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Online communities: Enjoy the insight but avoid the pitfalls

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10th Oct 2008
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Focus groups and market research have traditionally provided valuable insight for firms looking to improve their operations and products. But online communities are now proving another popular source. However, there are pitfalls to avoid for those looking to tap into this new source of customer insight.

Online communities

By Neil Davey, editor

Businesses have long used the likes of focus groups and market research to help them refine operations and services, and guide them in their efforts to create the next consumer sensation. But with the arrival of social networking via the internet, the whole process is receiving a Web 2.0 makeover.

Whilst an increasing number of businesses are bolting communities onto their websites, leading-edge organisations are using them as a panel to aid improvement and better reflect customers' needs and wants - what Forrester Research terms "social sigma" - and encourage customer co-creation.

"It has always been a competitive edge to listen to customers; now it is a requirement."

Jim Sterne

Dell's IdeaStorm community, for instance, has generated hundreds of ideas for its products, with only a fraction having yet been implemented. Starbucks has established the myStarbucksidea.com portal where customers can post, rank and discuss ideas of how the coffee firm can offer a more compelling value proposition and customer experience, a number of which have already been implemented, including loyalty cards and free wi-fi service.

And Procter & Gamble is often singled out for particular praise when it comes to its customer co-creation initiatives. "Procter & Gamble has been slowly building out a really massively diverse, sizeable customer community to help it with product and service development," says Web 2.0 practitioner and author Leon Benjamin. "The early reports were so successful that they actually think that up to a third of its global R&D division that is responsible for the creative aspects of coming up with new ideas may be redundant. In other words, the actual fiscal benefit is that they get what they describe as 'disproportionately rich ideas' from their customer community."

But is social sigma and customer co-creation via online communities really that straightforward? Some have their doubts...

Two-way interaction

Certainly the modern marketplace demands that organisations enter into a dialogue with their customers. "It has always been a competitive edge to listen to customers, now it is a requirement," says Jim Sterne, an author and speaker on internet marketing and web analytics. "It is the difference between the artisan or the engineer, saying 'I have just created this new device' and everybody wants it. Well, we can create new devices at the drop of a hat - but not everybody wants them. So now it is a case of going to customers and asking them what they want and what they need."

Where organisations traditionally used market research and focus groups, now online communities provide a new two-way interaction with consumers to ensure they meet their needs whilst also reinforcing loyalty by demonstrating that they listen to their customers.

"We would never pitch online communities directly against pure market research – there is clearly a place for both and they should be regarded as largely complementary."

Jeffrey Henning, chief strategy officer, Vovici

As Jeff Carruthers, managing director at customer engagement consulting firm Resonate, emphasises – the way that online communities operate provides some very practical benefits. "Whilst there are undoubtedly some benefits of using an experienced facilitator in a focus group, there are sometimes problems such as: the facilitator who knows the answer and is hell bent to get there; the questions that are never asked or sought due to over-scripting; the conclusion that is confected because we have a deadline; the attendee who answers as they believe they should not as they would; and the group pressure that gets in the way of individual 'truths'.

"Some of these factors are of course still present in an online environment but there are arguably some naturally occurring benefits. Artificial deadlines are not as relevant for an 'always on' community. Ideas that we (the brand, the facilitator) hadn't thought of will float to the surface if they are important and popular. Ideas are more likely to be judged on their merit than by the lesser known personality or social standing of the contributors. The larger numbers involved make for broader based sampling. And finally, the speed of execution in an online community (you will generally have the comprehensive 'position' of a community within 24-48 hrs of asking a question) is very attractive for many purposes.

"Having said all of this, we would never pitch online communities directly against pure market research – there is clearly a place for both and they should be regarded as largely complementary."

Co-creation dangers

But are there dangers associated with this kind of dialogue? Yes according to Tony Ulwick and Chris Lawer of Strategyn. "As firms begin to develop new capabilities for capturing, sharing and applying customer inputs, there are important risks they should be aware of when doing so," they suggested recently. "Companies, lacking any knowledge of what appropriate customer inputs are needed may often ask the wrong questions, or worse, they may not know what to do with the information once they receive it. Customers, though happy to share their 'requirements', do not know what information the company really needs. No wonder then that such mutual confusion and ambiguity often leads to unexpected failure when companies pursue rigorously the customer-driven path to innovation."

