NAME:AGBADAOLA OLABODE MATRICNO: 17100230594CHAPTER TWOLITERATURE REVIEW 2.0INTRODUCTIONThissection will review literatures on the insurance industry in Nigeria, socialmedia, branding and theories governing the study.
Finally, it will look at paststudies on social media and corporate performance. 2.1 THE NIGERIAN INSURANCE INDUSTRYTheinsurance industry in Nigeria is regulated by the National Insurance Commission,guided by constituted Acts like, the Insurance Commission Act 1997 andInsurance Act 2003. As an emerging industry in Nigeria, there are said to becertain major players within the sector which are: the insurance company andreinsurance establishments which underwrite policies, the insurance brokers andagents who play the role of the intermediary that connects the insurance orreinsurance companies and the customers, and the loss adjusters who, in theevent of a claim, perform a proper survey and estimate is to be done todetermine the exact value of damage and cost implication to indemnify theinsured for the loss. About1.
5% of adults in Nigeria have an insurance policy today. This little penetrationis partly due to a lack of faith of the public in insurance companies and thesector as a whole. Another major factor contributing to this is the lack ofknowledge and understanding of insurance on the part of the people. As a way toincrease sales and penetration, National Insurance Commission (NAICOM) in 2009,came up with the Market Development and Restructuring Initiative (MDRI), to furtherenforce certain insurance policies already made compulsory.Accordingto The Insurance Act 2003 and certain other legislations, six insurancepolicies are mandatory.
PENCOM Act 2004, mandates Group life insurance, Employersliability as stated in the Workmen’s Compensation Act 1987, buildings underconstruction in section 64 of the Insurance Act 2003, Occupiers liabilityinsurance in section 65 of the Insurance Act 2003, Motor Third party Insurancein section 68 of the Insurance Act 2003 and Health care Professional indemnityinsurance under section 45 of the NHIS Act 1999. 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, as micro insurance is seen as a significant risk managementinstrument, aiding protection the helpless population. It has been observed byNAICOM that sales and distribution of insurance is extremely focused on metropolitanareas due to target of compulsory insurance policies and corporate accounts,and that micro insurance cannot efficiently be accessed through conventionalintermediaries, brokers and agents. Thusother channels like cooperatives, non- governmental organizations, the NigerianPostal Service and Third Party Administrators such as post offices, branches ofbanks, airtime dealers and agents, fertilizer distributors (and otherdistributors such as dairies and bread distributors), and retail outlets thatare patronized and trusted by the local population to act as Micro insuranceintermediaries.
Thereis a reasonable level of competition in the insurance industry, in Nigeria andcertain sectors have been highlighted as competitive, from life to general insurancepolicies. Big, reputable financialestablishments are known as the ones with the huge competitive sector. The Nigerianinsurance industry is currently made up of about 57 registered organizationsapproved by NAICOM, as against the 140 registered in 1994. 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 and exchangeof user-generated content.” Furthermore, social media depend on mobile andweb-based technologies to create interactive platforms through whichindividuals and communities share, create, discuss, and modify user-generatedcontent. Social media differs from traditional media in many way from the sizeof the available audience to the frequency with which it is used to its stayingpower. 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 The extent to which a product or brand is known byexisting and potential clients, and to which connections can be made accuratelywithin the consumer group for the product, is called brand awareness. Asposited by Carol Tice, (2012), brand-building can be effectively done throughsocial media, as it is one of the essential tools.
Via social media, you canhow you want your brand positioned, and also create knowledge of the servicesyou render. 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 long or short term.
In essence, a brandthat customers and prospective customers are familiar with is more likely to bepatronized than competing brands or products. Social media marketing has agreat impact in creating brand awareness by the exposure it gives to the goodsand services of the company to a wide audience with differing metrics that canbe calculated and optimized to suit the brand’s needs. This level of exposureis mostly measured or known by the amount of subscribers, fans or followers onits 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 andfeedback, and reduces the time spent on creating consumer support feedback. Being quick to respond to clients improvestheir level of satisfaction with the brand and will further increase retention ratesas well as improve brand reputation.
A process or means through which people share meaning,is known as communication. It is necessary, therefore, that participants areable to interpret the meanings embedded in the message they receive, and then,as far as the sender is concerned, able to respond coherently. (Baines et al 2011).
Social media and mobile communication platforms can be used for studying andcollecting information on problems and issues faced by customers and consumers(Shih, 2009). This, when combined with research into the relevant market, willhelp create a clear direction for the organization and also help deal withcustomer issues before they get out of hand and cause reputational 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 repeat exposure as with social networks,organizations have the opportunity to remind their target audience over andover again about their offerings which can also lead to shortened sales cycles andquicker profits. (Tice, 2012). In order to measure the scope of the social media activitiesof an organization, social exposure can be used by measuring the numbers offollowers/fans, impressions and subscribers an organization receives on theirsocial pages. This exposure is necessary to build a community that can spreadthe company ideals and key messages. To maximize reach, companies would need tohave a presence where people are constantly updating themselves on the contentthey produce (Halligan & Shah, 2010) as having more exposure willessentially increase the chances of consumers interacting with your brand.
