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How your firm’s Tweets affect its value — both temporarily and permanently

Firm-generated tweets induce both permanent and temporary price impacts, which are linked to the tweet attributes of valence (i.e., positive and negative sentiment) and subject matter (i.e., consumer and competitor orientation).

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Photo by Souvik Banerjee from Unsplash.com

Researchers from University of Edinburgh and University of Maryland published a new paper in the Journal of Marketing that examines the impact of firm-generated social media content on firm stock price in real time.

The study, forthcoming in the Journal of Marketing, is titled “Measuring the Real-Time Stock Market Impact of Firm-Generated Content” and is authored by Ewelina Lacka, D. Eric Boyd, Gbenga Ibikunle, and P.K. Kannan.

Firms increasingly follow an ‘always on’ approach to social media marketing and post social media content multiple times during a day. For example, 92% of firms use their Twitter accounts more than once a day, with 42% of those tweeting 1 – 5 times a day and 19% tweeting 6 – 10 times a day. Although marketing managers engage heavily with this contemporary marketing practice, they are unable to demonstrate its immediate contribution to firm’s financial outcomes. 
 
This new research uses a combination of tweets disseminated by a sample of S&P 500 IT firms and ultra-high frequency trading data to examine the impact of firm-generated social media content on firm stock price in real time. The price impact estimation approach exploits the variance of sub-second level changes in stock price to capture the temporary and permanent stock price impacts of firm-generated tweets. Firms should aim for their firm-generated content to induce permanent price impact because it reflects information about the value of their firm. Temporary price impact can increase transaction costs for investors and the cost of capital acquisition for firms themselves because it reflects uncertainty about firm value. One could say, therefore, that permanent price impact is positive, while temporary price impact is undesirable, and potentially negative, especially if it leads to a higher firm cost of capital.

The researchers find that firm-generated tweets induce both permanent and temporary price impacts, which are linked to the tweet attributes of valence (i.e., positive and negative sentiment) and subject matter (i.e., consumer and competitor orientation).

Tweets reflecting negative or positive valence are consistently linked with a reduction in permanent price impact and an increase in temporary price impact as measured by the variance in stock price. Similar findings are obtained for tweets that only reflect a consumer or competitor orientation, although the impacts are smaller. Thus, both findings indicate that tweets reflecting only valence (positive or negative) or subject matter (consumer or competitor orientation) are associated with an increase in temporary price impact and a decrease in permanent price impact.

“Our results show the importance of interaction effects between tweet valence and subject matter in generating permanent price impact. The average negative and positive valence tweet when viewed through the lens of consumer or competitor orientation generates a permanent price impact, while a competitor-oriented tweet with a negative valence is likely to have the highest permanent price impact,” explains Lacka. From the perspectives of marketing practice and intraday social media marketing strategy design, this is a crucial finding because valence as a singular attribute is associated with decreasing permanent price impact. 
 
Boyd says “The implications of our study are clear. Investors in financial markets pay attention to firm-generated social media content and their ability to act on information at sub-second levels allows for instantaneous incorporation of social media content.” This is possible because of a new non-human breed of investor that now make most trade-by-trade decisions in financial markets—the so-called algorithmic traders or ‘algos.’ Algos scour many sources, including firms’ social media content such as tweets, for any indication of firm relevant information and act on it, often all within milliseconds. 
 
Marketing managers need to be aware of this when designing social media posts and campaigns. When social media posts contain what could be referred as “partial information” (i.e., only valence or subject matter), they lack the context that allows investors to make inferences about firm value. However, when, for example, tweet valence is set in the context of a specific subject (e.g., customer or competitor), it, on average, offers valid information that can be acted on by investors. “Our study shows that by carefully incorporating attributes, such as valence and subject matter, marketing managers can design social media content to generate varying degrees of permanent or temporary impact,” Ibikunle points out. 

In conclusion, these results suggest that firms should reflect valence and subject matter in their tweets if their aim is to improve the informativeness of their stocks with respect to firm value.

