A STUDY ABOUT E-WOM ON AN ECONOMIC CRISIS CONTEXT: THE CASE OF TELECOMMUNICATIONS

Hugo Miguel Fidalgo Ferreira

Dissertation submitted as partial requirement for the conferral of

Master in Marketing

Supervisor: Prof. Dr. Hélia Pereira

ISCTE-IUL, Marketing, Operations and General Management DepartmentApril 2014

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Index

I. Introduction

II. Theoretical Framework

III. The Telecommunications’ Industry

IV. Methodology

V. Main Results

VI. Principal Conclusions and Recommendations

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter I - IntroductionImportance of the subject in study

• The impact of the US financial crisis all over the world

• Financial crisis turned into a global economic downturn

• Dramatic change of reality to fragile economies

• New consumers’ shopping habits

• At the same time, “disconnection” is not an option for consumers

• However, consumer loyalty to telecom operators has decreased

“Particularly in the telecommunications industry, switching providers even from within continuous contract

relationships is easy and companies struggle to retain their customers”

(Karjaluoto et al., 2012: 636)

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter I - IntroductionResearch Problem

The centrality of “change” in contemporary consumption of telecoms:

• Change in the economic context;

• Change in the ways consumers get information from;

• Change in the telecommunications’ industry;

• Change in the consumers’ behavior.

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter II – Theoretical FrameworkEconomic Downturn

• The North American financial crisis, a.k.a. “the worst the world has seen since the Great Depression during

1929-33” (Sagemann & Reese, 2011: 22).

• U.S. securities sold to European banks as the reason for triggering the European crisis. Local financial crisis in

Europe contributed to deepen the economic crisis in Europe (Karanikolos et al., 2013; Feldstein, 2012; Glencross, 2014).

• Portugal in the center of the turbulence, as one of the more indebted countries and with higher

unemployment rates (Ureche-Rangau & Burietz, 2013; Dias, 2012; Ali, 2012; Eurostat, 2014b).

• Historically, economic downturns lead companies to decrease marketing investments. However, it had been

demonstrated that reinforcing investment seizes brands’ top market position from competitors (Maddox, 2009;

Rollins et al, 2014; Srinivasan et al., 2005; Mahoney, 2009).

• During the present economic recession → the rising of investment on e-marketing, across industries (Rollins et

al., 2014).

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter II – Theoretical FrameworkThe Consumer Behavior

• Human relationships in the center of consumers’ behavior and motivation. Consumers search to solve

specific buying problems + to fulfill their motives of achievement + reduce buying risks (Kassarjian, 1971; Webster

Jr. and Wind, 1972).

• Previously to the recession → times of extravagant shopping. The postmodern human: “Homo

consumericus” (Flatters & Willmott, 2009; Firat, 1997).

• Now, precarity/insecurity affect millions. Disillusionment, sobering and stress. Less money is spent. Price

becomes more important. Purchases are more benefit-driven (Dörre, 2006; Cundiff, 1975; Burroughs & Denton, 1997;

Faganel, 2011; Ang et al, 2000, Lichtenstein et al., 1993).

• Ease of access to information and products → impact on consumers’ level of involvement with products and

brands + decrease on brands’ loyalty (Feldman, 2002; Laurent and Kapferer, 1985; Richard et al., 2010; Flatters & Willmott, 2009).

• Clients in the center of content generation → urgency to understand how to create online trust (Kietzmann et

al., 2011; Shankar et al., 2002).

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter II – Theoretical FrameworkWord-Of-Mouth Communication

• “informal, person-to-person communication between a perceived noncommercial communicator and a

receiver regarding a brand, a product, an organization, or a service” (Harrison-Walker, 2011: 63).

• Concepts of “market mavens”; “price mavenism” and “opinion leaders” (Feick & Price, 1987; Lichtenstein et al., 1993;

Chan & Misra, 1990).

• Impact of WOM and e-WOM depends on consumers’ expertise and motivations upon products (Gupta & Harris,

2010; Park & Kim, 2008).

• Virtual communities and social media platforms as “the most popular, prominent and powerful tools to

disseminate information (…) shape public opinion”; and to influence consumers (Perlmutter & Schoen, 2007;

Thompson, 2003; Senecal and Nantel, 2004; Chevalier and Mayzlin, 2006; Dellarocas, 2006).

• Brand recommendations from friends (61%) and costumer reviews (38%) are the most trusted by consumers (Mashable, 2013).

• Brands and e-commerce sites reinforcing their presence in social networks; actively interacting with

customers; and increasing satisfaction levels (Goldenberg et al., 2012).

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

• Estimated revenue of market ecosystem = 1,2 billion EUR, almost 2,2% of the global GDP.

• Half the worldwide population is using mobile communications, and growing 7,6% p.a.

• Forecast of 4 billion mobile subscribers in 2018.

• In U.K., the time spent on smartphones is estimated on 128 minutes per day.

• Average Revenue Per User (APRU) declining in every region of the world due to price pressures over

operators and multi-SIM consumers.

