Online communities: Where is the value for company and customer?by
Businesses are exploring how the creation of their own online customer community can deliver a range of benefits. But for a community to be a real success, its value to both brand and customer needs to be transparent.
By Neil Davey, editor
Customer communities may be kicking up a lot of dust in the corporate world at present, but they aren't a new phenomenon by any stretch of the imagination. Indeed, brands such as Harley Davidson have had thriving customer communities for decades – arranging events and meets, exchanging expertise and ideas, and simply bonding over their shared passion. But, just as the internet has shaken up so many other areas of corporate life, so it has also served to give the customer community arena a shot in the arm.
"What has changed most of all is the ability for the communication to be much more two-way than it has been," explains William Buist, managing director at consultants Abelard Management and a regular speaker on the topic of social networks. "Harley Davidson has a very strong customer identity, but historically it was very much word of mouth within smaller groups. Now they can interact on a much more global scale in a more agile way, getting messages out to customers around the world and receiving feedback from them quickly."
With the internet throwing the potential of customer communities wide open, online community platforms are becoming increasingly prevalent. Although initially built around basic forums such as message boards, they have proceeded to evolve rapidly to encompass a whole range of capabilities for community members.
But whilst interest in online customer communities has been piqued, Web 2.0 practitioner and author Leon Benjamin, fires a warning to those firms who view online community platforms as merely a new way to market their brands. "They are becoming more popular, but they need to be really specific," he explains. "The key question to ask is: what is the exchange in value? What does the community get out of it and what does the brand get out of it? This needs to exist and it needs to be transparent in order for companies to have a successful customer community."
So what are the different online customer community propositions that are being explored?
Product and service development
Quite a lot of the really powerful customer-centric communities are actually invisible to the layman, as they are private and closed to the wider public. Arguably the most successful of these has been created by pharma giant Procter & Gamble, which has steadily been building out a massively diverse sizeable customer community to help it with product and service development over the past few years.
"The early reports were so successful that they actually think that up to a third of the part of their global R&D division that is responsible for coming up with new product ideas may be redundant," claims Benjamin. "The actual fiscal benefit is that they get what they describe as 'disproportionately rich' ideas from their customer community."
As a closed community, Procter & Gamble swells its community via a range of techniques including running competitions and offering promotional packs asking people to join the group. But what's the return for customers?
"In the Procter & Gamble case there are branding and personal reasons why customers engage and connect," says Matthew Lees, a community expert and vice president of operations at customer-centric consultancy the Patricia Seybold Group. "It is not simply about getting free stuff, there are some powerful motivators."
Benjamin adds: "People are quite willing to give their opinions on a continuous basis provided they know that they are being listened to. One of the reasons Procter & Gamble has been so successful with its community is that it takes those ideas and makes them real and then credits the community for co-creating it."
Standing focus groups
Operating on a similar principle, companies such as pharmaceutical company GlaxoSmithKline use customer communities as standing focus groups. Historically, the pharmaceutical industry has used test groups for new drugs to identify side effects to take it through the approval process. Online customer communities have opened up a new world of opportunity.
Matthew Lees, Patricia Seybold Group
"When the drug is approved they can use the community to look for long-term effects," explains Buist. "They do this for two reasons. Firstly, as a business they are looking for good stories that enable them to sell their product over their competitors because they can demonstrate better effectiveness. But also, if there is a problem, they get to hear about it faster so that they can deal with it."
These kinds of focus groups aren't confined to the pharmaceutical sector of course, and firms from a whole range of sectors are now using online customer communities to gauge customer opinions of their products and services. Intel, for instance, uses an online community model to gather feedback on its next-generation chip development projects.
Once again, however, the emphasis has been on ensuring that there is an exchange in value. "If a company wants to try and understand customers' perceptions of it, they can get a lot of opinions - but these will very soon dry up if they kept sucking customers of opinions without acting on any of them," continues Benjamin. "When a company gets a mass of data and opinion from customers, they need to actually internally convert it - whether that is reengineering business processes for example or deciding to go from offshore back to onshore – and then communicate it back. That feedback loop is incredibly important."
Arguably more self-perpetuating are communities that have been created to provide customer support. Hitachi Data Systems is one such firm to deploy a community model approach for this purpose, but it is perhaps Apple that has most famously – and successfully – utilised a passionate and knowledgeable customer base to provide a self-help community.
The Apple user group has, of course, existed for many years, with a primary purpose of helping individuals who have bought Apple products to get the best possible value from these goods. So encouraging the community to continue this activity in Apple's own domain has obvious benefits.
"It is easy to understand the value," agrees Lees. "If a community is about customers helping each other, they are not tying up service people as much. But organisations find that these communities are much more pervasive than just people asking questions and finding solutions. So, for example, they are very useful in presales. If someone wants an authentic sense of what people think of a product, and you have access to discussion forums, you can get really useful information, particularly if you have a specific concern about an issue. So there's a free sales aspect of it as well - although it is difficult to quantify the amount of business that is directly attributable to the community."