Kannan says that “By using permanent price impact as a metric to evaluate the long-term impact of tweets, social media managers can design campaigns that have an enduring impact on firm stock price, which should be a desirable outcome for firms.”

Not all intraday tweets will, nor should they, induce permanent impact on a firm’s stock price. Some tweets are aimed at the creation of social media ‘buzz,’ which is similar to the temporary price impacts we examine in this study. Firms can achieve social media ‘buzz’ by disseminating tweets as we show that tweets, in general, mostly generate temporary price impacts. The researchers urge caution, however, because temporary price impacts are linked to larger transaction costs for investors and cost of capital for firms.

BizListing

Casi’s Mushroom Chicharon taps TikTok Shop to grow business

Casi’s Mushroom Chicharon was founded by Josemartin Casillano during a challenging time, following a significant medical expense. Starting as a side project, Casillano’s commitment and hard work led to the rapid growth of his business.

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As the digital landscape continues to reshape the business landscape, small and medium enterprises (SMEs) are finding new avenues for growth and expansion. Among these success stories stands Casi’s Mushroom Chicharon, a local business specializing in snacks crafted from organic white oyster mushrooms.

With the rise of e-commerce platforms like TikTok Shop, this local enterprise has seized the opportunity to enhance its market reach and visibility, positioning itself for sustainable growth in the digital era.

Thriving in Adversity

Casi’s Mushroom Chicharon was founded by Josemartin Casillano during a challenging time, following a significant medical expense. Starting as a side project, Casillano’s commitment and hard work led to the rapid growth of his business. Initially employing a small team, the focus was on efficient mushroom cultivation, production, and sales. The nutritional benefits of oyster mushrooms, including being a source of protein, fiber, and antioxidants, attracted a health-conscious customer base.

Leveraging TikTok for Business Growth

Recognizing the potential of social media, Casillano launched a TikTok Shop to increase the visibility of his products. Dedicated to empowering local micro, small, and medium enterprises (MSMEs), TikTok Shop assists businesses in enhancing their visibility and creating growth opportunities in the digital landscape. Casi’s Mushroom Chicharon stands out as one of the success stories from this platform.

“Selling Casi’s Mushroom Chicharon has become easier because of TikTok Shop. Customers can now see our product. It doesn’t require a large capital, and you don’t need much technical knowledge to join TikTok Shop,” said Casillano.

Casi’s Mushroom Chicharon experienced a significant transformation after partnering with TikTok Shop. Leveraging the platform’s dynamic features, including content creation tools and shoppable content options, the business saw an unprecedented increase in visibility and consumer engagement. Consequently, the growing business boosted its sales by 50-60% through TikTok Shop.

Empowering Filipinos with income opportunities

The rise in Casi’s Mushroom Chicharon sales created new opportunities for many individuals. Starting with an initial team of three, the company has expanded to employ 19 people and now relies on 35 mushroom growers to meet the growing demand for its product.

“TikTok Shop helps small business owners like me through their programs like Buy Local, Shop Local. By providing vouchers and discounts, it further boosts the sales of small business owners and also helps local employees and farmers,” Casillano shared.

Launched in November 2023, TikTok Shop’s “Buy Local, Shop Local” campaign aims to enhance the visibility of local vendors and promote community pride and economic solidarity among consumers.

Reflecting on his business journey, Casillano acknowledges the collaborative efforts with TikTok Shop, citing its alignment with his goals to promote business and support local growers. Together, they contribute to positive change, fostering growth in agriculture and socio-economic empowerment.

Looking ahead, Casillano sees potential in continuing the partnership with TikTok Shop, recognizing its role in fostering growth for Filipino enterprises.

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BizListing

How Linya-Linya and Common Room’s financial missteps’ turned into business successes

Retail shop owners Jim Bacarro of Linya-linya and sisters Roma and Maan Agsalud of Common Room shared in RCBC Boz Sessions that they had to learn it the hard way.

