The Impact of Social Media on Business Model Innovation: Importance of Key Opinion Leader, User-Generated Contents, and Interactivity of the Network Community

Rajibul Hasan1, Yuelin Teng2, and S.M. Riad Shams3

'School of Business, Maynooth University, Ireland 2Rennes School of Business, France 3Newcastle Business School, University of Northumbria, UK

Introduction

In the Chinese merchandise market, social media marketing (SMM) has become commonplace. But luxury brands have always held a sense of exclusivity and perceived mystery and been cautious in their use of SMM. Increasingly, though, luxury brands have chosen to use more social media exposure in order to meet Chinese consumers’ needs and influence their purchasing behavior.

Through social media, consumers can interact with KOL, publish UGC, and view products recommended by their network. KOL on social media can influence a consumer’s purchasing-decision process, the network community is an essential means of improving the learners’ cognitive level, and the learners’ implicit knowledge plays an essential role in this cognitive process (Shams, 2013a; Vrontis et al., 2018).

Understanding these social media attributes and their influence on consumers, especially millennial, can help marketers better comprehend social media’s influence on luxury consumer behavior and adapt their strategies to attract consumers. This research aims to investigate the social media influence on Chinese consumers’ luxury purchase behaviors. Figure 2.1 shows the interaction of these elements.

Social Influences on Social Media and Its Influence on Consumer Behaviors

Figure 2.1 Social Influences on Social Media and Its Influence on Consumer Behaviors.

Literature Review

The Chinese Luxury Market Trend

The Chinese consumer market is in transition, and this offers tremendous new opportunities that other developed countries do not have. Three trends are currently manifesting themselves: (a) a rising middle- income group with more disposable income and a new sense of consumer freedom; (b) increasing social media influence and e-commerce channel power, enabling mobile payment to offer new opportunities and greater convenience; and (c) maturing Chinese consumers who have greater expectations regarding value for their money and brand distinction.

Tencent Marketing and Boston Consulting Group (2019) jointly released the China Luxury Digital playbook, and the report shows that data insight drive, social media, and omnichannel linkage are the foci of digital marketing growth for luxury brands, and younger, more regional and socialized consumers will become the future target of luxury marketing in China.

The Chinese Luxury Consumer Portrait and Habit

In developed countries, such as in Europe and the United States, the product or service with the highest quality, the deepest cultural connotation, and artistry is considered a luxury item (Vigneron & Johnson, 1999). For Chinese consumers in a society focused on becoming richer and attaining greater prestige, luxury goods or services serve as a means to boosting self-worth and social status. This is reflective of the central characteristics of Chinese culture: the importance of face and relationships. Therefore, enhanced social status is the biggest motivation for luxury consumption, which leads Chinese consumers, unlike consumers from other countries, to have higher expectations and seek personalized and unique luxury brand products.

Generation Y (those born between 1980 and 1996) is the main driving force for the Chinese luxury market’s development, accounting for 56% of total spending. For the most part, they are at the peak of their personal careers and normally have higher incomes. Thus, they have the material basis and intention to flaunt their social status and success by purchasing luxury brands.

Another demographic group, Generation Z (those born between 1997 and 2015), are well-educated, and because of the Chinese one-child policy in force when they were born, they come from families with better economic circumstances. The financial support parents provide them has greatly contributed to their strong purchasing intention, especially for expensive luxury goods. Most are connected to social media and are open to new experiences, so they are more likely to be influenced by bloggers and KOL and to follow the trends of luxury enthusiasts.

Both Generations Y and Z have grown up in the digital age. This has allowed them to be on the edge of fashion frontiers, and, as a result, they tend to redefine the value of certain goods and services based on new forms of consumerism.

Chinese luxury consumers can be classified into four categories—luxury enthusiasts, luxury followers, luxury wise, and luxury laggards—according to their consumer behaviors, brand recognition, and purchase intention (Chevalier & Gutsatz, 2012).

Social Media Marketing in China

Five social media marketing characteristics (entertainment, interaction, trendiness, customization, and word of mouth [WOM]) can be associated with a brand. And for some luxury brands, social media serve as the most interactive tool to communicate the core value of luxury. With SMM, the interaction between the consumer and the platform is immediate, interactive, and low cost (Miller et al., 2009).

Various digital platforms such as Weibo, Instagram, and Little Red Book have distinctive consumer influence. For example, some bloggers share their product-using experiences in videos, which are viewed and forwarded, and this creates great value. WeChat is the most popular messaging app in China and has 938 million monthly active users (Novet, 2017). Thus, based on these statistics, WeChat groups, friend circles, and merchandise companies’ public accounts have a huge propagation effect and stimulate digital commerce.

Accenture (2018) reported about 90% of Chinese consumers engage in social media that focuses on such areas as food, travel, sports, and fitness. These interest circles have had a significant influence on consumer buying behavior, and most consumers have expressed a preference for believing and buying products recommended in these communities. Flowever, even though creative activities such as offline exhibitions and flash shops have become attractive to consumers, social content and digital media still occupy nearly half of their attention. WeChat is the social platform consumers used most to search for information. Thus, social media marketing’s influence on consumers has been positively affected by several factors: trust, intimacy, WOM, and customization (Kim & Ко, 2010).

The Online Community

The development of the Internet and advanced information technology has led to social media building a new business model: community + e- commerce. The construction of an online community platform for consumers to interact and communicate has encouraged users to share their shopping experiences and has enhanced interaction between users and, also, users and brands, which has allowed them to become opinion leaders. There are four kinds of users active in the online community: KOLs (celebrity and key opinion leaders), KOCs (key opinion consumers), general users, and brand officials.

In addition, there is a new concept, UGC, on the online content communities. It refers to content that encourages users to express individuation, making consumers no longer passive recipients of information. They can post their comments on the e-commerce platform and share goods via a social network service; thus, a product achieves a second round of public exposure, which builds its influence. For consumers, the rise of UGC in the mainstream media not only furnishes information but also grants them the chance to be the producers and disseminators of information.

Key Opinion Leaders and the Celebrity Effect in China

In China, celebrities and the top-tier KOLs have more than million followers on social media. And thanks to these avid online followers, KOLs have reaped handsome sponsorship compensations when they represent, for example, fashion designers such as Louis Vuitton (Wu Yifan), Dior (Angelababy), and Armani (Hu Ge). The Chinese Internet online celebrity economy is a fast-growing economy built on digital and social media influence marketing where celebrities leverage their popularity and influence to get their fans to purchase goods and services they have endorsed.

Microinfluencers (i.e., those who have more than 10,000 fans on social media) interact with their fan bases often and strategically post pictures of themselves in outfits from the brand on their social media pages and detail how to make similar purchases and match different fashion elements. Their vast social assets on the networks and their loyal fan following provide an effective promotion for the brand, making them reliable “salespersons.” For some brands, the online celebrity helps promote sales; however, for some consumers, the so-called down-to- earth celebrities harm the brand exclusivity and brand image.

 
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