NAME:
AGBADAOLA OLABODE                                 MATRIC
NO: 17100230594

CHAPTER TWO

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LITERATURE REVIEW

 

2.0
INTRODUCTION

This
section will review existing literature on the insurance industry in Nigeria,
social media, branding and theories governing the study. Finally, it will look at
past studies on social media and its link to corporate performance.

 

2.1 THE NIGERIAN INSURANCE INDUSTRY

The
insurance industry in Nigeria is regulated by the National Insurance Commission,
guided by constituted Acts like the
Insurance Commission Act 1997 and Insurance Act 2003. As an emerging industry
in Nigeria, there are said to be certain major players within the sector which
are: the insurance company and reinsurance establishments which underwrite
policies, the insurance brokers and agents who play the role of the
intermediary that connects the insurance or reinsurance companies and the
customers, and the loss adjusters who, in the event of a claim, perform a proper
survey and estimate is to be done to determine the exact value of damage and
cost implication to indemnify the insured for the loss.

 

About
1.5% of adults in Nigeria have an insurance policy today. This low level of penetration
is partly due to a lack of faith of the public in insurance companies and the
sector as a whole. Another major factor contributing to this is the lack of
knowledge and proper understanding of the insurance sector on the part of the
people. As a way to increase sales and penetration, National Insurance
Commission (NAICOM) in 2009, came up with the Market Development and Restructuring
Initiative (MDRI), to further enforce certain insurance policies already made
compulsory.

 

According
to The Insurance Act 2003 and certain other legislation,
six insurance policies are mandatory: Group life insurance under PENCOM Act
2004, Employers liability under Workmen’s Compensation Act 1987, buildings
under construction under section 64 of the Insurance Act 2003, Occupiers Liability
insurance under section 65 of the Insurance Act 2003, Motor Third party insurance
under section 68 of the Insurance Act 2003 and Healthcare
Professional Indemnity insurance under section 45 of the NHIS Act 1999.1

 

Other
actions NAICOM has taken are, to instill the “no premium, no cover” rule,
further increasing premium generation for insurance companies, as well as
issuance of guiding principles released in December 2013 to guide microinsurance business. It has been observed
by NAICOM that sales and distribution of insurance are mainly focused on metropolitan areas due to the target of compulsory insurance policies and
corporate accounts and that microinsurance cannot efficiently be accessed
through conventional intermediaries, brokers and agents. Thus other channels
like cooperatives, non- governmental organizations and third party administrators
such as post offices, branches of banks, and retail outlets among others, are
patronized and trusted by the local population to act as micro insurance
intermediaries.

 

There
is a reasonable level of competition in the insurance industry, in Nigeria and
certain sectors in the insurance industry have been highlighted as competitive,
from life to general insurance policies, with the big and reputable financial
establishments taking the lead. The Nigerian insurance industry is currently made
up of about 57 registered organizations approved by NAICOM, compared to the 140
registered in 1994.2

 

2.2 SOCIAL MEDIA

(Kaplan & Haenlein, 2010) define social media
as “a group of Internet-based applications that build on the ideological
and technological foundations of Web 2.0 and that allow the creation and exchange
of user-generated content.” Furthermore, social media depend on mobile and
web-based technologies to create interactive platforms through which
individuals and communities share, create, discuss, and modify user-generated
content. Social media differs from traditional media in many ways, from the size of the available audience to the frequency
with 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 it
can boost performance in many ways, some of which are listed below;

 

Brand awareness

The extent to which a product or brand is known by
existing and potential clients, and to which connections can be made accurately
within the consumer group for the product, is called brand awareness. As
posited by Carol Tice, (2012), brand-building can be effectively done through
social media, as it is one of the essential tools. Via social media, you can
how you want your brand positioned, and also create knowledge of the services
you render. Through consistent post of great content, you can create awareness
about not just your product, but also your company’s values, vision and mission
statements, as it relates to your product and the value it adds.

 

Brand awareness is vital to how a company stands out
alongside products and services that are similar in any way, Gustafson and
Chabot (2007). Increased awareness of a brand does a lot of good for organizational
goals and objectives, whether these are the long
or short term. In essence, a brand that customers and prospective
customers are familiar with is more likely to be patronized than competing
brands or products. Social media marketing has a great impact in creating brand
awareness by the exposure it gives to the goods and services of the company to
a wide audience with different metrics
that can be calculated and optimized to suit the brand’s needs. This level of
exposure is mostly measured or known by the number
of subscribers, fans or followers on its social media platforms.