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For many successful entrepreneurs, financial missteps are part and parcel of the job—at first. And retail shop owners Jim Bacarro of Linya-linya and sisters Roma and Maan Agsalud of Common Room shared in RCBC Boz Sessions that they had to learn it the hard way.

RCBC Boz Sessions is a video series featuring Filipino entrepreneurs who share their own journey, tips and insights on starting and growing their own businesses.

Linya Linya’s Jim Bacarro said their company experienced “a rollercoaster of hilarious financial missteps” before it became the renowned and popular apparel and lifestyle brand that it is today. In this episode which premiered on April 3, he shared on Facebook how their funniest financial mistakes became the company’s foundational strategies, entitled Nadapa, Natuto, Kumita.

‘Those epic fails were also the foundational parts of who we are as a company today,” Bacarro shared.

Kids in a candy store

The Linya Linya founder cited issues with cash flow and business capital as “bloopers” that eventually became “incredible lessons.”

Bacarro admitted that they were like “kids in a candy store with our cash” during their beginning years. “Sales meant celebration, right? Wrong! We pulled out cash without thinking twice. And guess what? When it was time to pay suppliers, our wallets were singing crickets.”

He added Linya Linya started their operations “undercapitalized,” diving into projects with their “pockets half-empty.”

“The result? We got smothered by interest payments and were left scrambling for funds.” Bacarro explained, adding that they were also prone to making unplanned and unnecessary big purchases that “led to us scrimping on our actual products—the T-shirts!”

Mixing business with personal

Sisters Roma Agsalud-Agsunod and Maan Agsalud of the arts and craft store Common Room also admitted committing basic mistakes during their first few years in business.

In their YouTube video “Three Mistakes When Scaling Up Your Business,”  Agsunod and Agsalud shared the lapses they committed that prevented them from leveling up sooner.

The Common Room sisters said they did not know anything about the basics of business when they started. “Sa sobrang wala kaming alam sa negosyo, akala naming kumita na kami basta maibalik lang ang rental fee namin,” they said.

Their lack of business know-how made them commit other mistakes, such as mixing personal finances with their business earnings, and making decisions based on feelings instead of hard financial data.

“When Common Room was just starting, kami ang breadwinners ng family namin, so lahat ng earnings naming napupunta sa panggastos ng pamilya. Hindi namin alam na dapat paghiwalayin ang personal bank account sa business bank account. Pag hindi niyo sila pinaghiwalay, mabagal ang growth ng business,” they shared.

They also said: “Ang solution to not knowing the basics of business is to do simple self-studying. Kahit pinaka-basic concepts lang, pwede mo na matutunan sa YouTube videos. Manood lang kayo ng ilang videos at malaking advantage na agad yan.”

“Nakaka-stress ang mistake na yan. Kaya ikaw, study your data before you make any big decision,” the sisters added.

Don’t be afraid to try new tools

Bacarro believes that a financial misstep can translate to business success if one recognizes the mistake immediately, and turn it into an opportunity for growth and innovation. “Through these mishaps, we learned the hard way that managing a business isn’t just about making sales; it’s about smart financial planning,” he said.

For Agsunod and Agsalud, accepting the mistakes allowed them to make the necessary fixes and changes. “So, to all aspiring entrepreneurs out there, embrace your mishaps, learn from them, and maybe get a little help,” they said. Bacarro advised being in the know when it comes to new tools and technology for business owners as these could significantly make their lives easier. “Don’t be afraid to try new tools to help grow your business,” he said.

And so these bosses were all delighted to have found out about RCBC’s Boz app – something they wished they had when they were just starting out.

RCBC Boz is one of the bank’s newest apps specially designed for beginning entrepreneurs. It is a mobile banking platform that allows users to manage their RCBC business accounts separately from their personal accounts, to have an overall financial view of their business performance. It also has functions that allow users to pay suppliers, create and send invoices, and set financial goals. The mobile app has a Report feature that can provide entrepreneurs with weekly, monthly, and yearly financial reports—giving them access to instant and accurate business financial data.

