The most recent Harvard Business Review reports on a study (requires subscription) that was done on the impact of customer communities on customer behavior at eBay in Germany (disclosure – I have an active interest in this topic as I have agreed to chair a conference on the business of communities – Community 2.0 – but more on that later).
The numbers are quite interesting. The experiment involved 140,120 eBay customers who had bought or sold on eBay but who had not participated in the eBay customer communities before. 79.242 were invited to join the online customer community, while the remaining 60,878 were used as a control group. Of the people who were asked to join the community, 3,299 became active participants and 11,242 became lurkers. Over the course of a year they compared the behavior of the active participants and lurkers to that of the control group and found that:
- Lurkers and active participants won up to 25% more auctions
- Lurkers and participants paid prices that were as much as 24% higher
- Lurkers and participants spent up to 54% more money in total
- Active participants listed up to 4 times as many items
- Active participants earned up up 6 times as much monthly sales revenue
- For first time sellers who were lurkers and participants, 10 times as many of them started selling on eBay after joining the community
All in all the activities of the lurkers and participants resulted in 56% more sales during the year of the study – bringing in millions of additional dollars into eBay’s bottom line.
So can the results of this experiment be replicated in more traditional businesses?
Some people clearly think so, while others who used to be very enthusiastic about the business of communities are starting to become very skeptical.
Communities require a certain critical mass to get going – and not all companies have a large enough customer base to get to that point. They also require a lot more work and resources than most companies are willing to invest – to set up the infrastructure, to nurture the communities, to acquire content, etc.
Active communities of employees, customers and partners are clearly powerful management instruments that can dramatically improve core business processes like innovation, product development and marketing & sales. They can also backfire and have very negative impact if they are not managed properly, or set up wrongly. Before embarking on this path, companies have to truly understand the dynamics as well as the pros and cons of communities. They also need to find out if they have the resources and wherewithal to create their own communities or whether they should play in someone else’s sandbox.
Unfortunately, many will start the process by throwing technology at the problem – let’s just hope that those ignorants won’t destroy the market for the rest of us like email spammers destroyed email marketing and (un)ethical zealots are slowly destroying word of mouth marketing.