Online Communities from the Perspective of Business - Essay Example

A CRITICAL EVALUATION OF ONLINE COMMUNITIES FROM THE PERSPECTIVE OF BUSINESS The term online community means different things to different people. The imprecise term lacks a defined meaning even amongst sociologists although there is consensus that it involves a group of people sharing a common interest. In the physical context, Hillery argues that every community has social interaction, a shared space or location and common obligations and responsibilities. For the virtual world, Preece adds computer systems to the criteria identified by Hillery. These four criteria are well recognized in other research addressing the nature of an online community. The work of Rheingold has been instrumental in establishing ways in which others define an online community. He argues that virtual communities are social aggregations that emerge from the Internet when enough people carry on a discussion long enough to form personal relationships. This view remains recognizable in what Preece calls the e-commerce perspective of online communities. The early arguments for regarding virtual communities as a marketing tool took a Spartan view of what constitutes a community. Hagel and Armstrong contend that the community integrates content and communication in a computer mediated space. They put an emphasis on member-generated content; a perspective that may have influenced views that ‘any chat or bulletin board’ is regarded as a community by businesses. The development of an economic perspective to online communities may be frowned upon by some, but there has been a surge of interest from businesses eager to gain advantage from building relationships with customers. The range of business communities now seen on the Web further complicates the definition of an online community. If it is more than a bulletin board, then the boundaries of the shared space and the nature of the interaction have to be identified. In an example of an embedded business community, Preece examines Rei.com. Rei.com has a link from its homepage to its community page. The Lonely Planet community is more embedded in that it has no separation between community’s space and sales space. Jones [14] argues that information exchange is not a sufficiency for a community. This paper takes the perspective that the virtual space of the website constitutes the shared space of Lonely Planet’s community. These accords with the view that the business community is more than the interchange of information between customers, that information interchange is in itself insufficient to form a community and that the company itself draws no borders but integrates all its information sources. Online Business Communities Despite the different definitions of communities, here is agreement that a significant characteristic of an online community is its reason to exist; that is the common goals or interests of its members. Preece and Maloney- Krichmar describe the different characteristics of various communities, but they also highlight the commonalities that can be found. These commonalities were defined by a multi-disciplined group of academics in 1996. An online community displays: A shared goal, interest or need Repeated and active participation by members with strong interaction and emotional ties Accessibility of shared resources and policies governing the access Reciprocity of information, support and services Shared context of social conventions, language and protocols Members of such communities feel a sense of belonging, a shared history and develop ongoing relationships. There is a growing body of literature on why people contribute to online communities. One factor is the concept of the gift economy prevalent in the early days of the Internet that leads people to freely contribute. (Werry sees the hijacking of the early ‘gift economy’ for business purposes as an exploitative move.) The theory of self concept adds to the motivation debate by supporting the view that people contribute for reasons of status and prestige; that is reputation based rewards. A further factor is the simple desire for entertainment; that people participate in communities for enjoyment. The characteristics of online business communities show some of the commonalities described above, but they also encompass characteristics that relate to the underlying strategy of the site owner. The development of business communities is a relatively recent phenomenon. When businesses first began to look to the Internet, the prevailing thoughts were that communities were nonexistent. It took the failure of many business models and the work of such authors as Hagel and Armstrong, before communities became a desirable feature of online business strategy. Preece and Maloney-Krichmar argue that the prevailing pragmatic view that businesses display in developing the concept of community as a means to promote commerce often leads to failure. Businesses, they argue, ignore the complexities of community in favor of a market driven approach resulting in ‘ghost town’ sites that fail to attract members. Walden contributes to the debate with a description of the many uses of online communities across a variety of disciplines. His arguments against online communities in some areas of commerce, however, are based on the disadvantages that may develop from consumer to consumer interaction. Hagel recognizes the need for firms to develop a new mindset to overcome a common aversion to customers talking to each other. The benefits, he argues, of business promoted online communities are significant and numerous. Customers