City University Research Journal

Volume 06 Number 02 July 2016 PP 256-268

ROLE OF SOCIAL MEDIA ON CONSUMER PREFERENCES

Fazle Malik*, Muhammad Asif** and Said Wali***

ABSTRACT
Social media is an integral part of every individual's life where one can share his/ her
experience, opinions, and feelings with others. The democratization of information
through social media has brought significant changes in the purchasing behaviors of
consumers. Consumers' connectivity in a wired and online world allowed them to know
everything about the products and services they want particularly their availability,
price, location and the desire attributes. This research aims to find the importance of
social media on consumers' purchasing behaviors, which includes information
acquisition, electronic word of mouth, seller created information, consumers' perceived
quality, and customers' perceived risk.

Keywords: Social media, electronic word of mouth, social media marketing, and
consumers' behaviors.

INTRODUCTION
The World Wide Web was introduced in 1989 and during the same years Internet was
also introduced which quickly become a global network for the people of the world
(Hansel and Dyes, 2010). The introduction of Web 2.0 in 2004 was a transition from
more static HTML to a more dynamic web which consists of such application software's
that is users friendly and which facilitate open communication and information sharing
with web based users. The essence of Web 2.0 is harnessing collective intelligence. That
is Web 2.0 play an important role in collecting knowledge, insights, wisdom and
expertise of diverse groups and then effectively using it for better and informed
decision. Such type of collective intelligence generates new ideas, solve complicated
and age-old problems and help in making the right decision about the future
opportunities of the organization. Web 2.0 is a marketing buzzword and it facilitates
business of an organization (Tim O'Reilly and John Battele 2009).
Social media are “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” (Kaplan and Haenlen 2010). To get better sense of a product
consumers access their groups online through social media to know and get their
opinions regarding that particular product or service (Hensel & Deis, 2010). Social
media is now getting greater importance in the field of marketing, advertising and
communication and its users are growing exponentially every year (Constantinida and
Stagnoa 2011). When the customers have strong relationship with the company then
they share their experiences with other people through social media and recommend the
brands to friends in the form of EWOM promotion. All these activities ultimately lead to
*Sales Executive, Otsuka Pakistan Ltd (PhD Scholar)
** Assistant Professor, Management Sciences, City University of Science & IT,
Peshawar.
***Lecturer, Management Sciences, City University of Science & IT, Peshawar.
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 Role of Social Media on Consumer Preferences

greater growth and increase customer base (Gronroos, 2007). By the introduction of
internet EWOM has far reaching effects due to its accessibility and spreading of
messages to million people. It is an important marketing tool in the modern era of
business world due to its credibility and the urge of people to interact through social
media (Gummesson, 2008).

Statement of the Research Problem

Due to globalization, consumers are now aware from a number of alternative products
which are available online and offline and have similar attributes and characteristics and
they satisfy the same needs and wants of the customers. The availability of information
is so complete and so profound that even a new terminology is required to interpret it
precisely and accurately. This inexorable flow of information which is available for
consumers has changed significantly their purchasing behaviors (Eric K. Clemons,
2008). According to the same researcher consumers informedness in a wired and online
world allowed them to know everything about the products and services they want
particularly their availability, price, location and the desire attributes. In the same way
companies can identify the un-served and unmet needs of the consumers and address
them with a new product or service. Online advertisement and purchases have become
common in rest of the world. Social media is an important forum where people
exchange ideas and experiences that make it an important tool for the companies to
advertise their products and consumers to get information about their need satisfying
products. Social media is now getting greater importance in the field of marketing,
advertising and communication and its users are growing exponentially every year
(Constantinida and Stagnoa 2011). Increased use of social media in Pakistan calls for an
investigation for its impact on consumer preferences.

Objectives of the Research:

The specific objectives of the research are;
 To find out different factors of social media that can influence consumers'
preferences.
 To find out the impact of electronic word of mouth, seller created information,
information acquisition, perceived quality, and perceived risk on consumers'
preferences.

Significance of the Research:

The study in hand will be helpful for organizations that are intended to incorporate
social media to create Good will and create awareness about products and services.
Information acquisition, electronic word of mouth, perceived quality is the factors to be
kept in mind by managers while implementing social media in their organizations. This
study will be a valuable addition in the body of literature especially from the context of
Pakistan. People are making new connections online with a phenomenal growth every
year and they tell each other about the products and services. It is understood that friends
and families are more trusted in asking during purchasing decision. So this study will
help to focus on this important channel through which they communicate messages to
their customers.
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Fazle Malik et al.

