Do social media marketing activities enhance customer equity? An empirical study of luxury fashion brand

Angella J. Kim a,1, Eunju Ko

Abstract:

In light of a growing interest in the use of social media marketing (SMM) among luxury fashion brands, this study set out to identify attributes of SMM activities and examine the relationships among those perceived activities, value equity, relationship equity, brand equity, customer equity, and purchase intention through a structural equation model. Five constructs of perceived SSM activities of luxury fashion brands are entertainment, interaction, trendiness, customization, and word of mouth. Their effects on value equity, relationship equity, and brand equity are significantly positive. For the relationship between customer equity drivers and customer equity, brand equity has significant negative effect on customer equity while value equity and relationship equity show no significant effect. As for purchase intention, value equity and relationship equity had significant positive effects, while relationship equity had no significant influence. Finally, the relationship between purchase intention and customer equity has significance. The findings of this study can enable luxury brands to forecast the future purchasing behavior of their customers more accurately and provide a guide to managing their assets and marketing activities as well.

Notes:

Social media are online applications, platforms and media which aim to facilitate interactions, collaborations and the sharing of content (Richter & Koch, 2007).They take a variety of forms, including weblogs, social blogs, microblogging, wikis, podcasts, pictures, video, rating and social bookmarking.

A recent study by DEI Worldwide (2008) provides the following statistics: 70% of consumers have visited social media sites to get information; 49% of these consumers have made a purchase decision based on the information they found through the social media sites; 60% said they were likely to use social media sites to pass along information to others online; and 45% of those who searched for information via social media sites engaged in word-of-mouth.

The value a customer brings to a firm is not limited to the profit from each transaction but is the total profit the customer may provide over the duration of the relationship with the firm (Kumar & George, 2007).

Customer equity, usually defined as the discounted sum of customer lifetime values, has been considered the most determinant of the long-term values of the firm (Kim, Park, Lee, Knight, Xu & Jeon, 2010; Lemon et al., 2001).

Purchase intention is a combination of consumers’ interest in and possibility of buying a product. As a result of many studies, it strongly relates to attitude and preference toward a brand or a product (Kim, Kim & Johnson, 2010; Kim & Ko, 2010b; Kim & Lee, 2009; Lloyd & Luk, 2010) so that measuring purchase intention assumes consumers’ future behavior based on their attitudes.

Purchase intention is an attitudinal variable for measuring customers’ future contributions to a brand, whereas customer equity is a behavioral variable accounting for actual purchasing record.

Initially, the purpose of marketing is to form a communication by which a firm is able to inform customers of its products and services and create interest in its offering. Marketing is a multidimensional process made up of various strategies; however, a primary goal of any marketing strategy is to increase sales and profitability. According to Srivastava et al. (1998) marketing is an investment that improves customer equity drivers.

Result indicates that a luxury brand’s marketing activity using social media platforms entertains customers by offering a variety of free contents as well as social network activity, and enables customized information searching. Activities on the brand’s social media platforms create interaction among users that can lead to word-ofmouth effects and include fashion and trend attributes. In contrast to existing marketing activities that appeal directly to the value of actual products or services, a luxury fashion brand’s SMM activities focus more on hedonic and empirical values that can be reached by indirect brand experience.

Conclusions:

First, SMM marketing activities of luxury fashion brands comprise five constructs; entertainment, interaction, trendiness, customization, and word of mouth. The brands’ SMM activities perceived by consumers include distinctive values compared to old-fashioned marketing performances.

Second, SSM activities perceived by customers are influential to all customer equity drivers. Since these activities for luxury fashion brands act affirmatively toward all drivers, they are fairly effective. As an integrated marketing medium, SSM activities effectively enhance value equity by providing novel value to customers that traditional marketing media do not usually provide. The brand’s social media platforms offers venues for customers to engage in sincere and friendly communications with the brand and other users, so the brand’s intended actions on the social communication scene were positively affecting relationship equity and brand equity as well.

Third, unlike findings in prior studies, the three customer equity drivers show no positive influence on customer equity in the case of a luxury fashion brand. In fact, brand equity has a negative influence in the present study.

In comparing the influence of three customer equity drivers on purchase intention, value equity, and brand equity, this study found significant positive impacts.

Finally, concerning the relationship between purchase intention and customer equity, which can be redefined as a short-term attitudinal variable and a long-term behavioral variable, the two factors connect each other highly.