The seven myths of online loyalty – part six

In this seven-part series, Michael Shostak explores some common myths and misconceptions about building customer loyalty online and, more specifically, explains why many of the loyalty tactics employed on the Internet simply don't work. Previous instalments can be found online at...

In this seven-part series, Michael Shostak explores some common myths and misconceptions about building customer loyalty online and, more specifically, explains why many of the loyalty tactics employed on the Internet simply don’t work. Previous instalments can be found online at www.strategymag.com by searching for ‘Seven Myths.’

In this month’s column, I talk about online loyalty myth number six: You can create a ‘community’ around your brand.

At the height of the Internet frenzy, much of the online world was singing the praises of the ‘Three-C’ strategy of online customer loyalty: it’s all about content, community and commerce, the song went.

Content and commerce I understand. But what about this strange new Internet phenomenon called community? How does it factor into your online customer loyalty mix?

First, let’s define what community on the Internet really means.

The English-language definition of community, according to Merriam-Webster’s Collegiate Dictionary (www.m-w.com), is as follows:

(a) A unified body of individuals;

(b) The people with common interests living in a particular area;

(c) An interacting population of various kinds of individuals (as species) in a common location;

(d) A group of people with a common characteristic or interest living together within a larger society.

The same applies to the online world.

A community on the Internet is an electronic ‘gathering’ of like individuals who share something in common. Community sites provide members with an opportunity to participate in discussions, exchange information or simply connect to others out there who share in their interests. Such sites feature discussion boards or groups (threaded conversations that are electronically posted), chat forums (real-time discussions, usually text-based), instant messaging (the Internet’s equivalent of a two-way pager) and e-mail-based discussion lists (user-generated, editor-moderated editorials or discussions that are e-mailed daily or weekly).

Early on in the Internet’s evolution, some bright followers of Marshall McLuhan realized that the World Wide Web, more than any other medium, could really help to create the global village McLuhan prophesied. Suddenly, thousands of sites such as The Well, Tripod, GeoCities, ParentSoup, TalkCity and TheMiningCo (now called About.com) began to pop up offering Internet ‘villagers’ a place to call home and, in the process, managed to attract hundreds of thousands of loyal users.

Eventually, smart marketers realized that online communities had one very powerful proposition going for them – extremely high repeat visit rates. Hence, what better way to attract and retain a targeted audience to your own product or service site than to add community-like features to your online offering?

The notion makes sense on the surface – you sell gardening supplies and you facilitate an online community for gardening enthusiasts on your gardening supply site. In theory, it helps to drive targeted repeat traffic, taps into word-of-mouth advertising and allows you to benefit from user-generated content, which in the long term, should help to build customer loyalty, or affinity towards your brand.

Unfortunately, it’s not that easy. Adding community features to your branded site doesn’t always work as an online customer loyalty tactic for three reasons:

1) Online communities are between people.

It’s important to recognize that online communities exist so that people of like interest can share their experiences. The branded provider or facilitator of such exchanges benefits little from the relationship. In other words, online community members are not loyal to the community provider; they’re loyal to the community members.

I recall a story last year about an online community site that decided to start charging its members for accessing the community (figuring, of course, that the high repeat visit rates meant users clearly saw value in what they were offering). It didn’t work. The entire community disappeared literally overnight, resurfacing on another site that offered the same community features for free.

2) To attract and retain members, online communities must be free-form and relatively uncensored.

The benefit of connecting people with other people of like interest is that it promotes the free exchange of ideas and information. As a result, online community exchanges are difficult to contain and must be left to flourish organically in order to succeed. The problem for marketers, of course, is that they want the discussion to centre on themes relating to their products or services. But this is difficult to do, and any attempt to moderate or censor the community exchanges will likely drive members away. (Think of it as going to dinner with your best friend and being forced to talk about only their favourite movie).

Even master marketers Amazon.com have admitted to struggling with this problem. Early on in their history, they had community features embedded in all of their shopping areas. The community areas were aligned to merchandising categories (book topics, music, videos, and so on) and were moderated by forum leaders who used every opportunity to artificially contain discussions or to promote Amazon-sold products that related to discussion topics. After thoroughly annoying community members and failing to drive incremental revenues, they removed the community features from their merchandising areas and gave them a separate home on the site.

To understand why the company’s ‘community’ strategy didn’t work, go to Amazon.com and take a look at the discussion boards under the ‘Friends and Favorites’ section. You’ll notice that while the discussion categories are perfectly aligned to Amazon’s merchandising categories, the actual member exchanges in the various discussion sections have little to do with Amazon-sold products. (For example, one lengthy discussion under the category Health & Fitness Books centred on the best hot sauce).

3) Online communities are costly to develop and maintain, but difficult to capitalize upon.

While you may yield increased repeat traffic from your online community efforts, the correlation between the additional traffic you generate and the incremental revenue that it drives is often out of sync – unless you make your money from online advertising.

One of the early pioneers of the Three-Cs formula was Garden.com, an online gardening store that won accolades for its innovative design and online merchandising concepts. Unfortunately, Garden.com didn’t survive the e-commerce shakeout because they struggled to convert their high traffic numbers into sales. At the same time, their content development costs were 50% of their total revenue, most of which went to creating gardening editorial and community-type features above and beyond their online merchandising efforts. In other words, they could not find cost-effective ways to convert their loyal traffic into actual revenues.

Similarly, I recall participating in a conference panel during which the marketing director for one of the big breweries presented a case study on their Internet community efforts. This individual was proud of some of his brand’s accomplishments, citing that tens of thousands of beer devotees had participated in various online community activities on the brewery-branded site. At the same time, and to his credit, he ended the presentation by admitting that while the traffic numbers were impressive, he had yet to figure out how they related to brand loyalty or more importantly, incremental beer sales.

My experience with online community features on a marketer-sponsored site is that they’re great at generating traffic, but rarely correlate to increased revenue. And in cases where community features do drive incremental revenues, the cost of developing and maintaining those features outpaces the incremental revenue

In the end, adding community features to your site can be a powerful proposition for your customers – but not as a marketing and sales tool. Community features work best as a customer service and support tool for products and services that are either highly complex or very specialized and can benefit from user interaction. (For a couple of pertinent examples, see www.sap.com/community or www.verticalnet.com).

Next month, last but not least, myth number seven: Technology saves the day.

Michael Shostak is president of Wideframe, a Toronto-based Internet and marketing strategy consulting firm that specializes in helping organizations make better use of technology to build profitable customer relationships. He can be reached at mshostak@wideframe.com or at (416) 480-3760.