 

Real-time communication

Social media aids effective communication thus the use
of social media by organizations has a rapid effect on customer engagement and feedback and reduces the time spent on creating
consumer support feedback.  Being quick
to respond to clients improves their level of satisfaction with the brand and
will 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 the
message they receive, and then, as far as the sender is concerned, able to
respond coherently. (Baines et al 2011). Social media and mobile communication
platforms can be used for studying and collecting information on problems and
issues faced by customers and consumers (Shih, 2009). This, when combined with research
into the relevant market, will help create a clear direction for the organization
and also help deal with customer issues before they get out of hand and cause
reputational damage.

 

Repeat Exposure

There is an old marketing adage that says it takes six
to eight exposures to a product before a customer decides to buy. A clear
benefit of social media is repeat exposure as with social networks,
organizations have the opportunity to remind their target audience over and
over again about their offerings which can also lead to shortened sales cycles and
quicker profits. (Tice, 2012).

In order to measure the scope of the social media activities
of an organization, social exposure can be used by measuring the numbers of
followers/fans, impressions and subscribers an organization receives on their
social pages. This exposure is necessary to build a community that can spread
the company ideals and key messages. To maximize reach, companies would need to
have a presence where people are constantly updating themselves on the content
they produce (Halligan & Shah, 2010) as having more exposure will
essentially increase the chances of consumers interacting with your brand.

 

Competitive
Advantage

Competitive
advantages are company assets, attributes, or abilities that are difficult to
duplicate or exceed and which provide a favourable
position over competitors in the long run (Faulkenberry, 2012). It
is 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 through
lower costs or product availability. Social media gives organizations who
incorporate it into their marketing strategy a competitive edge by providing
real-time feedback from customers. With little or no delay between receiving
information and disseminating it, the company can provide rapid responses to
customers and gain an advantage over competitors who do not respond as quickly
or have failed to invest in social media (Baines et al 2010).

Another
competitive advantage that social media offers is the ability for organizations
to monitor and measure brand performance
and perception. Social media enables companies
to follow the conversations that
customers are having about their product and effect any changes or deal with
any issues if necessary and in a timely manner. It offers a competitive
advantage by showing the comparisons that customers draw between the company
and its competitors, which can help to make decisions about pricing and
customer preferences. By using tracking programs such as Google Analytics or
Row Feeder, the company can identify the demographic profiles of their
followers, customize their products and market them accordingly (Mangold &
Fauld, 2009).

2.3 CONCEPT OF BRANDING

The
word “brand” is rooted from the Scandinavian
word “bränna”, meaning to burn, fire in Swedish is referred to as “brand”, (Dahlberg, Kulluvaara, & Tornberg, 2004). In essence, to
leave a mark on an item or property produced by someone is branding (Dahlberg, Kulluvaara, & Tornberg, 2004). Czinkota and
Ronkainen (2001) were of the view that a company with a strong brand name
provided freedom to exploit a fresh market or different market category. (Kotler & Armstrong, 1996), were of the view
that a brand can be taken as a name,
term, sign, symbol, design or a combination of all, that is associated with a
product or service with the intention of identification in any circumstance by consumers.

A
brand can, in essence, be defined as the promise of certain anticipated attributes
that someone buys in order to experience satisfaction later on. These
attributes 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 services
of a seller or group of sellers and which can differentiate them from those of
competitors. Baker, (1992) described a brand as a good or service with a set of
characteristics which clearly and readily differentiates it from all other
products, acting as an identifier to potential customers.

2.3.1
The Four Components of Brand Value

 

Reputation
Value

From
an economic point of view, a brand acts as a container for a company’s
reputation. Customers take on risk when they purchase products, whether they
are marketed as perishable or long-lasting and to varying degrees, customers
can get added value from products that lower risk to them. So when there is a risk inherent in a product, customers are
usually willing to pay to reduce risk. The brand acts as a mechanism to increase
customers’ confidence that the product will provide excellent and expected
quality.

 

Relationship
Value

Brands
also communicate assurance that the firm producing the product can be trusted
to attend to the customers’ needs and concerns as needed. A significant aspect
of product value is the perception that the firm will respond as the customers’
desire, to unforeseen issues.

 

Experiential
Value

From
a psychological perspective, the brand can shape perception about the product,
highlighting certain benefits delivered by the product. This guides consumers
in choosing products and also influences how they make use of the product. Hence,
firms often seek to brand their products as particularly effective in
delivering on a single benefit desired by customers.

