2005: The Year of the Customer Community


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Published with the permission of MyCustomer.com.

Wikis, RSS and weblogs: If you have not yet been assailed by these terms, I guarantee you will be by the end of 2005.
For these social network technologies are starting to hit the collective conscience at the same time as various other trends point to a “second coming” for customer communities. With business planning in full swing, an evaluation of the costs and benefits of a customer community should be on the cards; but beware, they are not for everyone.

What is a customer community?

I have yet to find good definition of a customer community, but the major characteristics seem to be:

  • It enables dialogue and collaboration between an organization and its customers.

  • It is a place for customers to find, meet and interact with each other.

  • It is a major source for swapping knowledge and information.

  • It is used by people who have values and needs in common.

  • There is strong personal affinity and high degree of emotional value attached to it.

Thus, a software user group, a fan club or an interest group (e.g. Friends of Highland Malt) would be a likely community. Conversely, Nectar loyalty card holders or an FAQ (frequently asked questions) self-service web site would not be. Particularly successful customer communities include HOG, the Harley Davidson Owners Group, and applefritter, the community for Apple computer owners.

Customer communities are not a new idea, but what is new is the ability for organizations to use online technologies to build or enhance community services. This puts the potential benefits of a customer community within the reach of more companies. So, a web site may be evolved into a customer community, or loyalty card holders of cherished brands such as Body Shop, may have offline events enhanced with online community services.

Market trends

The availability of the technology is not the prime reason why companies should explore the benefits of creating a community. Economic and social trends, too, are highlighting this as a very influential way of doing business. For example:

  • The flip side of better customer relationships is that customers want suppliers they trust. They want to be known, respected and involved with those they deal with. Marketing is becoming a set of activities done with customers not to them—be that communication or product design.

  • Consumers are becoming more active online. They are increasingly interacting with the medium and creating their own content (e.g. blogs and web sites). Everyone is looking for his or her 15 minutes of fame.

  • Successful brands are increasingly those that are strongly linked to a social purpose. At the same time, personal affinity networks and word of mouth are growing as a means of finding suppliers and supporters.

  • Economic challenges mean that companies need to adapt to market changes quickly. This necessitates having a finger on the market pulse and organizations designed to “sense and respond” to the customer experience. A key way of achieving this is through customer feedback and tapping into customer networks.

  • Increased market competitiveness means that:
  • “Emotion is the great differentiator in a world where sameness increasingly rules. In an excess economy, success comes from attracting the emotional consumer not the rational one. Companies can tap into the emotions of consumers by focusing on a specific tribe.”
    —Kjell Nordstrom, Advanced Management Programme, Stockholm School of Economics

    Community benefits

    Despite the green light implied by market trends, there is still debate about the benefits of building a customer community. “We tried that, but it didn’t work” is often heard. These are some of the main benefits that should be considered—with the right strategy and investment:

    • Reduced service costs. Often sited as the way to pay for community investment, web based customer care can cost an average of $4 to $7 per interaction, as opposed to $7.50 to $50 per telephone call. (Source: Gartner)

    • A community helps build valuable “my brand” customers. The Ogilvy Loyalty Index has found that such customers can be worth up to six times the value of an “ordinary” customer. A McKinsey study found that users of online community features were around one-third of all site visitors but accounted for two-thirds of sales.

    • Increased word-of-mouth recommendations and referrals. Research shows that 30 percent to 50 percent of all brand switching is based on recommendation, as against 20 percent each for advertising, promotions and personal search. Media budgets could be more effective if they were switched to communities, rather than multi media broadcast communication.

    • Customer retention. Community services can be invaluable in helping to solve problems—and get the most value from purchases. A very cost effective means of:
      • Knowing and understanding your customers in ways research cannot reach

      • Innovative product and service development

      • Providing customer process quality controls

    Key factors in building a community

    Benefits can be achieved only if some of the important lessons from the previous disappointments are learned:

    • A community is a customer service, not a service to the company. Think of it as part of the value proposition (e.g. Aveda Professional Connections).

    • There are two main ways of community building. Provide a service for a value group that has a link to your brand either directly or through sponsorship (e.g. Coke Music. Or build a community service for key groups of your current customers (e.g. Heinz tinytums. (See my Gartner report, Accessing Value Groups Through On Line Communities.)

    • Personal affinity is key to a successful community. This takes time and effort to build, if you do not already have strong links to a value group. (See Techniques for Engaging With Members by Tim Pickles, Sift.)

    • Good real-time information and measures are needed to make the community experience worthwhile for participants and for the company (e.g. Genes Reunited).

    • A successful customer community has the right organizational structure to support it.

    • A community leader is needed to encourage contribution, build interest and interaction and censor inappropriate content and activity.

    • Continuously improve the customer experience in collaboration with the community.

    These lessons highlight the fact that many organizations do not yet have the capabilities to benefit from building a customer community. However, this should not stop an evaluation of the potential and the investment needed. At the very least, it should curtail unwise technology investments in social software and at best it will serve as a sign-post for future CRM development.

    © 2005 The Customer Management Community

    Jennifer Kirkby
    Mutual Marketing
    Jennifer Kirkby is a leading analyst and writer on marketing and customer management. She is director of Mutual Marketing and a contributor to many books and journals, and she lectures at business schools. After a career in marketing, she was a director at Gartner and advisor to the U.K. government.


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