Over the last two decades, customer-based brand equity (CBBE) has emerged as one of the key marketing concepts for academics and practitioners alike (Keller 1993
). CBBE is defined as the differential effect of brand knowledge on consumer response to the brand’s marketing (Keller 1993
). There now exists a robust body of literature on creating, measuring, and managing CBBE in traditional marketing settings (Keller 2016
). As consumer-brand engagement progressively shifts to digital domains, understanding the effectiveness of social media marketing strategies has become vital for brand management. Recently, researchers have started examining how social media activities affect consumer mindset metrics (Colicev et al. 2018
; Liu and Lopez 2016
; Lovett and Staelin 2016
) and consumer behavior (De Vries et al. 2017
). Yet, limited research exists on the link between social media and CBBE. Understanding this connection is important for two related reasons. First, although research has shown that social media is associated with firm value, it’s unclear whether this relationship is predictive or causal. Since CBBE is an important determinant of firm value (Rego et al. 2009
), investigating the social media–CBBE link will help illuminate the mechanism underlying the relationship between social media and firm value. Second, a strong social media–CBBE link will underscore the potential of social media to create enduring customer value (see Kumar 2015
) and thus complement the recent research on value-relevance of digital marketing.
We seek to bridge this research gap by investigating how owned and earned social media affect CBBE. Whereas owned social media (OSM) refers to brand-owned digital assets, such as corporate Facebook pages, earned social media (ESM) refers to voluntary, user-generated brand mentions and recommendations that a company does not directly generate or control. Empirically, we focus on the retail industry because its context presents several advantages for our study. First, social media usage is pervasive in the US retail industry with 91% of American retailers active on two or more social networks as of 2014 (Yesmail 2014
). Second, social media profoundly affects retailer business with the recent social media report suggesting that social media influences purchase decisions of 32% of consumers (Deloitte 2014
). Furthermore, 71% percent of retail executives believe that social media has a significant impact on their businesses (Larson and Dolan 2013
). Yet, the research on the effectiveness of social media in the retail industry remains sparse (Rapp et al. 2013
). Despite the interest in social media, both B2C and B2B retailers continue to focus on one-directional communications with more obsolete communication tools (e.g., email) (Järvinen et al. 2012
). Third, CBBE is particularly crucial for profitable retailer operations due to the intense competition in the sector (Ailawadi and Keller 2004
). As more and more retailers incorporate social media spending in their marketing budgets, understanding how social media impacts CBBE will help retailers in long-term marketing planning.
Accordingly, we investigate the following two research questions: (1) How are owned and earned social media associated with retailers’ CBBE, and (2) which factors moderate this association? To that end, we use high-frequency daily data for 39 retailers and estimate a panel vector autoregression model with exogenous variables (PVAR) to uncover the relationships between earned and owned social media and CBBE.
By doing so, we make three contributions to the marketing theory and practice. First, we are among the first few to show the effect of social media on CBBE, which is an important market-based asset. As CBBE is a key determinant of cash flows and long-term firm value (Rego et al. 2009
), our research implies potentially causal effect of social media on firm value. Thus, this study advances the research stream on key performance indicators for social media marketing, the role of web analytics as well as the return on investment on social media (Saura et al. 2017
). Accordingly, marketers can use social media simultaneously for improving consumer sentiments in the short term and for enhancing CBBE, customer equity, customer experience, and consequent firm value in the long term (Lemon and Verhoef 2016
). Second, our study underscores the relevance of social media for highly competitive retail sector where creating and sustaining CBBE is a major and costly challenge (Ailawadi and Keller 2004
). Third, our analysis pinpoints the conditions under which social media is most effective for retailers. We find that social media emerges as an important driver of CBBE for general retail and high involvement products. Finally, we find that owned social media plays a beneficial (harmful) role for utilitarian (hedonic) and high involvement products.
The manuscript proceeds as follows: in Section 2
, we provide the conceptual framework of this research, in terms of the effects of owned and earned social media on customer-based brand equity. We also introduce the key moderating variables: utilitarian and hedonic goods, high and low-involvement goods, and retail categories. We describe the data and its unique characteristics in Section 3
. We adopt a Panel Vector-Autoregressive (PVAR) modeling approach that we describe in Section 4
and report the results in Section 5
. We conclude in Section 6
with the discussion of the results, the implication of the study, and suggestions for future research.
5.1. Main Results and Moderators
In Appendix A
, we present descriptive statistics and correlations for the sample variables. Table 7
shows PVAR results estimated on the full sample of 39 retailers along with four retail product categories: utilitarian-high involvement (UHI), utilitarian-low involvement (ULI), hedonic-high involvement, and hedonic-low involvement retailers.