will be attracted to these sites, despite their commercial nature, if they can extract more value from the products and services offered by the firms. The value proposition lies in the ability of customers to see benefits in their participation. The business model must therefore: Bring people together with common needs and interests Integrate published content with discussion forums Recognize the value in discussion forums Support aggregation of competing vendors and publishers to maximize the selection available to ensure best value for members in transactions relevant to their area of interest Recognize the commercial motivation for the site and plan revenue return on resources expended through enough customers Hagel further argues that previous social models failed to enhance the value proposition of business communities, although Walden asserts that a sense of social belonging is essential for members to encourage them to interact. This latter view is reflected in the broader literature on socially constructed online communities. From a business perspective, Bughin and Hagel see the benefits to be gained from communities to be potentially extensive, although they caution that cost effectiveness will be a slow process. Nevertheless, there is potential for diverse sources of revenue to be gained and information available to members can be both interactive and cheaper than conventional forms of marketing such as television. Narrow targeted segments for marketing and sales are complemented by the ubiquity of the Web enabling the extension of niche markets to more geographic areas. A key aspect of these communities is their ability to generate traffic beyond the scope of average websites. McKinsey’s research in this area has shown that member retention can be as high as 18% of visitors in contrast to an average 1% for other websites. By developing online communities firms can foster relationships between customers, reinforce brand recognition, use customer feedback to develop products and services more effectively, accumulate customer information, improve pre and post transaction services and test new products. In essence, a business supported online community is an effective tool for Customer Relationship Management (CRM). ‘Online community’ broadly to refer to all communities that exist predominantly online, vary depending on: Whether they have physical as well as virtual (i.e., networked, physi-virtual) presence (Lazar, Tsao & Preece, 1999) • Purpose (e.g., health support, education, business, neighborhood activities) • The software environment supporting them (e.g., listserver, bulletin board, chat, instant messaging, or more often these days – some combination) • Size (small communities of fifty people are different from those of 5000 or 50,000) • Duration of their existence • Stage in their life-cycle • Culture of their members (e.g., international, national, local and influences that may be related to politics, religion, gender, professional norms, etc.) • Governance structure (e.g., the kind of governance structure that develops and the types of norms and rules associated with it) The characteristics of an online community are determined by the social interactions of the members, and the policies that guide them, a concept known as sociability. Software design also contributes to the character of an online community. A community that communicates via a synchronous chat system will have quite a different ambiance from one that uses an asynchronous bulletin board. The ease with which the software can be used is known as its usability and this depends on how well the user interface supports human-computer interaction (HCI) (Preece, 2000; Preece & Maloney-Krichmar, 2002). Attention to social policies and software design is therefore an important component in community development and evolution. There are broadly three types of online community: Virtual communities of interest These are groups of people - tens, hundreds or thousands - who may never have met but who have some interest or concern they wish to share using the Internet. This may be a hobby, politics or religion... it may be a rare illness, some aspect of computing or the Internet itself. The main tools for virtual communities are mailing lists, Web conferencing and newsgroups. These communities of interest may wax and wane in their activity and can be volatile in their exchanges because those participating may have no common culture or background. They only know each other online. Organizational communities Increasingly organizations both large and small are setting up internal communication systems - often called intranets - which use the same technology as the Internet to enable staff to work together more effectively. These systems may be built using mailings lists, Web pages and Web conferencing, or special systems like Lotus Notus or First Class. Those using the systems may be sitting at adjacent desks - or communicating across the world. While they may be diverse in their personal backgrounds and interests, their exchanges will be focused on organizational business, and (officially at least) conducted within the culture of the organization. Partnerships Online is helping a number of non-profit organizations develop their own intranets including Community Action Network, and is also developing rural net as a specialized system for rural organizations. Local communities online Many neighborhoods, villages, towns and cities now have their own online presence, the Web pages and discussions that mirror in part the real world of residents, shops, businesses and civic institutions. Contrary to