Virtual communities

Virtual community

An Internet-based forum for special-interest groups to communicate.

Virtual communities also provide opportunities for some companies to develop relationships with their customers. Since the publication of the article by Armstrong and Hagel in 1996 entitled 'The real value of online communities' and John Hagel's subsequent book (Hagel, 1997) there has been much discussion about the suitability of the web for virtual communities.

The power of the virtual communities, according to Hagel (1997), is that they exhibit a number of positive-feedback loops (or 'virtuous circles'). Focused content attracts new members, who in turn contribute to the quantity and quality of the community's pooled knowledge. Member loyalty grows as the community grows and evolves. The purchasing power of the community grows and thus the community attracts more vendors. The growing revenue potential attracts yet more vendors, providing more choice and attracting more members. As the size and sophistication of the community grow (while it still remains tightly focused) its data gathering and profiling capabilities increase - thus enabling better targeted marketing and attracting more vendors . . . and so on. In such positive-feedback loops there is an initial start-up period of slow and uneven growth until critical mass in members, content, vendors and transactions is reached. The potential for growth is then exponential - until the limits of the focus of the community as it defines itself are reached.

From this description of virtual communities it can be seen that they provide many of the attributes for effective relationship marketing - they can be used to learn about customers and provide information and offers to a group of customers.

When deciding on a strategic approach to virtual communities, companies have two basic choices if they decide to use them as part of their efforts in relationship building. First, they can provide community facilities on the site, or they can monitor and become involved in relevant communities set up by other organisations.

If a company sets up a community facility on its site, it has the advantage that it can improve its brand by adding value to its products. Sterne (1999) suggests that minimal intrusion should occur, but it may be necessary for the company to seed discussion and moderate out some negative comments. It may also be instrumental in increasing word-of-mouth promotion of the site. The community will provide customer feedback on the company and its products as part of the learning relationship. However, the brand may be damaged if customers criticise products. The company may also be unable to get sufficient people to contribute to a company-hosted community. An example where this approach has been used successfully is shown in Figure 6.15. Communities are best suited to high-involvement brands such as a professional body like CIPD or those related to sports and hobbies and business-to-business.

What is the reality behind Hagel and Armstrong's original vision of communities? How can companies deliver the promise of community? The key to a successful community is customer-centred communication. It is a customer-to-customer (C2C) interaction (Chapter 1). Consumers, not businesses, generate the content of the site, e-mail list or bulletin board.

According to Durlacher (1999), depending on market sector, an organisation has a choice of developing different types of community: communities of purpose, position and interest for B2C, and of profession for B2B.

1 Purpose - people who are going through the same process or trying to achieve a particular objective. Examples include those researching cars, e.g. at Autotrader (www.autotrader.co.uk) or stocks online, e.g. at the Motley Fool (www.motleyfool.co.uk).

Price or product comparison services such as Bizrate (www.bizrate.com) are also in this category.

Position - people who are in a certain circumstance such as a health disorder or in a certain stage of life, such as communities set up specifically for young people or old people. Examples are teenage chat site Habbo Hotel (www.habbohotel.com). Cennet, www.cennet.co.uk 'New horizons for the over 50s' and parenting sites such as Baby Center (www.babycenter.com).

Figure 6.15 CIPD forums ■ customers a forum operated by a company to keep closer to its

Figure 6.15 CIPD forums ■ customers a forum operated by a company to keep closer to its

3 Interest. This community is for people who share an interest or passion such as sport (www.football365.com), music (www.pepsi.com) or leisure (www.walkingworld.com).

4 Profession. These are important for companies promoting B2B services.

A further classification of communities is that of Armstrong and Hagel (1996) which is arguably less useful and identifies communities of transaction, communities of interest, communities of fantasy and communities of relationship.

What tactics can organisations use to foster community? Despite the hype and potential, many communities fail to generate activity, and a silent community isn't a community. Parker (2000) suggests eight questions organisations should ask when considering how to create a customer community:

1 What interests, needs or passions do many of your customers have in common?

2 What topics or concerns might your customers like to share with each other?

3 What information is likely to appeal to your customers' friends or colleagues?

4 What other types of business in your area appeal to buyers of your products and services?

How can you create packages or offers based on combining offers from two or more affinity partners?

What price, delivery, financing or incentives can you afford to offer to friends (or colleagues) that your current customers recommend?

What types of incentives or rewards can you afford to provide customers who recommend friends (or colleagues) who make a purchase?

How can you best track purchases resulting from word-of-mouth recommendations from friends?

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