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Think about it, who is your favourite advisor when it comes to finding your next, undiscovered restaurant? Your mum or perhaps your best friend? Sometimes they might not give the best advice, luckily you have kind strangers who write reviews online, which you can consult. Review platforms such as Yelp.com, enable people to write and read reviews on products and/or services. But how do businesses handle marketing efforts in the context of electronic word-of-mouth (eWOM)? This is an important question for managers since the rise of the Internet has changed how they allocate marketing expenditure, turning more to online advertising (Lu et al. 2013), but is this effective? To answer this question Lu et al. research the influence of promotional marketing on third-party review platforms.

What was their approach?
Lu et al. examined the impact of online coupons, keyword sponsored search and eWOM on weekly restaurants’ sales using a three-year panel study. They focused on restaurants since going out to dinner is a high-involvement service and eWOM is particularly important for high-involvement products and/or services (Gu et al. 2012). With high-involvement products customers spend considerable time searching for information before purchasing. Lu et al. collected their data from one of the largest restaurant review websites in China. Online coupons are displayed on this platform and the keyword sponsored search works as follows: restaurants buy keywords and when users search for restaurants using that keyword, the restaurants will be displayed at the top of the platform’s search results.

Key insights
One of the key insights Lu et al. found is that both promotional marketing and eWOM have a significant impact on sales. Keyword sponsored search and eWOM have a positive impact on sales. Likewise, offering online coupons has a positive impact on sales, however this relationship is not present for coupon value, indicating that the presence of online coupons is more important than their value since it increases awareness among users (Leone and Srinivasan 1996). Another key insight is that interaction between eWOM and promotional marketing is significant. The interaction between eWOM and coupon offerings is negative, indicating that they substitute one another and thus only one is needed to attract sales. On the other hand, the interaction between eWOM and keyword sponsored search is positive, indicating that they complement one another and together increase sales. Furthermore, if you would use both promotional marketing tools simultaneously, this would negatively impact sales since too many marketing tools at the same time is experienced as too intrusive by customers. Altogether, these insights highlight different sources of information, with different levels of credibility, while still both sharing the power to inform and attract customers.

Looking to promote your business?
The study’s strength is that it presents some very useful advices when it comes to using promotional marketing in the context of eWOM. First of all, it is good to know that allowing promotional marketing activities on third-party platforms does not hurt the platform’s credibility and thus indicates some interesting marketing possibilities. According to Lu et al., you should stimulate users to generate more positive eWOM since this increases sales. Businesses could use online coupons to get customers’ attention, but if the volume of eWOM is high, this tool becomes less effective. In the case of high eWOM volume, businesses should rather buy keywords to increase sales. However, businesses should not use these two promotional marketing tools simultaneously since this decreases sales, rather they should focus on the tool that is most suitable for them.

Although these insights are useful, managers should note the study’s weaknesses. One of these weaknesses is the study’s generalisability. Firstly, the study only included restaurants from Shanghai, while other academics indicate the presence of cross-cultural differences (King et al. 2014). Secondly, the study focused on high-involvement products, while many studies examine low-involvement products, e.g. books and films, and find that eWOM has a significant impact on sales (Chevalier and Mayzlin 2006; Duan et al. 2008). Thirdly, the study focused on one platform, while other studies indicate that eWOM across platforms can impact sales (Gu et al. 2012). Therefore, future research could focus on whether the study’s results also apply cross-culturally, across different product and across different platforms. Another weakness of this study is the limited dimensions of eWOM and promotional marketing captured. For instance, Chavelier and Maryzlin (2006) indicate that the length of reviews also influences customers’ purchasing behaviour. Besides, the measurement of promotional marketing is two-fold, while other options such as banners or pop-up ads also exist. Future research could therefore investigate whether results differ for other promotional marketing tools and if adding more dimensions for eWOM might indicate different results. To conclude, although the paper has some weaknesses, it does not overturn the practical implications, managers should however be cautious and decide whether the study applies to their specific situation or if their situation deviates from the study’s setting.

References
Chevalier, J.A. and D. Mayzlin (2006) ‘The Effect of Word of Mouth on Sales: Online Book Reviews’, Journal of Marketing Research 43(3): 345-354.

Duan, W., B. Gu and A.B. Whinston (2008) ‘The dynamics of online word-of-mouth and product sales – An empirical investigation of the movie industry’, Journal of Retailing 84(2): 233-242.

Gu, B., J. Park and P. Konana (2012) ‘Research Note – The Impact of External Word-of-Mouth Sources on Retailer Sales of High-Involvement Products’, Information Systems Research 23(1): 182-196.

King, R.A., P. Racherla and V.D. Bush (2014) ‘What We Know and Don’t Know About Online Word-of-Mouth: A Review and Synthesis of the Literature’, Journal of Interactive Marketing 28(3): 167-183.

Leone, R.P. and S.S. Srinivasan (1996) ‘Coupon face value: Its impact on coupon redemptions, brand sales, and brand profitability’, Journal of Retailing 72(3): 273-289.

Lu, X., S. Ba, L. Huang and Y. Feng (2013) ‘Promotional Marketing or Word-of-Mouth? Evidence from Online Restaurant Reviews’, Information Systems Research 24(3): 596-612.