REVIEW OF THE RELATED LITERATURE

Social media are the online tools and platforms that are used by customers, friends,
relatives, groups and communities to share information, opinions and experiences in the
form of insights, perception, photos, music and videos with each other (Turban E, King
D, Long J 2009). It is a medium used by organizations whether large or small, profit or
non- profit to create awareness regarding their products and services. Through
social media e-commerce is more customer as well as community driven. Social and
economic benefits are attracted with networking. Nowadays people have developed
network societies to reach each other for information, education, networking and e-
commerce (Albert S, Flournoy P, Lebrasseur R. 2009). According to Evans social media
is in tremendous growth stage so he advises businesses to participate in for future
growth and progress because many people are connected with one another through this
media (Evans D, 2008). Researchers predict that social media will be a dominant force
in the future for businesses as well as for individuals so they must participate in it
otherwise they will be out of market (Lauder KC, Traver CG, 2010).
Fisher and Reuber (2011) in their research found that if social media is finely deployed
in an organization then it definitely bring about significant changes in its sales, growth,
brand image, and company reputation in the market. In the same study it was also found
that there is a direct positive relationship between social media and variables like
organization's sales, growth, brand image, and company reputation in the market. One
of the major advantages of social media is that it communicates information and
conveys it to a large population, and helps customers to select from a number of
available choices and thus ease the purchasing process for the businesses worldwide (Al
Kailani and Kumar 2011). Surveys conducted by Pew Research Center in 2012 and
2013 found that 71% internet users access Facbook of whom 66% men and 76%
women, 22% used LinedIn of whom majority are professional people and 18% used
Twitter. According to the surveys the use of Smartphone is almost ubiquitous around the
world. All Smartphone owners used their phone to access facebook and other sites for
interaction with their friend and groups. They get information about products' prices and
availability. In these users four-in-ten used their smart phone to access the sellers and get
information about products and their prices. Beside this political, religious and
community issues related discussion on these sites is very common. The recent wave of
changed in the Arab world particularly Tunisia and Egypt also called as Arab Spring,
social media play a pivotal role in molding the political behaviors of the people. In these
countries six-in-ten share their opinions and feelings about politics, religious affairs and
community issues (PEW Research Center, 2012 & 2013).
Social networking sites were actively used in the 2008 and 2012 US election in order to
attract young people and obtained their support in the form of attending rallies, gaining
their votes and raising fund for political activities. The strategic utilization of social
networking sites has mobilized the youth, raised enough funds for the election
campaign and thus created the difference for Barak Obama in both elections. A
paradigms shift in communication takes place in recent years due to the emergence of
social media. Smart companies have included social media channels in their integrated
marketing communication in order to keep and grow existing customers and attract new
customers for rapid growth and grabbing more market share (Mangold and Faulds
2009).
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 Role of Social Media on Consumer Preferences

Theories of Social Media:

There are three main social media theories. Micro-theories deal with the information
available online and the communication from individual social actors. Macro-theories
deal with the structure and dynamics of social actors and social media content. Pseudo-
theories deal with the recently developed conceptual framework in marketing. In this
theory socialgraphic and social feedback loop of consumers are important
considerations. In intuitive sense this theory is logical but in practice it is yet to be tested.

Micro-Theories:
In the hospitality industry the most influential and frequent source of information is
advices from friends and relatives (Perdue 1993, Crotts 1999). This sort of
communication comes under the heading of word of mouth theory. The information
communicated from friends and relatives is considered to be more credible and
communicators are not compensated for such type of referrals. Due to the introduction
of Web 2.0 technologies and other social networking sites consumers are now access
even strangers experiences and post purchase comments which significantly affects
their purchasing behavior (Depeches 2010). The social exchange theory states that
individual through social media engage with those behaviors which are rewarding for
them and avoid the cost.

Macro-Theories:
Macro-theory views the individuals of the community as connected actors, and such
theories use mathematical models to study its structure, evolution and development
(Wasserman and Faust 1994). According to this theory social media is the
materialization and solidification of consumers reviews, comments and chatters. The
recent phenomenal growth in multi-dimensional social media has affected consumers
purchasing behaviors and its interaction between social actors and information artifacts
(Contractor 2009).