The customer rewards for these kinds of communities really cuts to the core of what the community model is all about. "Being part of that community, you can get help quickly, but of course once you have been helped then there is a strong desire to help as well," says Buist. "There is a lot of satisfaction in being a part of something as dynamic as that for these people, because there is a sense of 'giving something back'. And that to me is the essence of what a community is about."
Elsewhere, in the example of online discount broker TradeKing, the incentive to create an online community was simply to engage clients – a move that has reportedly had a positive impact on its revenue. Yet despite the different goals of these community models, there are innate similarities. The underlying tools will be similar across the board, for instance, as will the way that the company approaches, analyses and engages the groups.
James Paterson, Plebble
Yet for firms wanting to take advantage of a customer community without having to go through the not inconsiderable effort of building the model, there is an alternative. With the proliferation of social networking sites such as Facebook, businesses are increasingly exploring ways to involve themselves in independent, existing community groups.
Coca-Cola for instance, whilst it has tried to set up its own community, has also used Facebook, responding to the fact that a number of its brands, including Sprite, had existing fan pages. "Coca-Cola has decided that it is not going to try and build Sprite as a standalone site because it is one product out of the range, it is a tiny part of what it does," explains Buist. "But it created a microsite within another site where there are lots of people, where it can generate a presence and generate some conversation. And to some extent those kinds of things can become self-sustaining because they are small enough that the people who are attracted to it keep the conversation going."
This 'piggybacking' of existing social networking sites to exploit the customer community model could have serious consequences, however. James Paterson, co-founder of Plebble, sounds a very strong note of caution to companies looking to get into this arena for marketing purposes.
"Social networks like MySpace, Bebo and Facebook are not actually designed with businesses and brands in mind – social networks are where groups of friends meet up and have discussions," he explains. "There is a sense of frustration that these groups are sharing information and then businesses want to participate. Some firms have even gone into these groups pretending not to be the business concerned and have been found out and received some very negative publicity as a result. It's slightly like the Wild West out there, but there are quite defined rules and these are common sense – if you are not expected to be somewhere, then you probably shouldn't be there."
Making its mark
Nevertheless, the future may see greater integration between these kinds of independent communities and corporate sites, once the boundaries have been laid out. Benjamin in particular believes that discussions are already taking place regarding how vibrant communities that exist outside of corporate sites can be plugged into relevant pages on a firm's website.
"What we are going to see next is that in the same way that companies can embed an RSS feed into your website, firms will be able to take a very active group that resides on Facebook and plug it into a relevant page on the company's website," he says. "It would be such that it has the experience you have is exactly the same as on the website, and it can be white-labelled or co-branded, and the company would say: 'this is a customer-made community and it is the community that we are supporting, join here.'"
In this scenario – as with the other successful community models – it would again present a win-win situation. "The person running the group gets more members and more kudos, and there are a lot of opportunities for sponsorship and branding," continues Benjamin. "Again the purpose would be to present the company's most avid followers or best and most knowledgeable customers, so that when other customers have problems, they can approach the community. So I think you're going to see a lot of that in the future."
Nevertheless, it remains early days in this arena. Even those firms that are only just developing their online communities now – several years after the Procter & Gambles of the world – are still relatively early adopters. Indeed, the huge majority of firms are not yet taking steps into the space.
Yet while firms are still feeling their way, Lees remains adamant that the customer community model will make its mark in the coming years. "Customers, and in particular the younger generation, will have an expectation that if they are looking to use your product or service, you will be able to let them connect with other people like them – and if you don't help them do it, they will go to someone else who does," he concludes. "You will have a community that pervades your site, that is part of your presence, and you will have a team of people in your organisation that will be experts in engaging appropriately with your customers through your community channels.
"And so while the ROI cases are difficult now because they are tough to quantify directly, our expectation is that in maybe another five to eight years, this area will be a no-brainer."
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A really interesting piece Neil. The mention of several large businesses in your article reinforces a conclusion we drew ourselves - a lot of online community/social networking activity is undertaken only by companies who have the (often expensive) technology at their disposal and can afford to hire people to look after what is said about them online. It's a shame that effectively exploitation of these technologies seems closed to smaller companies.
We hope we go some way to fixing this with WeCanDo.BIZ, which provides an arena for smaller companies to network with prospective clients, all hosted and maintained on their behalf. Beyond building a network of existing customers, they don't have to worry about working their online profile as their customers do the work for them.
I would hope to see more of these community initiaves open to the smaller business owner in the future.
This is an insightful article! We too have been trying to understand the ROI of online communities. Our clients typically use it for product & service innovation, market testing, and improving loyalty and word of mouth. We recently built a model for building a business case. It's currently an archived webinar (http://satmetrix.com/webinar/webinar_2008-06-04.htm), but we plan to put it into a white paper as well.
The area we believe to have one of the greatest benefits is increasing loyalty and positive word of mouth that is generated from that. We did a study in the B2C hardware industry to better quantify these WOM benefits on economics. Your readers may be interested in that white paper as well (http://satmetrix.com/resources/whitepapers.htm).
As for the comment from Ian, it is difficult for smaller companies to dedicate the resources necessary to create a thriving community. While varying degress of technology sophistication is available, you have to nurture the community and keep it fresh to create the desired outcomes.
Deb Eastman, CMO