NAME:AGBADAOLA OLABODE MATRICNO: 17100230594CHAPTER TWOLITERATURE REVIEW 2.0INTRODUCTIONThissection will review existing literature on the insurance industry in Nigeria,social media, branding and theories governing the study. Finally, it will look atpast studies on social media and its link to corporate performance. 2.1 THE NIGERIAN INSURANCE INDUSTRYTheinsurance industry in Nigeria is regulated by the National Insurance Commission,guided by constituted Acts like theInsurance Commission Act 1997 and Insurance Act 2003. As an emerging industryin Nigeria, there are said to be certain major players within the sector whichare: the insurance company and reinsurance establishments which underwritepolicies, the insurance brokers and agents who play the role of theintermediary that connects the insurance or reinsurance companies and thecustomers, and the loss adjusters who, in the event of a claim, perform a propersurvey and estimate is to be done to determine the exact value of damage andcost implication to indemnify the insured for the loss.
About1.5% of adults in Nigeria have an insurance policy today. This low level of 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 proper understanding of the insurance sector on the part of thepeople.
As a way to increase sales and penetration, National InsuranceCommission (NAICOM) in 2009, came up with the Market Development and RestructuringInitiative (MDRI), to further enforce certain insurance policies already madecompulsory. Accordingto The Insurance Act 2003 and certain other legislation,six insurance policies are mandatory: Group life insurance under PENCOM Act2004, Employers liability under Workmen’s Compensation Act 1987, buildingsunder construction under section 64 of the Insurance Act 2003, Occupiers Liabilityinsurance under section 65 of the Insurance Act 2003, Motor Third party insuranceunder section 68 of the Insurance Act 2003 and HealthcareProfessional Indemnity insurance under section 45 of the NHIS Act 1999.1 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. It has been observedby NAICOM that sales and distribution of insurance are mainly focused on metropolitan areas due to the target of compulsory insurance policies andcorporate accounts and that microinsurance cannot efficiently be accessedthrough conventional intermediaries, brokers and agents.
Thus other channelslike cooperatives, non- governmental organizations and third party administratorssuch as post offices, branches of banks, and retail outlets among others, arepatronized 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 in the insurance industry have been highlighted as competitive,from life to general insurance policies, with the big and reputable financialestablishments taking the lead. The Nigerian insurance industry is currently madeup of about 57 registered organizations approved by NAICOM, compared to the 140registered in 1994.2 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 ways, from the size of the available audience to the frequencywith which it is used to its staying power. 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 the longor short term. In essence, a brand that customers and prospectivecustomers are familiar with is more likely to be patronized than competingbrands or products. Social media marketing has a great impact in creating brandawareness by the exposure it gives to the goods and services of the company toa wide audience with different metricsthat can be calculated and optimized to suit the brand’s needs. This level ofexposure is mostly measured or known by the numberof subscribers, fans or followers on its 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 and feedback and reduces the time spent on creatingconsumer support feedback. Being quickto respond to clients improves their level of satisfaction with the brand andwill further increase retention rates as well as improve brand reputation.A process through which people share meaning is known as communication. It is necessary,therefore, that participants are able to interpret the meanings embedded in themessage they receive, and then, as far as the sender is concerned, able torespond coherently. (Baines et al 2011).
Social media and mobile communicationplatforms can be used for studying and collecting information on problems andissues faced by customers and consumers (Shih, 2009). This, when combined with researchinto the relevant market, will help create a clear direction for the organizationand also help deal with customer issues before they get out of hand and causereputational 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 favourableposition over competitors in the long run (Faulkenberry, 2012). Itis the ability of a company to deliver their products, services or benefits,either at a better rate than other players in the same industry be it throughlower costs or product availability. Social media gives organizations whoincorporate it into their marketing strategy a competitive edge by providingreal-time feedback from customers.
With little or no delay between receivinginformation and disseminating it, the company can provide rapid responses tocustomers and gain an advantage over competitors who do not respond as quicklyor have failed to invest in social media (Baines et al 2010). Anothercompetitive advantage that social media offers is the ability for organizationsto monitor and measure brand performanceand perception. Social media enables companiesto follow the conversations thatcustomers are having about their product and effect any changes or deal withany issues if necessary and in a timely manner. It offers a competitiveadvantage by showing the comparisons that customers draw between the companyand its competitors, which can help to make decisions about pricing andcustomer preferences. By using tracking programs such as Google Analytics orRow Feeder, the company can identify the demographic profiles of theirfollowers, customize their products and market them accordingly (Mangold , 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 a name,term, sign, symbol, design or a combination of all, that is associated with aproduct or service with the intention of identification 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 is a risk inherent in a product, customers areusually willing to pay to reduce risk.
The brand acts as a mechanism to increasecustomers’ confidence that the product will provide excellent and expectedquality. 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, schoolmates, alumni’s,family, and friends of friends. People who are in the same clique or networkare able to get their network to share the same information. For example,friends can get each other to buy the same insurance policies from the samecompany. So with social media, insurance companies can get into the networks ofestablished networks and only need one person in the network to adopt the idea.
Members of the same network are likely going to adopt an idea or pay attentionto reference, remarks or testimony shared by a member of their network than,than testimony or reference shared by a stranger.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, itgives companies an opportunity to learn from instantand 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 a negativeimpact on organizational reputation. He further noted that social mediasuch as Facebook and Twitter are popular for corporate social media activitiesbut that they expand what the scope of reputational risk and boost chances ofrisk to companies.
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1 http://www.lawnigeria.com/LawsoftheFederation/Insurance-Act,-2003.html2 https://www.ft.com/content/8c9e297b-6433-3e79-989f-3aa2f11b48bd
