Manage Learn to apply best practices and optimize your operations.

The key to customer communities

Why have companies like eBay been so successful? One reason is that they've formed a community among their customers.



Lessons Iin Loyalty

M arketers are showing increasing interest in the value of community -- particularly online community -- as a way of connecting with, selling to and learning from their customers.

I'm not talking about communities of proficiency or independent community portals, such as those for people interested in grandchildren, gardening, ancient civilizations or woodworking. No, I'm not talking about communities organized for strictly mercantile purposes between participating members, and I'm not referring to complaint and review post sites, such as epinions.com and planetfeedback.com. I'm referring to the online forums organized and managed by companies for generating feedback and sharing interest and expertise with their customers.

The focus on online communities is growing rapidly. The editor of a prominent CRM information portal recently wrote about company-managed communities. There is a book, entitled Customer.Community (for which I wrote the Afterword), entirely devoted to customer communities. Online and print business periodicals are running articles on the benefits of community. There are some terrific models and community success stories, with more coming to light every day.

What are the benefits of customer communities and why should marketers care, you ask? Well, most immediately, and of utmost interest to marketers is the direct correlation to increased sales. Studies by McKinsey & Company and Jupiter Media Metrix found that from some sites, regular users of bulletin boards and feedback areas generated two-thirds of a site's sales, though they accounted for just one-third of site visitors. Further, McKinsey has determined that users who post messages to a site's forum or who contribute product/service reviews visit nine times more frequently than non-participants. They buy almost twice as often.

There are pure-play Web sites, based on paid memberships, which exist almost entirely around community. One of these is Classmates.com. Connectivity is the basis of Classmates' 400% growth over the past two years. The company now has 30 million members and hopes to hit 100 million by 2005. What works for Classmates.com can be applied to many other online businesses: enabling community and commerce to happily merge.

Retailers like eBags, online merchants of luggage and briefcases, and Orvis, the outdoor products merchant, use managed communities to maintain relationships with customers and generate valuable feedback from them. Orvis, predominantly a catalog marketer since its inception, began its online life strictly as an information resource, but has since expanded this footprint to become a fully functional online store as well. The combination enabled them to host 6 million unique visitors in 2001 (double the number of the year before), and online sales now account for one-fifth of Orvis' overall revenue.

The key issue for community participants, according to all the studies conducted, is relevance. If there's a sense of shared interest or support, customers and visitors will chat, evaluate, recommend – and buy. Another of McKinsey's most compelling findings is that even if visitors don't directly contribute to message boards and forums, they often read them. This gives them enough of a connection that they are more likely to return and become purchasers and community members.

So, beyond sales and potential sales, are there many other bottom-line benefits of customer community. It turns out that there are plenty. Here are just two of them:

 

  • Lower Customer Service Costs – Companies can save money by using community management software, enabling them to encourage customers to share information and participate in relevant discussions. The more sites can register members to a community, and get them to participate frequently, the more opportunity there is for saving dollars by allowing customers to interact and help themselves. They can also benefit through mining the information from customer discussions, generating reports on customer concerns and trends.
  • Product/Concept Beta Testing – When companies come up with new products or concepts, they can get an early read on customer response by using their community as collaborators and jury. Customers can critique or test a proposed offering, sharing opinions and suggestions, while companies observe and mine the information. This helps companies optimize their offerings, often avoiding the missteps associated with having complete customer input prior to introduction.

The 500-pound gorilla of online community, eBay, plans to take participation to a new level. They've organized a three-day community event at the Anaheim Convention Center in California. Several thousand eBay-ers from around the globe – buyers and sellers alike – are expected to attend. They'll have the opportunity to hear eBay's president and CEO, Meg Whitman, talk about the role of community, meet eBay's senior staff at forums over the three days, visit booths to help them with their trading, attend educational classes and participate in events such as a live auction, games, and a gala.

As one community participant said in an eBay community posting, "I, for one, am thankful eBay exists. They have given us a venue. We are grateful." That's real advocacy, the ultimate value of community.


Michael Lowenstein is managing Director of Customer Retention Associates, a customer and staff loyalty program development, research and consulting firm located in Collingswood, N.J. He has three decades of experience in customer and staff loyalty research and has written several books, including Customer Retention: Keeping Your Best Customers, The Customer Loyalty Pyramid and Customer Win-back: How To Recapture Lost Customers - And Keep Them Loyal.


Dig Deeper on Customer loyalty and retention

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

-ADS BY GOOGLE

SearchContentManagement

SearchUnifiedCommunications

SearchDataManagement

SearchEnterpriseAI

SearchERP

Close