The rise of the Internet has drastically changed the recruitment industry. The Internet made recruitment faster, cheaper and easier (Revell 2014). Companies can post job applications online for the world to see, while jobseekers can reply in seconds. On top of that, communication between companies and job applicants changed; companies can now for instance reach job applicants through e-mail or Skype, diminishing recruitment costs and increasing the reach of the company. The Internet therefore increased the range and the competition for talent amongst companies, for example through recruitment platforms. One of these recruitment platforms that makes locating and acquiring of job applicants easier, is Magnet.me.

What is Magnet.me?
Magnet.me was launched in 2012 in Rotterdam by three students as a recruitment platform that connects students (and recent graduates) with companies. Currently, the platform has over 1,500 companies and 150,000 students using it, creating more than three million connections (Magnet.me n.d. a). So, how does it exactly work?

Companies create a profile, where they describe their business, selection criteria for students and add relevant news, jobs and other possibilities. Students, create a profile with their skills and interests and upload their resume. Magnet.me then checks if the student’s profile matches any companies. If so, the student will automatically receive a network request from the company. If the student accepts that request (and only in that case), the student will receive updates and information on available jobs, internships, business courses and traineeships offered by the company. The company can view the connected students’ profiles, send them messages or invitations to directly apply for job opportunities. In that way, a company can build a network of suitable candidates (Magnet.me n.d. a).

The video below summarises the idea behind Magnet.me as described above.

Thus, Magnet.me is a two-sided market, providing structure and rules that facilitate the interaction between students and companies (Eisenmann et al. 2006). The two groups attract one another, meaning that if the number of students grows, it will attract more companies, and vice versa. This is called the network effect, which suggests that the higher the number of users, the more attractive Magnet.me will be and the higher its value.

Business model
Magnet.me uses a freemium business model, meaning that basic functions are free for students and companies, but companies must pay a subscription fee for additional functions (Kumar 2014). Companies pay €190 per job per month to put their job offer on the homepage of all students who meet their selection criteria (Magnet.me n.d. b). Other premium options are the ability to approach and invite the best suited candidates to apply for jobs and user data insights. For these additional options, an inquiry must be done to determine the fee. However, the creation of a company profile and posting job offers is free.

This business model is beneficial for all platform players and thus creates joint profitability (Carson 1999). Magnet.me has many users and thus companies can benefit by recruiting more students that are better suited with less effort. Magnet.me is payable for both small and large companies since the subscription fee is relatively low compared to alternatives, such as recruitment agencies. Hence, switching costs are substantial since the convenience of Magnet.me is high; you can reach many suitable students at a relatively low cost. On the other hand, students benefit by the many job options Magnet.me offers and the ease with which they can look up jobs, while not having to pay a subscription fee. Finally, Magnet.me itself benefits from an increase of users since in that case it can collect more subscription fees.

Magnet.me is very customer-centric since students and companies can set selection criteria indicating what they are looking for. For instance, a student can filter job applications for the type of job, function, industry, educational level and company size, making Magnet.me parameter-based (Randall 2005). Thus, the platform takes care of institutional arrangements by giving power to platform players; companies and students can indicate what they are looking for and they can directly communicate, which makes recruitment more efficient.

In terms of the institutional environment, Magnet.me complies to social norms and regulations. Magnet.me hosts many well-known companies such as Unilever, KLM and Heineken and recently acquired one million euro from investors to grow the company, suggesting trust and enormous potential (Thole 2017). The company is also registered at the chamber of commerce and complies to the Dutch (Personal) Data Protection Act (Magnet.me n.d. c).

All in all, Magnet.me meets efficiency criteria and is still growing. Although there are many other recruitment platforms (e.g. LinkedIn), Magnet.me differentiates itself by focusing on students and matching them with companies instead of individuals. The potential of Magnet.me is enormous, last year the company expanded to the U.K., where it is now the number one student career website (Magnet.me 2017). So, one may wonder how far Magnet.me can go.

References
Carson, S.J., T.M. Devinney, G.R. Dowling and G. John (1999) ‘Understanding institutional designs without marketing value systems’, Journal of Marketing 63(4): 115-130.

Eisenmann, T., G. Parker and M.W. Van Alstyne (2006) ‘Strategies for Two-Sided Markets’, Harvard Business Review 84(10): 92-101.

Magnet.me (2017) ‘2017: Our year in numbers’. Accessed on 18 February 2018 on https://magnet.me/blog/en/2017/12/21/our-year-in-numbers.html.

Magnet.me (n.d. a) ‘About Magnet.me’. Accessed on 16 February 2018 on https://magnet.me/press?country=nl&lang=en.

Magnet.me (n.d. b) ‘Attract talent, save time’. Accessed on 17 February 2018 on https://magnet.me/employers?country=nl&lang=en#.

Magnet.me (n.d. c) ‘Terms of Service (User Agreement)’. Accessed on 17 February 2018 on https://magnet.me/terms-of-service.html.

Kumar, V. (2014) ‘Making ‘’freemium’’ work’, Harvard Business review 92(5): 27-29.

Randall, T., C. Terwiesch and K.T. Ulrich (2005) ‘Principles for user design of customized products’, California Management Review 47(4): 68-85.

Revell, S. (2014) ‘5 Ways the Internet has Changed Recruitment Forever’. Accessed on 17 February 2018 on https://www.recruiter.com/i/5-ways-the-internet-has-changed-recruitment-forever/.

Thole, H. (2017) ‘Deze Nederlandse startup ziet de Brexit als grote kans – en krijgt €1 miljoen om te groeien in het VK’. Accessed on 17 February 2018 on https://www.businessinsider.nl/magnet-me-investering-startup-brexit-vincent-karremans/.