NAME: of damage and cost implication to indemnify the

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 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.

 

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 usual channels. Thus other channels like cooperatives, non- governmental
organizations and third party administrators such as bank branches, and retail
outlets among others, are patronized and trusted by the local population to act
as intermediaries for access to micro insurance.

 

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 1994.1

 

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.” 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

This can be defined as 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. 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.

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 constant exposure as organizations have the
opportunity to remind their target audience repeatedly about their offerings
which can also lead to shortened sales cycles and quicker profits. (Tice, 2012).

This can also be a method of measuring the range of
the social media activities of an organization as the numbers of followers,
impressions and subscribers an organization has on their social pages can be
tracked. All this can help the company to build a community that is not only
interested in their offerings, but also in spreading 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 more exposure equals an increase in the chances of
consumers interacting with the 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 as it provides
real-time feedback from customers. As the company provides rapid responses to
customers, they gain an advantage over competitors who have not incorporated
social media into their marketing strategy (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. Tracking programs like Google
Analytics or Row Feeder, help the company identify the demographic profiles of
their followers, customize their products and market them accordingly (Mangold
& Fauld, 2009).

2.3 CONCEPT OF BRANDING

(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. Czinkota and Ronkainen (2001) wrote that a company with a strong
brand name provided freedom to exploit a fresh market or different market
category.

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) wrote 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 are taking a risk whenever they purchase a product,
whether it is marketed as perishable or long-lasting. So when there is a risk inherent in a product, customers are
usually willing to pay to reduce risk. Branding that is well-done acts as a
mechanism to increase customers’ confidence that the product will live up to
its marketed quality.

 

Relationship
Value

Brands
also provide 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 material items (clothes,
homes, craft goods, etc.) as symbols for self-expression. The term “consumer
culture” is an indicator of how consumer goods have dominated current market
economies. In particular, brands have become markers 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 becomes 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. For
example, the nodes to which an individual is connected are the social contacts of that individual.

 

Social
networks 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 depends on the role
that the brand is playing in the consumer’s buying process. 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 more 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 and
even building their own social networks, implementing user reviews into their
brand decision making, and selling their products online.

Also,
Dutta and 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
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.