popular belief there is such a thing as a profitable venture on the web. Success online comes from two factors – value to the customer and value to the company. Most of us understand the value to the organization and are able to relate to it readily. But very few of us understand that the key to achieving this is to understand the value to the customer. And what does this mean? It means understanding your customers within the time frame and context to achieve business objectives. Many of the existing business models on the web are a mere extension to their online counterparts, but the web can also redefine traditional business models. What the web does is that it helps us do things that we normally did in slightly different ways. And if this generates added value to the business, then isn’t it a case for consideration? New business strategies that take advantage of the net as many-to-many interactive medium that emphasizes communication and community are what we are going to study here. Community Portal: In business-speak a portal or an online community web site is an infomediary. What does an infomediary do? It brings buyers and sellers together by providing content in the form of advice, services or any other benefits. A portal is a content aggregator – content in the form of information, knowledge or experience. Example: Yahoo.com; autobytel.com, e-loan.com, Travelocity, expedia and instill.com. A portal is synonymous with a gateway or a COIN (communities of interest) – a major starting site for users when they get connected to the web. Typical services that a portal offers include a directory of websites, a facility to search for other sites, news, weather information, email, stock quotes, phone and map information and sometimes a community forum. How do portals make money? After all they don’t really own anything. They rely on their partners for all the money. Now isn’t that one of the most unpredictable ways of making money? But surprisingly, the current statistics show that portals or rather these infomediaries dominate a lion’s share of the business and will continue to do so in the future. The functions of a portal Aggregation of needs Aggregation of services Negotiation and notification services Consulting services Creating demand Matchmaking Up selling Portals understand that they have value because they can command the attention of large numbers of visitors to the E-conomy. But the key point that many portal owners miss is that they need business partners more than they need users. The portal site is not the product, instead “eyeballs” are the product and the portal’s advertisers, E-conomy partners, and content providers are its consumers. A portal can’t survive without attracting and retaining eyeballs. More importantly, it needs to attract the right kind of eyeballs. It needs to build relationships that keep their customers coming back at a profit. A sticky site creates customer loyalty by offering the content, the community and the context. Allowing a customer to create a website on the portal that talks about the customer’s specific services is a sure-fire way of ensuring customer loyalty. “Sticky applications”, like these are where the customer makes investments by creating individualized content. When the portal takes such a personal interest in the customer’s business model it’s bound to have the customer for life. A portal doesn’t have to be large – both in terms of its customers and sponsors. This would mean greater investment in hardware and infrastructure and more costs. The battle should be about the business of potential advertisers and merchants. This market will be the chief source of revenue and the relationships that are built within this market through the portal are what make the difference. Banner ads and traditional mouseovers don’t work: they form the traditional advertising method of interruption marketing where the visitor is interrupted from his focus when he clicks on a banner ad. Buyers are less willing to give a part of their attention away today. Instead if they are rewarded for giving away their attention through a contest, a prize or a game, they just might be interested enough. This is an example of permission marketing and describes another business model that the net is breeding today So, how does one start to evaluate the opportunity with online communities? Research! The following 4 step framework describes the typical community strategy development exercise: 1. Define Business Goals and Objectives. This first step establishes a baseline definition of the organizations goals and potential objectives for engaging in community building activities. These goals and objectives will serve as guidance throughout the project to ensure that the final strategy reflects a direction that creates value back to the organization. This process varies by organization type, the number and role of stakeholders, and the maturity (or existence) of the community team. The research in this step includes identification of the stakeholders for community within an organization, interviews with the stakeholders, and an initial brainstorm with members of the stake holder’s team to discuss objectives for community. Themes and business goals for a community strategy will emerge. 