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February 24, 2015

Excerpt: A Big Payoff from Online Communities

by massmarotta

Originally posted January 2012

Revised February 2015

A study out of the University of Michigan – Ross School of Business conducted earlier this year answers the question; can company revenue from community customers [members] be attributed to their joining the branded online community? The short answer is yes. According to the study, revenues increased on average 19% after they joined, a result of making connections with other customers and engagement and transparency with the company and its employees.

I came across this research paper after a colleague of mine forwarded me this article, “A Big Payoff from Online Company Communties.” Here are a few excerpts to give you a flavor of the value contained in both.

“While it is likely that hosting customer communities on third-party websites such as Facebook provides reach to a broader audience,” the authors conclude, “this strategy does not offer the same level of access and control over customer interaction management and data offered by a firm-sponsored social network, nor is the third-party community interaction data commonly available to the firm in a manner that can be easily linked to customer-level purchase behavior.”

Bottom Line:

Consumers who join a company’s online community spend significantly more on the firm’s products than they did prior to signing up or in comparison with similar customers who are not part of the network. The findings indicate that online communities more than justify the investment to create and maintain them, and provide a unique way for companies to connect with customers and monitor their purchases and behavior.   

Download the full research paper – “Social Dollars: Economic Impact of Customer Participation in a Firm-Sponsored Online Community.”

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