At the overall sample level, we find that Earned Social Media Volume (0.05, p
< 0.001), Positive ESM Valence (0.046, p
< 0.001), Owned Social Media (0.106, p
< 0.001), and Advertising (0.332, p
< 0.001) all positively affect CBBE. Thus, positive social media activity, as well as advertising increase retailers CBBE. Interestingly, advertising still has the highest effect on CBBE, confirming previous findings that advertising still constitutes an important way to affect customer perceptions of the firm (De Vries et al. 2017
). In addition, we find that Negative ESM Valence (−0.053, p
< 0.001) negatively affects CBBE, confirming previous research on the role of negative information in customer-based brand equity (Ho-Dac et al. 2013
). We thus find that valence and volume of ESM are equally important for CBBE.
At the subgroups level, we find a few sign changes and considerable heterogeneity in the effect sizes of IRFs. Earned Social Media Volume has the highest effect on both utilitarian-high involvement and hedonic-high involvement retailers (0.173, p < 0.001 and 0.102, p < 0.001 respectively). Thus, the volume of earned social media is effective in driving CBBE for these brands, implying that brand popularity metrics (e.g., likes) are very relevant for high-involvement products. Interestingly, we find that for utilitarian-low involvement brands (e.g., Kroger, Publix), the effect of earned social media volume on CBBE is negative and significant. Given that utilitarian and low involvement brands typically are not very exciting to talk about, their volume of conversation might not be effective, or even detrimental to CBBE. Next, we find that Positive ESM Valence benefits CBBE of hedonic-high involvement retailers the most (0.111, p < 0.01) and Negative ESM Valence harms CBBE of utilitarian-high involvement retailers the most (−0.153, p < 0.01). Thus, for high involvement brands (both utilitarian and hedonic), social media constitutes a double-edge sword. Consistent with our expectation, overall it appears that retailers of high involvement products are more sensitive to earned social media compared to retailers of low involvement products. On the positive side, they can rely on earned social media volume and positive ESM valence to increase CBBE, but on the negative side they are very sensitive to negative ESM valence. Thus, such brands must be able to avoid negative consumer reactions, as it might harm their CBBE. Although Owned Social Media affects CBBE positively at the overall sample level, it harms hedonic-high involvement retailers (−0.293, p < 0.001). This has important managerial implications which we discuss in the Discussion section. The impact of advertising awareness on CBBE is consistently large and positive across the 4 subgroups, underscoring the importance of traditional advertising to the retail sector.
shows the IRFs for 3 retailer subcategories. The impacts of Owned and Earned Social Media are strong for general retail compared to specialty retail and restaurants. Interestingly, Owned Social Media’s impact on CBBE is significantly positive for general retail (1.648, p
< 0.001), non-significant for restaurants (0.004, p
> 0.1), and significantly negative for specialty retail (−0.046, p
< 0.001). On the other hand, restaurants and specialty retail benefit from advertising (0.196, p
< 0.001 and 0.064, p
< 0.001 respectively) while CBBE of general retail suffers (−0.548, p
< 0.001). This suggests that Owned Social Media and advertising awareness work as substitutes in various retail categories. The negative impact of Owned Social Media on CBBE in specialty retail may imply that their consumers trust advertising much more than Owned Social Media. We expand more on this result in the discussion section.
5.2. Robustness Checks
We performed several robustness checks. First, we confirmed the robustness of the CBBE measure to performing brand-level (rather than panel-level) PCA on YouGov metrics. We obtained the same one factor solution. Second, we checked the robustness of our results by (a) using CBBE measure obtained from brand-level PCA, (b) using average of YouGov metrics instead of a factor from PCA, (c) dropping advertising and buzz variables from the model, and (d) using alternative lag-lengths (lag 3 and 4). We present the results of the latter in Table 9
. We do not find significant differences in the results.
We have explored the effects of social media on CBBE in the retail sector. We make three contributions to the marketing theory and practice. First, we are among the first few to show that social media affects CBBE, which is an important market-based asset. This finding has long-term implications for brand management. Thus far, the extant literature has shown either correlational effects of social media on firm value (e.g., Tirunillai and Tellis 2012
) or short-term effects through consumer mind-set metrics (e.g., Colicev et al. 2018
). CBBE is both a short-term and long-term performance metric, given its immediate effect on brand sales (e.g., next quarter) (Seggie et al. 2007
) and more lasting effect on cash flows and long-term financial value (Rego et al. 2009
). Considering that some measures that form CBBE are connected to long-term measures of consumer perceptions towards the brand (e.g., satisfaction) it portrays brand’s longer-term orientation. Thus, CBBE being a key determinant of our research implies a potentially causal effect of social media on firm value. Although we don’t study the full chain of effects from social media to firm value, our research illuminates the underlying mechanism in this chain through CBBE.