CompetitiveAdvantage Competitiveadvantages are company assets, attributes, or abilities that are difficult toduplicate or exceed and which provide a favorable position over competitors inthe long run (Faulkenberry, 2012). It is the ability of a companyto deliver their products, services or benefits, either at a better rate thanother players in the same industry be it through lower costs or productavailability. Social media gives organizations who incorporate it into theirmarketing strategy a competitive edge by providing real-time feedback fromcustomers. With little or no delay between receiving information anddisseminating it, the company can provide rapid responses to customers and gainan advantage over competitors who do not respond as quickly or have failed toinvest in social media (Baines et al 2010). Anothercompetitive advantage social media offers is brand monitoring.
Monitoring andmeasuring brand performance and perception via social media enables companies followthe conversations that customers are having about their product and effect anychanges if necessary. It offers a competitive advantage by showing the comparisonsthat customers draw between the company and its competitors, which can help tomake decisions about pricing and customer preferences. By using trackingprograms such as Google Analytics or Row Feeder, the company can identify thedemographic profiles of their followers, customize their products and marketthem accordingly (Mangold & Fauld, 2009).2.3 CONCEPT OF BRANDINGTheword “brand” is rooted from the Scandinavianword “bränna”, meaning to burn, fire in Swedish is referred to as “brand”, (Dahlberg, Kulluvaara, & Tornberg, 2004). In essence, toleave a mark on an item or property produced by someone is branding (Dahlberg, Kulluvaara, & Tornberg, 2004). Czinkota andRonkainen (2001) were of the view that a company with a strong brand nameprovided freedom to exploit a fresh market or different market category. (Kotler & Armstrong, 1996), were of the viewthat a brand can be taken as name, term, sign, symbol, design or a combinationof all, that is associated with a product or service with the intention ofidentification in any circumstance by consumers.
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) added 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 take on risk when they purchase products, whether theyare marketed as perishable or long-lasting and to varying degrees, customerscan get added value from products that lower risk to them. So when there isrisk inherent in a product, customers are usually willing to pay to reducerisk. The brand acts as a mechanism to increase customers’ confidence that theproduct will provide excellent and expected quality. RelationshipValue Brandsalso communicate assurance that the firm producing the product can be trustedto attend to the customers’ needs and concerns as needed. A significant aspectof product value is the perception that the firm will respond as the customers’desire, to unforeseen 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 their material culture(clothes, homes, craft goods, etc.
) as symbols of values and self-expression.In contemporary market economies, consumer goods now dominate in serving thisfunction hence the popularity of the term “consumer culture”. In particular,brands have become powerful markers to express a variety 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 social structureso that the rate of adoption reaches a point where it happens automatically andcreates further, self-sustained. Factors influencing critical mass may involvethe size, interrelatedness and level of communication in a society or any ofits 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. Therecan be many kinds of ties between the nodes. For example, the nodes to which anindividual is thus connected are the socialcontacts of that individual. These concepts are often displayed in asocial network diagram, where nodes are the points and ties are the lines. Socialnetworks operate on many levels and play a critical role in determining the wayproblems are solved, how organizations are run, and the degree to whichindividuals succeed in achieving their goals. Peoplein a network share information and communicate.
One’s network will include friends,colleagues, school mates, alumni’s, family, and friends of friends. People whoare in the same clique or network are able to get their network to share thesame information. For example, friends can get each other to buy the sameinsurance policies from the same company. So with social media, insurancecompanies can get into the networks of established networks and only need oneperson in the network to adopt the idea.
Members of the same network are likelygoing to adopt an idea or pay attention to reference, remarks or testimony sharedby a member of their network than, than testimony or reference shared by astranger.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 of purchasefor sales to be made.
The impact of the Internet will only vary according tothe role that the brand plays in certain cases. Secondly, there is a vastoffering of Internet technologies which will affect brands in different ways.Thirdly, the Internet is leading to some secondary effects in the marketstructures that affect brands. The combination of these factors, far fromleading to the death of brand management, will in many cases lead to anincreased role for brand management.
(Corcoran & Feugere, 2009) in their study reported that the use of socialmedia by brands and retailers in the U.S. showed that low to high-profit brandsand retailers 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,implementing user reviews into their brand decision making, and selling theirproducts online.
It also notes that companies now build their own socialnetworks. Also,Dutta, 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 creating comprehensivestrategies in the area of social media, it is yet to be adopted ascomprehensively 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, theygive an opportunity to learn from instant information and unvarnished feedback.
HoweverAula (2010), in his article, focused on the threat and risk of social media to thereputation of businesses. He cited examples of events showing how negativepublicity on social media led to negative impact on organizational reputation.He further noted that social media such as Facebook and Twitter are popular forcorporate social media activities but that they expand what the scope ofreputational risk and boost chances of risk 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, allowing themto interact and foster a potentially lucrative relationship.
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