Bill Johnston
May 27, 2015 · 5 min read

All over the world, Companies have woken up with a social media hangover. After many years and dollars of investment in developing heavy duty social media programs and platforms (Centers of Excellence, Listening Command Centers, Engagement Consoles, etc.), companies are now finding that they are forced to pay to engage with the audiences they worked so hard to build. They realize they have been renting their customer communities.

“We’ve been duped!” they cry. Maybe. In most programs, a key ingredient to the “social” strategy has been missing, and with it in place you can begin to move forward and grow. The ingredient? Customer communities. Specifically, online customer communities that companies build, host and manage. Customer communities hold the key to customer acquisition, retention and growth. Further, communities can be a catalyst for development and innovation, and will be critical to future business models.

Connected Customers Are More Valuable

The 1:1 relationship between a company and a customer is increasingly perishable. The customer is blessed by an abundance of choice in the market, and increasingly (especially for technology) the lifespan of a relationship can last only days, weeks or months — not years. As an example: most software companies are moving from a perpetual license to term-based licensing that can be as short as 24 hours. Creating a great customer experience and minimizing churn are key. One key strategy is to develop customer communities where customers connect to people in the business (as hosts) as well as other customers and prospects (as peers). This creates a network of many to many connections, where bonds strengthen over time and value is exchanged in the form of knowledge, content, advice and help. These communities translate into real value for the customer and for the host business. When I led communities at Autodesk, we found that community members were more loyal and more likely to recommend than non-members. We also were able to quantify cost savings from our support community to be several million dollars. When I led communities at Dell, we discovered our IdeaStorm community members spent 50% more than non-members, and members’ purchase frequency was 33% higher than non-members. Community member ideas from IdeaStorm created $100's of millions of dollars in revenue in the period between 2007–2011.

Networked Companies Create More Value

In a recent article from Harvard Business Review, a study between Deloitte and a team of independent researchers examined 40 years of S&P 500 data to examine how business models have evolved with emerging technologies. The study had 3 key findings, including the emergence of a distinct new business model of “Network Orchestrator”. As defined by the study:

Network Orchestrators. These companies create a network of peers in which the participants interact and share in the value creation. They may sell products or services, build relationships, share advice, give reviews, collaborate, co-create and more. Examples include eBay, Red Hat, and Visa, Uber, Tripadvisor, and Alibaba.

The study also determined that fewer than 5% of the S&P 500 qualified as a Network Orchestrator. This signals both an opportunity and underscores the urgent need for transformation, as the average lifespan of the S&P 500 has sharply declined from 90 years (in 1935) to just 18 years.

Develop Communities from the Network

Most marketers have confused or conflated the concepts of social media marketing and community building. This has created a lot of pain and frustration for marketers recently, as mass social networks like Facebook have essentially become pay to play: requiring advertising dollars to reach audiences that they have spent lots of time and money building out. Engaging with fans and followers in social media is a component of developing community, but to realize the full potential of a customer community you need to take a more holistic approach. Hosting a customer community site, and connecting that community to social media and 3rd party communities with engagement programs and relevant content build a vibrant community ecosystem, not just a 1-dimensional fan page.

An example of a Community Ecosystem

Communities Will Become the Product

Customer communities are an essential part of most technology products now. At the very least, online support forums are expected as part of
the offering. Many companies are experimenting with customer communities as a means to raise product awareness, convert trial customers and retain existing customers. My team had great success with this at Autodesk with our Fusion 360 product launch. A radical new frontier is emerging where the community (both the people and the platform) are the actual product. Purchases are artifacts or a gateway in to the community experience, and the real “product” is the collective experience, knowledge, content and means of collaboration with the community. There are many early examples in the gaming world, from MMOG’s like World of Warcraft to the new “build and explore” virtual worlds like Roblox.

To Grow, Executive Thinking Must Evolve

When most Executives think about customer communities, there is an unfortunate tendency to view them as “cost saving” vs “value producing”. This thinking leads to strategies and outcomes that fail to realize the full value of customer communities. This typically manifests in the form of myopically focusing on customer support communities and an overburdening of customers taking on the role of customer support agent. In extreme examples, this sort of strategy breeds resentment with valuable customers and leads to a dangerous dependance on an unsustainable resource. When the Executive mindset shifts to “value producing”, the aperture of community strategy widens to a rich set of possibilities: community advocacy programs, open innovation, peer to peer mentoring, complex content sharing, co-design and much more. In the coming era of what many are calling the Collaborative Economy, customer communities are the platforms by which value is co-created and exchanged between companies and customers. To have any chance of long term success with customer communities, mindsets have to evolve beyond a fixation on cost savings to a more enlightened view of communities as a valuable catalyst for growth.

The Net:

Businesses that create online communities with their customers will realize more value and have a healthier lifespan than their competitors who don’t.

Bill Johnston

Written by

Chief Community Officer Structure3c | I ❤ Community, Crowd & Collaboration. built a bunch of digital stuff, most of it still thriving. I make awesome crepes.

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