(GSMA Wireless Intelligence & A.T. Kearney Analysis, 2013)

Chapter III – The Telecommunications’ IndustryThe Global Telecommunications Market

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter III – The Telecommunications’ IndustryThe Portuguese Telecommunications Market

• 10,8 million inhabitants VS 16,7 million active mobile devices (CIA, 2013; ANACOM, 2013c).

• Increasing popularity of “services packs” in double/triple/quadruple/quintuple-play (ANACOM, 2013a).

The four major operators in Portugal:

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter IV – MethodologyResearch Questions

1. What are the characteristics of Consumer-to-Consumer (C2C) communication, within the defined online

platforms, and what may be the outcomes of the observed e-WOM?

2. What is the role and influence of “price” on C2C communications and how is its evolution presented

throughout time?

3. What are the most valuable aspects and solutions for telecommunication consumers, according to the

observed C2C and Consumer-to-Business (C2B) communication?

4. Are telecommunication brands performing the best online practices to enhance their Business-to-

Consumer (B2C) communication, and thus increase their brand equity?

5. What can operators do in order to try to increase their customers' satisfaction levels and, therefore, to

enhance their performance?

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter IV – MethodologyNetnography

• Exploratory study: opinions of a sample of people who may contribute with ideas/knowledge linked to a

phenomena under investigation (Churchill, 1979).

• Qualitative research: absence of numerical measurement/statistical analysis but which provides “an in-

depth, if necessarily subjective, understanding of the consumer” (Calder 1977: 353)

• Non-participant Netnography: research tool that allows researchers to capture and critically examine “the

education and learning occurring in informal sites of consumer education, especially in online communities”;

in a manner that it is totally naturalistic and entirely unobtrusive (Sandlin, 2007: 288; Kozinets, 2002).

• Periods in which data was collected: 1st – April/May 2013; 2nd – March/April 2014

• Estimated number of direct/indirect observed respondents: {200 – 400}

• Web communities under analysis:

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter V – Main ResultsMain Results from the Investigation

1. What are the characteristics of Consumer-to-Consumer (C2C) communication, within the defined online

platforms, and what may be the outcomes of the observed e-WOM?

• Zwame Forum: Highly involved and informed consumers; very fast responses; technology enthusiasts; brand

ambassadors; fast dissemination of information and high influence of e-WOM.

• Facebook: B2C/C2B interaction focused; e-WOM occurs more through indirect way.

2. What is the role and influence of “price” on C2C communications and how is its evolution presented

throughout time?

• Great importance (and increasing) given to price, across topics and over years;

• Discussions on promotions; discounts; and contracts and negotiations;

• However, “price” was not always the most single important variable for consumers.

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter V – Main ResultsMain Results from the Investigation

3. What are the most valuable aspects and solutions for telecommunication consumers, according to the

observed C2C and Consumer-to-Business (C2B) communication?

• Price + Quality (e.g. Internet speed; connection strength);

• Innovation; Customer Service; Bundling services in packs; and Extra benefits also pointed out.

4. Are telecommunication brands performing the best online practices to enhance their Business-to-

Consumer (B2C) communication, and thus increase their brand equity?

• MEO as the most popular operator on Facebook, sharing multiple types of content. Competitors faced

difficulties on creating engagement; as well as they shared much more limited types of content.

• MEO also as the most “humanized” and sympathetic brand while communicating with consumers.

• MEO and Vodafone use social networks for Customer Service.

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter V – Main ResultsMain Results from the Investigation

5. What can operators do in order to try to increase their customers' satisfaction levels and, therefore, to

enhance their performance?

• To be aware of consumers’ needs and concerns;

• Focus their effort on improving and obtaining the best services and then strategically promote them among

the target (investments on communicating inferior products is not a good strategy);

• Be flexible when dealing with consumers, especially on negotiations;

• Approach subjects outside the company’s boundaries when communicating online;

• Share relevant, valuable and interesting content;

• Provide good customer service through social networks and create bonds with audience.

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter VI – Principal Conclusions and RecommendationsTheoretical and Business Contributions from the Investigation

• Amplification of empirical knowledge on online discussions of telecommunication consumers, on a crisis context;

• Fulfillment of gap in literature on the observed research field;

• Disclosure of the importance and influence of “price” and “quality” on shaping shopping decisions;

• Confirmation of price sensitivity and benefit search among consumers – “loyalty” as a frivolous aspect;

• Acknowledgement of e-WOM power on influencing the observed online consumers’ decisions.

• Identification of critical factors for operators to improve performance:

• Price, quality, flexibility, innovation, transparency, seriousness, humanity and sympathy;

• Contribution with detailed information on operators’ actions and performance;

• Providing knowledge for operators to enhance services and to better target investment and marketing efforts.

E-WOM ON AN ECONOMIC CRISIS CONTEXT TELECOMMUNICATIONS

Chapter VI – Principal Conclusions and RecommendationsLimitations and Suggestions for Future Investigations

• Quantitative study to confirm/revoke conclusions;

• Guarantee that only real consumers are observed and taken into account;

• Extend the study to other countries deeply affected by the economic crisis;

• Revisit the subject in some time from now and observe differences.

Thank youHugo Fidalgo