Pseudo-Theories:
The social media landscape is changing very fast due to the democratization of
information and the low cost of innovation. Businesses need to focus on the
socialgraphics of the consumers instead of demographic, geographic, psychographic,
profiles of them (Jowyang, 2010). Traditional decision making has three stages
information, consideration and purchase. Some consumers will use the product, make
opinion about it and then at later stage talk about it. Some of the experiences will be
materialized by sharing them on social media to assist others in their decision making.
Harnessing the feedback loop is more important for marketers and business (Dave
Evans, 2008). From the discussion on pseudo-theory it has been proved that
Socialgraphic framework and Social Feedback loop framework are important for
marketers to consider and focus.

Theoretical Framework:
In this research information acquisition (IA), electronic word of mouth (EWOM), seller
created information (SCI), customers' perceived product quality (PQ) and customers'
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Fazle Malik et al.

perceived risk (PR) are independent variables and purchase intention (PI) is dependent
variable.
Social media has a substantial impact on the consumer perceptions, behavior and
attitudes. It is a source which has empowered consumers. It is a source which has
significantly influence the purchasing behavior of consumer. It provides a public forum
that gives individual consumer their own voices and access to product information
which helps in purchasing decision (Kozinets et al., 2010).
Customers’ Perceived Quality

Seller Created Informa on

Consumers’ Preferences
Electronic Word Of Mouth (Purchase Inten on)
Perceived Risk

Informa on Acquisi on

Figure 2: Conceptual Framework

HYPOTHESES
H1: Electronic word of mouth (EWOM) has a significant relationship with consumers'
preferences (purchase intention)
H2: Seller created information has a significant relationship with consumers'
preferences (purchase intention).
H3: Information acquisition has a significant relationship with consumers' preferences
(purchase intention).
H4: Customers' perceived quality has a significant relationship with consumers'
preferences (purchase intention).
H5: Customers' perceived risk (PR) has an inverse relationship with consumers'
preferences (purchase intention)

RESEARCH METHODOLOGY
It was a quantitative research because the phenomenon was investigated by applying
statistical, mathematical and computational techniques. According to Cooper and
Schindler (2006) quantitative research approach is characterized by the use of statistics
related to a problem and answer the questions like how much, how often, how many,
when and who. The data from the selected sample was quantified and the acquired
results were generalized for the larger interest of the population. The target population
for this research was those students who are enrolled in the public sector Universities of
Peshawar offering business education. Only graduate and research scholars were the
target population.
Primary data was collected from respondents through structured questionnaire design
on a five point Likert scale in which 1 denotes strongly agree and 5 denotes strongly
disagree. The sample size was 300 students from the public sector universities of
Peshawar. The sampling technique used in this research study was proportionate
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stratified random sampling technique. The population was divided in to two subgroups
or strata on the basis of their educational level. One stratum was composed of graduate
students and the other was composed of research scholars which include MS and PhD
students. Both these strata are internally homogeneous and heterogeneous with each
other. The stratified sampling technique was used to increase the statistical efficiency of
the sample, to provide sufficient data for analyzing the various subpopulations and to
enable different research methods to be used in the strata. The size of population in the
first stratum was 1120. It means that at graduate level these universities have
accommodated 1120 students' app. The second stratum was composed of 520 research
scholars. That is there are approximately 520 students enrolled in MS and PhD
programs in these universities. The researcher has selected 20% from each stratum. The
sample from the first stratum 1120*20%= 224. The sample from the second stratum
520*20%= 104. (Uma Sekaran, 2006).
Measureable and verifiable data was obtained and utilized in this research. The data
obtained was analyzed through SPSS20 (Statistical Package for Social sciences) which
is well known software for data analysis. It has the characteristics of statistical analysis
of the data, graphic and reporting of the data and also possesses file management
capabilities. Correlation, Multiple linear regression, and questionnaire reliability tests
techniques was applied for data analysis.

DATA ANALYSIS
Correlation:
Correlation here means a Pearson correlation which measures the strength and direction
of linear relationship between two variables.