 

 

Symbolic
Value

Brands
also act as symbols, allowing consumers to express their values and personal
identities. 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 this
function hence the popularity of the term “consumer culture”. In particular,
brands have become powerful markers to express a variety of aspirational social
identities from status to lifestyle.

 

2.4 THEORETICAL FRAMEWORK

2.4.1 THEORY OF CRITICAL MASS

The theory of critical mass supposes that an
innovation needs to be adopted by a certain number of people within a social structure
so that the rate of adoption reaches a point where it happens automatically and
creates further, self-sustained. Factors influencing critical mass may involve
the size, interrelatedness and level of communication in a society or any of
its relevant subcultures.

In the same light
social media creates critical mass for organizations so that a large number of
people can adopt the brand. With social media, companies can build a critical
mass, that critical mass is what then goes on to get other members of the
population to adopt the brand or innovation. Insurance companies can use social
media to build a critical mass for their product so that the early adopters
will then influence their social network to also buy into insurance.

 

2.4.2 THEORY OF SOCIAL NETWORK

A
social network is a structure
made up of individuals or organizations called “nodes”, which are connected
by one or more specific types of interdependency, such as friendship, kinship,
common interest, prestige and so forth.

 

In
its simplest form, a social network is a map of specified ties, such as
friendship, between the nodes being studied. Nodes are the individual actors
within the networks, and ties are the relationships between these actors. There
can be many kinds of ties between the nodes. For example, the nodes to which an
individual is thus connected are the social
contacts of that individual. These concepts are often displayed in a
social network diagram, where nodes are the points and ties are the lines.

 

Social
networks operate on many levels and play a critical role in determining the way
problems are solved, how organizations are run, and the degree to which
individuals succeed in achieving their goals.

 

People
in 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 network
are 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 same
company. So with social media, insurance companies can get into the networks of
established 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 attention
to 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 research
study assessed the claim that e-commerce will spell the end of brand management
as we know it. The paper dispelled this scenario by identifying certain factors.
First, there are still other variables that have not been affected by
e-commerce which still relies on other factors such as product and type of purchase
for sales to be made. The impact of the Internet will only vary according to
the role that the brand plays in certain cases. Secondly, there is a vast
offering of Internet technologies which will affect brands in different ways.
Thirdly, the Internet is leading to some secondary effects in the market
structures that affect brands. The combination of these factors, far from
leading to the death of brand management, will in many cases lead to an
increased role for brand management.

(Corcoran & Feugere, 2009)  in their study reported that the use of social
media by brands and retailers in the U.S. showed that low to high-profit brands
and retailers are embracing social media and use it to boost sales and brand
awareness. According to New York University professor of marketing Scott
Galloway, luxury brands are now engaging with customers through Facebook,
implementing user reviews into their brand decision making, and selling their
products online. It also notes that companies now build their own social
networks.

Also,
Dutta, Soumitra (2010) in their study showed that social
media is changing the traditional methods of doing business and perception of
leadership. They further showed that although businesses are creating comprehensive
strategies in the area of social media, it is yet to be adopted as
comprehensively and strategically by corporate leaders. According to their
study, today’s corporate leaders must embrace social media for three reasons.
First, social media provides a low-cost and easily accessible platform on which
a personal brand can be built, which can also communicate company identity.
Second, it allows for rapid engagement with relevant stakeholders from peers to
customers, allowing them the chance to foster better relationships. Third, it
gives companies an opportunity to learn from instant
and unvarnished feedback.

However
Aula (2010), in his article, focused on the threat and risk of social media to the
reputation of businesses. He cited examples of events showing how negative
publicity on social media led to a negative
impact on organizational reputation. He further noted that social media
such as Facebook and Twitter are popular for corporate social media activities
but that they expand what the scope of reputational risk and boost chances of
risk to companies.

(Hunt, 2010) stated in their article
the vital role social media plays in staff recruitment in organizations. It
further makes known that the social media platforms are not limited to
socialization, but can be an important tool that aids information about
available jobs and subsequent staff employment. They further showed that
companies that do not embrace social media as a recruitment tool might lose
quality candidates. An example is the LinkedIn social/business platform that
brings the employer and the prospective employee in the same space, allowing them
to interact and foster a potentially lucrative relationship.

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1 http://www.lawnigeria.com/LawsoftheFederation/Insurance-Act,-2003.html

2 https://www.ft.com/content/8c9e297b-6433-3e79-989f-3aa2f11b48bd