1. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Part Two: Chapter Ten Creating Commitment

2. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Community Goes Online The debate: –Do online communities help us rebuild connections between friends and family? –Or, does participating in online community lead to increased alienation?

3. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Community Goes Online The arguments for: –New technologies allow new forms of communication between close friends, acquaintances, and strangers –Online communities provide a focus for social interaction –New technologies improve communication between co-workers, customers and suppliers –Online communities enable consumer-to- consumer interaction –Marketers can use community-building technologies to generate customer loyalty, involvement, and repeat sales

4. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Community Goes Online The arguments against: –Private time online comes at the expense of physical interaction with friends and family –Weak ties between strangers replace strong ties between friends and neighbors –Those who spend hours online often test higher on psychological measures of loneliness and depression

5. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Defining Online Community Online communities combine 4 important features –Internet communication tools –Rules that define community membership –Collaborative production of material by members –Repeat use by members Communication is multidirectional –Users provide material –Users consume information Challenges faced by community builders –Building traffic –Maintaining member collaboration –Member retention

6. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personal and Extended Communities Personal communities –Are small in scale –Members know each other –Communication is direct between individuals E-mail A shared Web site Extended communities –Larger in scale and scope –Composed of many smaller areas that allow personal communities to flourish –Rely on a mixture of content and communication tools Web content publishing Centrally-managed discussions

7. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Community and Loyalty Focused social gathering places Multi-directional communication Community value > individual value

8. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Community and Loyalty Focused social gathering places Multi-directional communication Community value > individual value Results?

9. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Community and Loyalty Focused social gathering places Multi-directional communication Community value > individual value Results? Online community activities can build good will and lead to word-of-mouth support, donations or purchases

10. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Family Tree Maker Online FTM Online: an online genealogy center One of the first to create and leverage community –Provides access to information Databases of names and Web access to government records –Provides opportunities for collaboration Member generated content enables users to search other users’ family trees to find threads of their own history Creates a network of knowledgeable users and engenders a spirit of sharing –Enables FTM Online to tap into commercial opportunities Subscription services to Genealogy Library http://www.familytreemaker.com/

11. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Challenges to Creating Community Gaining attention and building traffic Losing member focus as community grows or changes If members disengage, content creation lags and retention drops Firms accustomed to controlling the message reluctant to let go

12. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Community and Customer Insight Content attractiveness –Access frequency, content diversity, contributor edits, emailed articles Member Loyalty –Access frequency, access duration, referrals, church or opt-out rates Member Profiles –Database completeness, user update frequency, email bounces Transaction Offerings –Sales revenue, active vendors, customer LTV

13. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Four Increasing Returns Cycles with Virtual Communities Transaction Offerings Member Loyalty Online Community Increasing Returns   Draw more members to community Promote member-to- member interaction Build member loyalty to community     Generate member- based content Content Attractiveness   Target products and offerings Member Profiles     Draw vendors and user spending to community

14. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Signs of a Healthy Online Community Content Attractiveness: More content = more value = more members

15. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Content Attractiveness Attractive content helps reduce member churn and build loyalty This feeds into the loyalty feedback loop At the same time, focused content increases marketing effectiveness and improved member acquisition There is positive WOM & news media coverage Community visitors are more easily converted to active membership Content Builds Discussion and More Content

16. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Content Attractiveness Member- generated content Member churn Content Attractiveness Hours Online Members Marketing effectiveness Member- to-member interaction

17. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Signs of a Healthy Online Community Content Attractiveness: More content = more value = more members Member Profiles: Opportunity for individual outreach by sponsors

18. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Member Profile Loop Information generated by the community is linked to transaction activity, ad effectiveness, and ad rates More accurate information about members leads to more relevant ads with greater impact The member database becomes a key asset of the community Growth Leads to Increasing Understanding of Community Members

19. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Member Profile Loop Advertising click- through Member Profiles Advertising revenue Data- gathering capabilities Targeted advertising Targeted transaction offerings Transaction volume

20. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Signs of a Healthy Online Community Content Attractiveness: More content = more value = more members Member Profiles: Opportunity for individual outreach by sponsors Member Loyalty: Commitment fosters participation, creates audience

21. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Member Loyalty Member loyalty leads to increased hours spent online and a reduced churn rate Continuity and commitment lead to trust and collaboration The more members are committed to each other, the more connected they are to the community Loyalty builds social capital and leads to healthy chat rooms and discussion threads Loyalty supports customization and personalization Loyalty Builds Member-to-Member Relationships

22. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Member Loyalty Member churn rate Member Loyalty Hours of usage Members in community Customized interaction Contributions to member- generated content Member relationships

23. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Signs of a Healthy Online Community Content Attractiveness: More content = more value = more members Member Profiles: Opportunity for individual outreach by sponsors Member Loyalty: Commitment fosters participation, creates audience Transaction Offerings: Selling linked to interest area attracts other vendors

24. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The E-Commerce Loop The e-commerce loop provides the commercial foundation for most virtual communities The combined e-commerce offerings from the sponsoring organization and its partners leads to revenues Vendors are valuable to members and help build the membership base A large customer base attracts more vendors Vendors Attract Members Who Attract Vendors

25. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The E-Commerce Loop Vendor- marketing effectiveness Transaction Offerings Attractiveness to vendors Vendor- marketing spending Members in community Member willingness to spend Vendors in community

26. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Community Metrics Each of the Community Loops Suggests Ways of Measuring the Community’s Strength

27. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Fundamentals of Online Community Online tools Rules Collaboration Repeat use

28. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Tools Communication tools are the heart of online community Two categories of tools, based on the type and scale of communication possible Communication rings send messages directly between users –Everybody in the ring gets the message –Communication rings don’t scale – they break down as the group gets too big Content trees are indirect –They use a central gathering point such as a bulletin board or a Web site to collect and store information –Depend on hierarchies that create manageable discussions –Community members go to topic areas and discussion groups that match their interests

29. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Tools Types of Community Tools

30. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Tools A shared e-mail list among friends, the simplest form of online community –The rule for membership is friendship –Collaboration is at the heart of shared messages –Message archives become the storehouse of community interaction E-mail networks demonstrate the structure of a communication ring Communication Rings: E-mail

31. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation A Discussion Ring

32. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Tools Best for unstructured, quick communication How it works –Like text-based telephone –An individual has a unique number that can be called Allows impromptu direct chats between users Allows one-to-one and one-to-many communication Uses: –Brainstorming –Sharing thoughts & ideas –Surfing the Web together Communication Rings: Internet Pagers

33. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Tools Enables joint creation of community content Many tools are productivity oriented –Shared whiteboards –Enable file sharing Communication Rings: Groupware Communication Rings: Games and Simulations The shared experience of a game or simulation stimulates communication Immediacy turns an online game into a communication ring

34. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Tools Content Trees Site Structure as a Content Tree Mining Company Homepage Content

35. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Rules Strong communities have strong rules –Membership depends on passing through a difficult hurdle that creates shared values and experiences –Interests and opinions are strongly held Weak communities are easy to join –Examples are fan clubs, shopping club members, frequent flyer programs –Weak community ties are a serious problem for online marketers Strong and Weak Membership Rules

36. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Rules Easily attained membership enables a community to grow rapidly, but ties are weak Costly membership breeds stronger ties but creates a wall around community Escalating membership: the practical answer –Attract new members with easy-to-attain membership –Full benefits are only attainable through higher levels of commitment Escalating Membership Rules

37. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Collaboration Low cost: –Member-contributed material is cheap –Results in extensive content areas Current: –Member content reflects current interests –Active members keep their material current and interesting Creative: –While quality varies, thousands of users contribute creative content and unique points of view Credible: –The opinions of community members’ with credentials and expertise are trusted sources of information Member Content Has Desirable Features

38. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Collaboration Heavy users will contribute most of the content –Most members will lurk – read content posted by others Small groups tend to produce more active members However, since not everyone in a group will contribute, large groups may be needed to generate a sufficiently large body of interesting and compelling content Observations About Member Content

39. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Collaboration In 1985, the average American had 3 people with whom he felt comfortable discussion important matters Participation in online communities has changed this –Anonymity can encourage people to share personal concerns with strangers –People don’t have to worry with what their friends might think about their situations Online Tools Expand Discussion Networks

40. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Repeat Use Companies that sponsor online communities on their Web sites –Learn more about the tastes and wants of their members –May receive useful feedback and suggestions from users –Which, in turn, enables better service and product definition This defines a community of users The challenge for marketers is to build increasing levels of commitment among users

41. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Community and Customer Insight Interaction Measures such as email campaigns offer direct measures of community strength

42. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Community and Customer Insight Interaction Measures such as email campaigns offer direct measures of community strength Netnography moves traditional social group study of ethnography online –Self-interested helpers (economic) –Multiple-motive consumers –Consumer advocates –True altruists (Helping fellow consumers and companies)

43. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Community and Customer Insight Using email and homepages to identify communities of interest SOURCE: Culotta, Bekkerman, McCallum, ‘Extracting Social Networks and Contact Information from Email and the Web,’ American Association of Artificial Intelligence, 2004, p.2

44. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Creating Consumer Dialogue Understanding the customer base –Analyzing customer loyalty, profitability –Loyalty programs build commitment –Extending loyalty with switching costs

45. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Creating Consumer Dialogue Understanding the customer base –Analyzing customer loyalty, profitability –Loyalty programs build commitment –Extending loyalty with switching costs Building customer dialogue –Email outreach to possible defectors –Follow up with high value customers –Tipping points and trigger moments

46. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Creating Consumer Dialogue Categories of Switching Costs SOURCE: Adapted from Burnham, Freis and Mahajan, “Consumer Switching Costs: A Typology, Antecedents, and Consequences,’ Journal of the Academy of Marketing Sciences 31, no. 2 (2003): 109-126

47. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Creating Consumer Dialogue Customer state and appropriate contact questions

48. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 1 For marketers, one challenge in interacting with online communities is the inability to fully control which of the following? A.Price B.Participation C.traffic D.message

49. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 2 Successful online communities are marked by a mix of transaction offerings, member profiles, member loyalty and which of the following? A.rotating content B.content attractiveness C.open membership D.member anonymity

50. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 3 For many marketers, customer __________ is the leading indicator of customer profitability. A.Spending B.Loyalty C.Dialogue D.scale

51. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 4 Price competition can be minimized if firms are able to build ____________ costs around a product. A.Inducement B.Switch C.Loyalty D.transactional

52. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 5 Which of the following steps can solve problems of inappropriate or offensive real-time content in online communities? A.peer review B.Authentication C.editing D.fees