Wednesday, July 23, 2008

Enterprise Value of Online Communities Yet to be Realized

A Deloitte survey of companies sponsoring online communities indicates that enterprises have begun to effectively use social media tools and online communities to engage with customers and employees for brand discussions, idea generation and product discovery. However, the survey also indicates that while these online initiatives are having a positive impact, enterprises have not yet harnessed the true potential of these communities.

Deloitte’s ‘2008 Tribalization of Business Survey,’ conducted in conjunction with Beeline Labs and the Society for New Communications Research, points to building community critical mass as a principal barrier. According to the survey, a majority of the communities have fewer than 500 active members, and 50 percent of the respondents replied that the biggest obstacle to making communities work is getting people engaged.

Notwithstanding this challenge, companies reported a significant impact from their communities. Of the companies surveyed, 35 percent have seen an increase in word-of-mouth for their brands, and 28 percent have seen their overall brand awareness increase. Online communities are also helping companies increase customer loyalty and bring outside ideas into the organization faster, according to 24 percent of survey respondents.

The tribalization of business is all about “people helping people,” where those who share a similar passion turn to each other for information, recommendations and community feedback. Sixty percent of the survey respondents indicated that their communities are open for public interaction and feedback.

According to survey respondents, the community features that most contribute to community effectiveness are:
-- Ability for community members to connect with like minded people – 53 percent
-- Ability for members to help others – 43 percent
-- Community focus around a hot topic or issue – 41 percent

Conversely, poorly managed online communities are a critical barrier to their effectiveness. Forty-five percent of respondents recognize that finding enough time to manage the community is one of the biggest obstacles to making communities work. Survey respondents also see facilitation (25 percent) and quality of the community manager (34 percent) as two features that greatly impact the community’s effectiveness, making it critical for companies to devote the necessary resources to this important role.

The respondents recognized that communities can be used as a seedbed for innovation. Indeed, 39 percent of the companies that participated cited “idea generation” as the purpose of their online communities, and 19 percent cited “new product development” as the key goal.
A leading technology company is also using communities as a means of customer support by monitoring communities as an early warning system for product issues that can be expected to hit the help desk and prepares to respond accordingly.

The rich interaction and knowledge sharing typical within communities also allows for talent development and retention within organizations. Social media tools offer unparalleled visibility into employee sentiment and expertise, thereby helping organizations to better leverage and develop their talent.

The survey indicates that the role of the CMO is being revolutionized through communities, with the CMO often becoming the lead transformative agent, empowering the sales, customer service, and product development functions with the community’s intelligence and participation.
According to 42 percent of the survey respondents, the marketing organization is now responsible for driving online communities. With communities becoming a central focus, marketing is now required to participate in non-traditional functions such as customer support, idea generation and employee communications.

While the Internet has produced unprecedented levels of insight into the size and demographic makeup of audiences, the survey reveals significant gaps between community goals and how success is being measured. For instance, while the top business objectives of the communities were “generate more word of mouth” (60 percent) and “increase product/brand awareness” (48 percent), what is most measured to assess success are less helpful metrics like “number of visitors” and “page views.”

Not surprisingly, marketers often remain hard-pressed to identify areas where online communities are achieving their goals. Management also needs to rethink in some cases how business value can be extracted from sponsored communities.

The survey measured the responses of over 140 companies, including Fortune 100 organizations, which have created and maintain online communities today. Participating companies include leading computer manufacturers, software, insurance, online auction, media companies, hotel chains, and start ups. The communities ranged from fewer than 100 members to more than 10,000 members.

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