Can a company ever go wrong listening to its customers? Absolutely, according to Jeffrey Henning, chief strategy officer at Vovici. "Certainly a company can go wrong if they are drawing the wrong conclusions from what they are hearing. And one way to draw the wrong conclusions is to hear from certain people and then overestimate the percentage of their customers that feel that way. Where the errors are made is in really understanding how accurate the information is in representing the population."

"When the banks first undertook focus groups about ATMs in the late 60s early 70s, it was very technologically focused, so the initial results suggested that there wasn't a market for it."

Jeff Carruthers, Resonate

And Henning has seen other mistakes made in this field. "A great example is auto teller machines (ATMs). When the banks first undertook focus groups about ATMs in the late 60s early 70s, it was very technologically focused, talking about having a card and a secret number which you put in to get money out - and people were horrified by the idea that the computer was going to have access to their money. So the initial results suggested that there wasn't a market for this. And then somebody came around and talked to the customers, asking them about their complaints, which concerned the banks closing at four when they wanted money, or at the weekends, and how there was no way for them to check their balances."

From these results it was clear that there most certainly was a demand for the kinds of services offered by ATMs. Henning believes this emphasises the kind of shortcomings that can occur. "You really have to try to understand their problems and their world and then apply what your possible solutions are to those problems," he explains. "If you just present them with your solutions, they might not get it. The idea of ATM was so new and as it wasn't presented in terms of benefits to them, they weren't interested at all."

Feedback communities

So how can you ensure that if your organisation is probing its online community, that the insight it provides is accurate and useful? A recent study by Professor Manfred Krafft examined the use of online communities for the co-creation of new products and concluded that the process is most effective if the community is given broad, general questions to consider. But there were other interesting findings.

"Krafft and team found that incentives/rewards for participation increased the quantity but dropped the quality of ideas, which makes you scratch your head over the standard practice of paying focus groups," says Tim Tyler, principal consultant for online communities at Resonate. "Having unmet needs and being dissatisfied had positive impact on innovation while knowledge had none. Being 'innovative' or an 'opinion leader' had a negative impact.

"One way to draw the wrong conclusions is to hear from certain people and then overestimate the percentage of their customers that feel that way."

Jeffrey Henning, Vovici

"Our tip comes from asking a simple question: 'what type of customer will participate in an online conversation with you while having unmet needs and dissatisfaction?' Clearly someone highly engaged in your 'category' of product or service or if you are lucky, your brand advocates/fans. Encourage all interested customers into a conversation in your online community but keep an eye out for the most passionate – good or bad – and invite these individuals into an 'inner circle' where they can be integrated into your new product development at the 'fuzzy front end'."

Still, as previously highlighted, the most vocal or passionate customer segment may not always represent the majority of customers. Henning believes this also can be resolved. "I'm excited about feedback communities. You can use the qualitative data to ensure that you are getting all of the facts and insights, and then quantitative data so that you are taking those insights and trying to apply them to the population and understand the frequency of their occurrence," he explains.

Henning suggests that organisations could invite members of the public to participate in a survey, where the appeal of the ideas that have been generated by the community are quantified. Whilst the quantitative requirements will have been satisfied and improvements/ideas prioritised, there also would have been an opportunity to collect insightful comments made during the process that could be further explored. Then the community could be contacted once more to have these suggestions and comments re-evaluated. This kind of feedback community can be nurtured with something as simple as adding a suggestion box on the website for customers to contribute ideas, which other community members can then vote on, thereby allowing the best ideas to naturally bubble to the top.

"I think that is a great way because it takes an old methodology and applies new techniques," says Henning. "You are then developing an instrument based on the insights you have learned and it is a much richer survey instrument than we've had in the past."

So as with all initiatives involving emerging platforms, the use of online communities for customer insight comes with its share of risks. But with Web 2.0 promising to throw open the doors to greater company-customer interaction, it stands to reason that one of the biggest benefits should be its contribution to customer insight. And ultimately this can only be a good thing for firms that feel their focus groups haven't given them enough focus.

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