Second, we highlight the importance of social media for retailers. In the fiercely competitive retail sector, creating and sustaining CBBE is a major challenge for retailers and likely to be a costly affair. For example, we find that an important determinant of CBBE in retail sector is advertising awareness. However, achieving and maintaining high levels of advertising awareness can be expensive. In contrast, owned social media is relatively inexpensive and earned social media is largely free. Thus, we urge retailers to emphasize social media much more than traditional advertising. Previous studies have urged for more research on the role of social media for retailers and B2B companies (Järvinen et al. 2012
). Overall, we add to this stream of research as well as to the stream that shows that using marketing metrics (e.g., on social media) can lead to a better customer relationship management (CRM) (Li 2011
) and value for the firm (Hanssens and Pauwels 2016
Third, our subsample-level analysis provides important managerial insights to retailers. Social media emerges as an important driver of CBBE for the retailers of high involvement products. As retailing brands increasingly use social media to augment/replace their traditional marketing activities, high involvement brands (e.g., Amazon) can now be more confident of a positive return on such spending (Hoffman and Fodor 2010
). One interesting finding is that for high involvement retailers (both hedonic and utilitarian), social media can act as a double-edged sword. On one side, earned social media volume and positive ESM valence have a large positive effect on CBBE. On the other side, negative ESM valence harms these retailers the most. Thus, high involvement retailers have to carefully manage their consumer sentiment on social media. In addition, whereas owned social media plays a beneficial role for utilitarian high involvement products, it is harmful for hedonic high involvement products. We interpret this result to recommend retailers of utilitarian-high involvement products to emphasize owned social media and invest more efforts in connecting to consumers to share information and resolve their problems. Hedonic-high involvement retailers will perhaps benefit from analyzing the nature of their owned social media messaging, which some consumers may perceive as “pushy”, leading to lower CBBE. Finally, the impact of advertising on CBBE is consistently large and positive, underscoring the importance of traditional advertising to the retail sector.
When we split the sample into subgroups based on the type of retailing operations, we find surprising results. General retailers get the most bang for their buck as owned and earned social media have large impacts on CBBE. Advertising harms CBBE of these retailers, which indicates that general retailers may benefit from shifting part of their advertising budget to social media marketing. On the other hand, specialty retailers and restaurants experience a negative or no impact of owned social media on CBBE. They, however, experience a strong impact of advertising. As earned social media still affects CBBE positively for these retailers, we suggest moving budgets allocated to owned social media to improving earned social media. For example, hiring additional staff to address negativity on earned social media will result in lower negative earned social media valence, which in turn will increase CBBE.
Future Research Directions
Our study paves the way for future research. First, our study shows the effects of social media on CBBE but does not consider the financial performance metrics. Future research can empirically test the potentially mediating effects of CBBE in the social media-sales and firm value link. In addition, future studies might develop a theoretical approach of why owned social media and earned social media affect CBBE. Second, future studies might dig deeper into the reasons why social media has a very strong effect on general retailers and why specialty retailers and restaurants experience a negative or no impact of owned social media on CBBE. Third, future studies might consider other industries in which the link between social media and CBBE can be of interest. For example, airlines and banking might present an interesting context for such studies. Fourth, we use aggregate brand-level data, which we believe to be appropriate for our study. Future research might employ disaggregate individual consumer-level data that can enable more precise estimation of social media effects on CBBE. Fifth, although Facebook is the most commonly used social media platform by retailers, we expect future research to consider other rising platforms such as Twitter, YouTube, and Instagram. For example, Instagram enables brands to engage with consumers using images and videos and enjoys immense popularity among luxury brands. How such vivid content influences CBBE is an interesting unanswered question. It’s possible that on Instagram, owned social media of hedonic-high involvement retailers has a positive impact on CBBE in contrast to the negative impact that we find. Finally, further research can analyze owned social media as well as traditional content more granularly to determine when owned social media complements traditional advertising.
Our study sheds light on the relationship between social media and CBBE in the retail industry context. Understanding this relationship should help us generate specific conditions under which owned and earned social media move the needle for our organizations.