Electronic Word of Mouth and Purchase Intention:

The Correlation coefficient between electronic word of mouth (EWOM) and purchase
intention (PI) is (0.307) which is significant and positively correlated with each other.
This proves that electronic word of mouth (EWOM) has a significant impact on
consumers' preferences or purchase intention. As it is according to our proposed
hypothesis so it is accepted. Therefore electronic word of mouth has a significant
impact on the purchasing decisions of consumers (Chevalier and Mayzlin 2006). Other
literature also supports these findings as evident from the literature review.

Seller Created Information and Purchase Intention:

The correlation coefficient between seller created information and purchase intention is
(0.303). This shows that there is a significant positive relationship between the two
variables and establishes the fact that increasing information from the seller or producer
the consumers' preferences will increase. This proves our proposed hypothesis in the
research.

Information Acquisition and Purchase Intention:

There is a strong positive relationship between information acquisition and purchase
intention. The correlation coefficient between information acquisition and purchase
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intention is (0.407) which is significant and strong positive linear relationship. This
proves the proposed hypothesis. As the customers get more and more information from
friends and groups about the products and services their purchasing behavior is
changing and vice versa.

Customers' Perceived Product Quality and Purchase Intention:

The quality of the product is important for the customers. There is a positive linear
relationship between product quality and purchase intention as by increasing one the
other will increase automatically. The correlation coefficient between product quality
and purchase intention is (0.184) which is positive and significant as well. This clearly
supports the proposed hypothesis.

Customers' Perceived Risk and Purchase Intention:

There is a weak negative relationship between customers' perceived risk and purchase
intention. The correlation coefficient between these variables is (-0.056) which is weak
negative relation. By increasing the customers' perceived risk will decrease slightly
their purchase intention. But the value of correlation coefficient is not valid. This also
proves our proposed hypothesis. The values of Correlation Coefficients are given in
table no.1.

Table-1: Before the regression analysis the following assumptions were confirmed:
EWOM SCI IA PQ PR PI

EWOM 1
** 1
SCI .360
** ** 1
IA .388 .552
PQ .410
**
.509
**
.604** 1

PR -.014 -.010 -.43 -.073 1

** ** ** ** 1
PI .307 .303 .407 .184 .056

All the observations are independent as the researcher checks it through Durbin-Watson
statistics (1.512).There is a linear relationship between each independent variable and
dependent variable. When checked there is also a linear relationship between all
independent variables (EWOM, SCI, IAC, PQ, and PR) and purchase intention. The
data was checked for multi-collinearity and there was no significant relationship
between any two independent variables. From the correlation table 1 all the values are
less than .70 so the chances of collinearity become less. The data was normally
distributed, that is, neither it was too skewed nor was it kurtotic. The values of skewness
and kurtosis for each variable falls in between the standard range ±1. The values for
skewness and kurtosis for EWOM were -.238 and -.686, for PI the values were -.398 and
-.030, for SCI the values were -.387 and -.080, for IA the values were -.479 and -.177, for
PQ the values were -.863 and .334 and for PR the values were -.148 and -.320
respectively.

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REGRESSION ANALYSIS
Regression analysis of Hypothesis H1 (EWOM has a direct relationship with
consumers' preferences)
Table 2 shows that in the regression analysis consumers' preferences is significantly
(B=.306, P=.000) affected by electronic word of mouth which is independent variable.
The table gives the value of R2 (the total variation in the dependent variable due to the
effect of independent variable explained by our proposed regression model). F value is
also greater than 10 which shows that the propose model is fit. If t value is greater than
1.96 and P value less than .005 then the proposed hypothesis is accepted. Hence the first
hypothesis of this research study is accepted.

Regression analysis of Hypothesis H2 (Seller created information has a

significant relationship with consumers' preferences).
Table 2 shows that the value of R2 (explain the proportion of variation in the dependent
variable explain by the regression model). Here its value is 10% which is the total
variance in consumers' preferences due to seller created information. The relationship is
also significant (B=.341 and P=.000). A unit change in seller created information, there
is 34% change in consumers' preferences. Similarly t value is 4.652 and P value is .000
which shows that the proposed hypothesis is accepted. The F value is 21.638 which
show that the model is best fit for the population from where the data has been collected.