“Entrepreneurship is fun. Having friends who can laugh and cry with you along the way makes it even better. What’s best though is a friend who can laugh, cry, and actually help you with stuff you’re not so knowledgeable on. An app like RCBC Boz is that friend,” he added. 

Download RCBC Boz app now and tune in to RCBC Boz sessions for more practical tips and insights on managing your own business.    

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Strategies

Marketing people, pay attention: Scent sells, and the right picture titillates both eyes and nose

There is a less expensive route to the olfactory senses – one where people’s imaginations almost do the marketer’s work. It is no surprise that attractive images of flowers or fruit with pleasant smells will attract customers if they are relevant to the product.

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Scented products with relevant images on their packaging and branding, such as flowers or fruit, are more attractive to potential customers and score better in produce evaluations, new research confirms.

And such images, the researchers conclude, are particularly effective if manufacturers and marketers choose pictures that are more likely to stimulate a stronger sense of the imagined smell – for example, cut rather than whole lemons. This, they say, suggests that as well as seducing our eyes, the images are stimulating our sense of smell.

The study, published online in the International Journal of Research in Marketing, could provide manufacturers and marketers with a cost-effective way of promoting the ever expanding range of scented products. As well as the obvious, such as perfumes, candles and air fresheners, products such as bottled water and greeting cards are now sometimes infused with scent.

The whiff of failure

Despite rising recognition of the power of scent, the paper says, much product branding does not include an image evoking an appealing smell. Alternatively, other marketers and their clients even choose images that actually reduce consumer appeal. Examples include objects whose unpleasant odours the product is designed to disguise, such as old trainers or ash trays. The new study confirms the negative impact of such images.

It also revealed that only 27% of the 957 scented laundry detergents and all-purpose cleaners on sale in America included in the study carried a picture of the object whose scent was recreated in the product.

The researchers then measured the customer ratings for the 532 products where consumers had provided feedback using 1-5 stars on the retailers’ website. Products branded with a relevant image of the source of the scent scored significantly better, with an average rating of 4.66 out of 5 stars, compared to 4.46 stars for products without a picture of scent on the package.

In an online study, 200 participants were asked to choose between two fruit-scented handwash products with and without pictures of the relevant fruit on packaging/advertising. As expected, the presence of an image was more important in determining consumer choice than whether the handwash was scented with clementines or pears.

A rose by any other name…

Similarly, when considering products described as having a floral scent, images of yellow roses scored better with participants than sunflowers, almost certainly because the latter does not have a strong smell.

The paper also concludes that marketers can boost the olfactory impact by adding a second ‘cue’ to packaging and branding material, such as showing cut lemons rather than whole lemons.

Co-author Zachary Estes, Professor of Marketing at Bayes Business School (formerly Cass), City, University of London, said: “Marketers and their clients have sought for some time to infuse packaging and even print advertisements with appropriate pleasant fragrances. There is strong evidence that appealing scents can boost sales in shops. However, for individual products that process is costly and not always particularly practical. It also has limited impact – research suggests that just 11 per cent of customers sniff fragranced magazine ads, for example.

“Our study suggests there is a less expensive route to the olfactory senses – one where people’s imaginations almost do the marketer’s work. It is no surprise that attractive images of flowers or fruit with pleasant smells will attract customers if they are relevant to the product. However, that impact can be magnified by using specific images that intensify stimulation the olfactory senses as well.”

Co-author Varun Sharma, Assistant Teaching Professor at Carnegie Mellon University (Qatar), said: “With this large market comes a growing demand to advertise and package these scented products effectively. Our work suggests that scent has far more pervasive and powerful marketing potential than previously thought.

“It’s reasonable to assume that even when packaging or advertisements carry a scent-related picture, it is initially chosen for visual appeal. Marketers and their clients need to understand the wider power of such images. Unless marketers fully understand why such pictures are effective and that their impact is multisensory, they may make costly mistakes.”

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