Not having a community is costing you money

The concept of companies reaching out to consumers via Facebook, Twitter and other social networks is far from new, but a number of companies are seeing a significant return on investment from building their own branded online communities (or community) for customers and fans.  A survey conducted last year found as many as half of the leading global brands have their own branded customer community online, and new research is showing just how lucrative this move has been for the companies.

The research looked at how members of these branded online communities interacted with the host company, with the specific aim of finding out if they ended up spending more money than your average customer.  The basic answer was that they do spend more, quite a bit more.  The researchers found that spending per member increased by 19% after they joined the community, with this attributed to closer interaction with other members and greater engagement with the host company.

Such a rise in income typically represents a healthy profit on the investment required to establish and maintain the community, whilst the researchers are at pains to point out that this increased spending is not typically diverted from other sources, such as offline stores.  It should instead be regarded as spend that would not have happened if it were not for the community.

To derive their findings, the researchers investigated a random sample of over 25,000 members of the test companies online community, which represented a sample size of approximately 10%.  They explored both offline and online purchases made by those community members alongside join dates, friendships forged online and their other community behavior.

Engagement was key

The researchers revealed that the key to the increased expenditure was both the quality and quantity of relationships with other customers.  I think that’s a key point right there for marketers to hear again.  Values doesn’t come from having you talk at customers, value comes from having customers talk to each other.

They found that customers with many strong relationships on the community spent considerably more on the companies products.  What’s more, the research suggested that the community ‘broke even’ after just 33,000 members had signed up, or just 12% of the total membership.

“Given that the firm acquired 260,000 members within the first fifteen months after community launch, this was clearly a very profitable investment for the firm,” the authors write, “especially as this number is comprised of a mix of both current and newly-acquired customers.”

So whilst engaging with customers on a ready made network such as Facebook might provide companies with an easier way to engage with their customers, this research underlines the value that can be had from bringing customers to your own branded communities.  That you can provide customers with an environment perfectly suited to their needs coupled with complete ownership of user and communications data should more than compensate for the extra effort and investment required to establish the community.

So what are you waiting for?  Time to get social. Time to create an online community.