Regression analysis of Hypothesis H3 (Information acquisition has a significant

relationship with consumers' preferences).
From table 2 it is clear that R2 (explain the proportion of variation in the dependent
variable explain by the regression model) and here its value is 16% that is 16% of
variability in consumers' preferences is due to information acquisition. The regression
model shows that the relationship between information acquisition and consumers'
preferences is significant (B=.413 and P=.000). A unit change in information
acquisition will bring 41% increase in consumers' preferences. The value of t= 6.203
and that of P = .000 which shows that the conditions are favorable to accept the third
hypothesis.

Regression analysis of Hypothesis H4 (Customers' perceived quality has a

significant relationship with consumers' preferences).
Table 2 shows that a unit changes in perceived quality will brought 17% change in
consumers' preferences. The B=.171 and P=.000 which shows that there is significant
relationship between perceived quality and consumers' preferences as hypotheses in the
above hypothesis. The variability in consumer preferences due to perceived quality is
just 3%. The t=2.614 and P=.000 which lead to the acceptance of the proposed
hypothesis. The F=6.832 which shows that the regression model is fit for the population.

Regression analysis of Hypothesis H5 (Customers' perceived risk (PR) has an

inverse relationship with consumers' preferences).
From table 5 it is clear that B=.043 and P=.322 which shows that there is not a significant
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Fazle Malik et al.

inverse relationship between perceived risk and consumers' preferences. If a unit

change is brought in perceived risk there is a negligible change which is just 4% in
consumers' preferences. The variability in consumers' preferences is very less and is just
0.5% due to perceived risk. From the value of t and P it is quite apparent that the
proposed hypothesis is not accepted.

Table-2:
Hypothesis R2 Beta T F Sig. Results

H1 EWOM has a direct relationship with .095 .306 4.500 20.249 .000 Accepted
CP.
H2 SCI has a signicant relationship with .100 .341 4.652 21.638 .000 Accepted
CP.
H3 IA has a signicant relationship with .166 .413 6.203 38.483 .000 Accepted
CP.
H4 PQ has a signicant relationship with .034 .171 2.614 6.832 .000 Accepted
CP.
H5 PR has an inverse relationship with .005 .043 .993 .986 .322 Not Accepted
CP.

CONCLUSION
Social media is now an integral part of every individual's life from President of a country
to a common man. The most important effect of social media is that it has empowered
individuals to share their experiences, opinions and feelings with others. Such sites
establish groups which frequently interact with each other and consequently affect the
purchasing behaviors. The research work of this study is directed towards social media,
and its impact on consumers' behaviors. The finding of this thesis provides a strong base
for marketing managers to focus and direct their communication towards such
communities. As such groups strongly affect each other purchasing behaviors so
organizations and companies must focus on them through social media. Organizations
can increase their revenues by influencing such groups to increase their brand
awareness and brand loyalty. It is the first study in Pakistan that provides the overall
impact of social media on consumers' preferences.
The second important finding of this study is that there is significant impact of
information acquisition, electronic word of mouth, customers' perceived quality and
seller created information on consumers' purchase intention. Customers' perceived risk
has a negligible impact on purchase intention. Although perceived risk has a negative
relationship as per proposed hypothesis but due to values of “P” and “t” its hypothesis
comes under the category of not acceptance. The inexorable flow of information
through social media has changed consumers' purchasing behaviors significantly (Eric
K. Clemons, 2008).

RECOMMENDATIONS FOR FUTURE RESEARCH

In the future some additional dimensions should be add to the research model to find out
the dominant factors that affect the purchase intention of those consumers using social
media. As the e-commerce is a global phenomenon so the factors which the researcher
has studied in this research should be investigated across the multinational settings to
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device generalized results for multinational organizations. The researcher suggests that
in future studies must focus on the impact of social media on the consumers' cognitive,
affective and behavioral attitudes should be seen to draw some practical implications for
organizations.
Future research may also take all segments of society such as children; professionals etc
to generalized it for the whole society. Because social networking sites in social media
are the hub of interaction for every individual of all age groups. The impact of a
product's facebook page on consumers' preferences should be studied to draw some
practical implications for the companies. The Facebook page of a product or company is
like by users of social media and then it is rated on the bases of likes. It is also suggested
that relationship of social media with hospitality and service industry should be
investigated. The impact of social media on organization's efficiency, productivity,
profitability, growth and market share should be studied to draw some practical
implications for many other organizations.

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