem. Pricing, deciding the worth of a good or service, became much easier, as there was one item against which to value your good or service. This item (currency) was able to be used by communities, and united them in a marketplace. Around this time came another important part of the marketing mix, the product. Before, the good or service bartered simply was presented without embellishments. With time, more firms were beginning to live off trading, which created more firms. Merchants began competing by increasing the values of their products, embellishing each item through words or design to get what is called in today's terms, the competitive edge. As the idea of getting people to know about your product and its features expanded, merchants began distributing flyers and brochures in the 1400's to get the word out to more potential customers, copying the first direct mail from the Egyptians around 1000 B.C. 3 This is the early form of direct marketing, where firms (individual entities offering a good or service) market directly to their specific individuals, instead of to the general mass. 2Mind Tools Ltd. "The Marketing Mix and 4 Ps." MindTools. Available from http://www.mindtools.com/pages/article/newSTR_94.htm. Internet; accessed 4 December 2009. 3Direct-Mail.org. "History of Direct Mail." Step-by-step Guide to Direct Mail. Available from http://www.direct-mail.org/history3.htm. Internet; accessed 18 November 2010. 3 As time progresses forward to a new era, one where mass media is more abundant and easily accessible, marketers had to adapt. April of 1704 produced the first paid 4 newspaper advertisement , which has been one of the most used methods of advertising until modem day. Mass marketing developed to exploit the advantages of economies of scale. The waste of printing such large amounts of messages about products made this medium evolve and eventually expanded to billboards and posters. Print advertising had been born and the number of potential customers reached by simply one message pleased firms. After, promoting products became the norm, and evolved as more technology came about. When radio was invented, the next step was broadcast advertising, using this new technology to market. Radio advertisements were a large mass market medium, reaching more people than ever. As better radios came to market, so did better radio ads. This pattern continues through television, phone, and finally, to the internet. As each new medium came into play, marketers learned to expand and utilize the new technology. The television's popularity with people brought about its popularity with marketers as well. For years, it has been the most expensive medium per person with the largest potential client market, being a generally nationwide promotionS. The sheer number of viewers kept advertising prices high and small businesses away. One can see from Figure 1.1 that per unit, television advertising is the most expensive. 4 Pishko, Scott. "History of Newspaper Ads." eHow. Available from http://www.ehow.comlabout_5366305 _ history-newspaper-ads.html. Internet; accessed 15 November20 10. S BusinessTown.com, LLC. "Choosing Advertising Mediums." Marketing Strategy. Available from http://www.businesstown.comlmarketing/strategy-medium.asp. Internet; accessed 21 November 2009. 4 Figure 1.1 Advertising cost comparison chart ADVERTISING COST!l.t)OO IMPRESSIONS COST COMPARISON CHART 8y lnstiblte on slgl1;;ge r@serc1\1' Media [)?l\jn11~S J1C . TV 3(} SEC SPOT PHIf.l( TIME W: 3{l SEC: SPOT i I\Tf ENHIING N:Y,21NE \ flAG; <1 C(iLO\J11 N PREMiSES SIGNS 6 Marketers started following the trend that the more people that saw their message, the higher number of customers they received. Mass marketing grew, with hopes that the more potential consumers, the greater revenue.
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