The importance of scale in communities…
Written by Francois Gossieaux on July 9, 2008 – 12:41 pm -
Most corporate community organizers are thinking too small when they set goals for their online community efforts. The result is that most community efforts fail to make it to the top of the CMOs priority list - both because of the low relative investments for the community efforts as compared to other marketing programs, and because of the low relative returns to the business’ bottom line.
Look at one of the flagship case studies in Groundswell, the recent blockbuster book on social technologies authored by two well known Forrester analysts. In it Lego is being touted as a smashing success story for communities. They were able to increase sales by $500K with an investment of $200K.
Who cares? Lego is a $1.8B company, so increasing revenue by $500K is not moving the needle - it represents a whopping increase of 0.027% of sales.
And that is one of the better case studies. Let’s take a look at Bank Of America’s community efforts for small businesses. It looks like they have a little over 15,000 members, and I am sure that there are many people within BoA who are patting themselves on the back with the success of this effort. But with millions of small businesses as clients and with millions of transactions every day from those clients, how many millions of people do you think you need in your community to move the needle? I am not sure about the exact number, but I do know that it is a heck of a lot more than 15K members.
And you can keep going on and on with examples. When a commerce site takes in 40,000 orders per day, how many members do they need to make a difference? When you have millions of tax customers, how many people do you need in your community to affect the bottom line?
Until marketers think differently about the scaling issues of their communities and the associated investments, communities will have a hard time going mainstream. And yet, when done properly, they could deliver game-changing results - eBay customers who participate in their customer support communities bring in 50% in increased revenue to the company.
Let’s go back to the Bank of America example. Apparently someone calculated that the value of a new small business customer is $100 - if you refer a small business you get $50 and so does the small business. Let’s assume that BoA has 10M small business customers (they had 59M consumers and small business customers combined in 2007). If a marketing program is to increase the number of small business customer by 0.5% that would mean an increase in 500,000 new customers worth $50M. I am sure that this is not out of the realm of possibilities for them to spend this kind of money on TV advertising, even though $50M in TV ads would probably not deliver 500K new customers. But do you think they spent anywhere near that on their community? And if they would, do you think they could deliver a resource to the small business community that would attract much more than 15K members and that could result in much higher reference sales?
You can argue the numbers, but you cannot argue the scale issue…
Tags: bank of america, blockbuster book, business bottom line, community efforts, community organizers, ebay, exact number, flagship, forrester, hard time, lego, marketers, marketing programs, relative returns, small businesses, smashing success, whopping increase
Posted in community marketing |
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July 9th, 2008 at 1:55 pm
Hi Francois,
A community of, say 500,000 people, doesn’t feel very personal to a member of that community any more. This is a reason why Facebook is brilliant; you can organize much smaller, more personal subgroups within it. Yes, FB has 80 million people now, but I don’t really care. I care about my 200 friends within that community, and look forward to connecting with a handful of new people when I attend events or travel. In any case, from a online community members’ perspective, there is no possible way to meaningfully interact with between 500,000 and 50 million people. If a community gets that large, then there needs to be GOOD ways to find people with commonalities to me within it.
Large corporations have to balance that fact that THEY, not the membership, is looking to maximize the size of the community. Growth should be the result of offering good value, not growth for growth’s sake. And if the corporations goals are not the same as the community members’ goals, then why would people want to join it?
July 9th, 2008 at 6:19 pm
Hi Morriss - I agree with you that a community of 500K people does not feel personal unless you let them self-organize into sub-groups. And you are right again when you say that a community needs to provide an easy way for you to find people and content that are right for YOU. As I described in another post (http://tinyurl.com/59a65t), the ability to leverage member profiles to match content and other members to their interest is one of the key success factors for online communities.
And yes again on providing value - you cannot build a large scale community without delivering value to its members.
Thanks for taking the time to comment!
July 10th, 2008 at 9:05 am
You are right - in that in an idealised world, companies would build and extract value from very large communities. However, in reality I don’t think this is going to happen. The best, most valuable and robust communities are ultimately going to be created and controlled by individuals. I suspect organisations are going to struggle to create and own mass communities of customers or consumers. In any case the world of the mass is ending, the world of the niche is emerging. I think corporate focus should be on understanding and supporting the range of communities relevant to their business that are starting to develop.
July 14th, 2008 at 5:12 pm
I think Facebook and the Bank of America communities are apples and oranges. Within the B of A site questions related to small business are discussed, you can pick and choose your topic, thus it is divided into unique communities. It does offer value and thus it grows.
July 22nd, 2008 at 3:10 pm
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July 23rd, 2008 at 9:22 am
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September 4th, 2008 at 6:40 am
Provide me with $50M and I would definitely bring you back 500 000 new customers within 2 years using small communities to generate insights and new ideas to meet needs of the customers who aren’t at BoA, others to become support and help communities, and I would use the rest of the money in content creation about the many issues my small business customers have.
We can definitely leverage communities to make more money. And I don’t see any scale issue in it. 400 smart people in a community are enough to create a killer application/ feature/ product/ service to dramatically increase the bottom line (Dell has proven it). Community is all about objectives, not scale to me.