2. Community Ecosystem Review During this second phase the goal is to do an audit of the current community ecosystem, including customer, prospect, and partner and competitor touch points. This information will help establish a baseline of market-oriented sites and activity, which will be important to understand the opportunities for new community activity by your (or your clients) brand. Using tools like Blog Pulse, Technorati, Delicious, and Google Blog search, conduct searches for brand mentions in the blogosphere and on smaller niche communities. You will quickly come up a list of the communities hosting conversations about your organization, products or brand, and the members (often time bloggers) engaging in those conversations. Its also important to research activity on the "walled garden" communities, and larger social media sites that some times dont surface in search results. Sites like Facebook, MySpace, YouTube, Ning, Flickr, Satisfaction, etc. In particular, look for ad-hoc groups that have sprung up around your brand or content tagged with your brand and/or products. 3. Member Needs Analysis. This phase will establish a baseline for potential community member’s needs, as well as their expectations of your organization. This critical phase will also guide decision-making on the types of activities to engage in, and the approach (offline / online, hosted / independent). This research is ideally done in person, or on the phone, but in a pinch you can also use a web-based survey tool like survey monkey. Recruit research candidates from the list that you made during the Ecosystem Review. Develop an interview script that really probes their needs and expectations of your brand. Ask what types of marketing and advertising the members would find acceptable, and which types they wont. Ask if they would be willing to help shape programs and advertisements (if you choose to go that route), Themes of member need, expectation of conduct from your organization, and tolerance of advertising / marketing messages should emerge from this research. 4. Community Strategy Development. This final phase will combine the inputs of business goals, user needs and the existing community audit to form a community strategy. Evaluating member need and business goals side by side should provide you with direction on the types of community opportunities to engage in. The ecosystem audit will provide direction on where to participate, and if there is an opportunity for your organization to host part of that conversation by building a destination site, hosting discussion groups, etc. Value of online communities: What metrics should one consider when gauging the impact of his online community and assessing the value it has on his business? As with other areas, its important to look for trends over time as his community develops. A few metrics to consider: Number of sign-ups for community updates (e.g., newsletter opt-in) Number of "send to a friend" messages Time spent with community content (e.g., films, music) Member conversion rate (percentage of completing goals) Dollar amount of revenue influenced by community members Percentage of revenue influenced by community members Number of friends added in social networks (e.g., MySpace.com) Number of blog views and comments Number of sign-ups via member referrals (with or without incentives) Future of online Communities: As the behavior of 40-year-old-and-unders does not include subscribing to magazines or newspapers, publishers, particularly of special interest publications, will find that building communities of interest and social networks around their area of expertise will be profitable and desirable, and critical to their ongoing strategy and mission. Most useful: IM, product reviews (e.g. Amazon), and open discussion forums. In the coming years the key enhancement will be mobile access to all of these functions which today are typically accessed just from a desktop computer. The other enhancement will be multi-media content published by the community participants. The technology to bring the social wiring of humans into fuller play online is just arriving. So it is expected fully expect the next wave of innovations (5-7 years) to eventually be labeled .social or relationship, processing/computing. We’ll see weblogs organize and link themselves together to form new kinds of disparate and tenuously linked online communities. Young technology and limited computer use resulted in online communities that spanned huge geographical areas. As technology becomes more user-friendly and computer use increases, online communities will become more local. Loose networks will be enhanced and will be more influential, forming new knowledge, and innovation. While the term .virtual community seems out of fashion, collaboration has taken on many of its best attributes and I believe that given outsourcing and more disparately located teams and interest groups- there will be growth in tools and deployments. Those born into it will transform it utterly. In their hands it will be (and often already is) characterized by ubiquity, informality, and great range of purpose, trivial to profound. Meantime, the tools, technical and organizational, will continue to both impede progress and evolve towards a state of seamless ease. “What make communities take off are specific people within attracting others who match the community purpose and social style. I foresee a short round where social networking for the sake of social networking booms, then collapses. After this, the tools of social networking will be integrated into other online tools and a new round of interesting social behaviors will take off. Mobile phones still promises to disrupt everything we thought we knew about social organization using technology. Kids and teens in Japan and other Asian countries offer a glimpse of the degree of connectedness yet to come. In short, the best is to come. Reference: http://www.socialtext.net/onlinecommunities. Read More