How Can Virtual Communities Create Value for Business?
We live in an increasingly digital and connected world, which has had consequences on consumers’ expectations and exchanges with brands. Newsletters and social media exchanges with a faceless customer service rep will no longer cut it. Today’s buyer wants a deeper interaction with the company and fellow consumers of the product or service.
This is why an effective online community can unlock an extraordinary competitive advantage.
With an online community, a business can offer a space to connect, engage, and extend relationships to provide value beyond the conventional products and services offered.
Many businesses have already wised-up to the value and importance of an online community. Tech giants such as Amazon, Apple, and Microsoft have heavily invested in community engagement across their different product lines. And it's not only the tech giants catching on, nearly 80 percent of startup founders reported building a community of users as important to their business, with 28 percent describing it as their moat and critical to their success. So what are the key benefits that make an online community vital to these companies' successes?
Improved customer lifetime value
In today’s busy marketplace competitors are vying for your audience's attention. Nurturing every customer relationship to increase retention and customer lifetime value is critical.
Loyalty translates to higher purchase rates (Accenture found that two-thirds of customers will spend more on a brand they are loyal to), higher retention rates, and consequently a higher lifetime value.
Catering to a customer’s sense of community is one of the most effective ways to encourage loyalty. Human beings crave connectedness, belonging, and meaning — needs that a community can deliver on! And the restrictions imposed due to the global health crisis have accentuated the need for connectedness and closeness — making people more receptive than ever to a community.
By being actively involved in the community the customer is investing time and effort. And the more they invest, the more they value the product and services. Researchers at Harvard Business School call this the IKEA Effect. IKEA customers have to invest time and effort to assemble the products themselves, which tends to lead to them overvaluing the product and brand. As they engage with other members of your community, your members develop a legitimate and genuine sense of shared ownership in your organization's vision.
Plus, think about it, leaving a brand is a lot more difficult if it also entails leaving a community of people that you have a connection with.
Lower service costs
One of the greatest things to witness in a community is altruistic behavior and collective creativity. An online community provides a space for members to ask and answer questions, share ideas, and best practices. And each time a customer can solve an issue using the community it is one less issue for your support team to deal with. In fact, 49 percent of businesses with online communities report cost savings of 10 percent to 25 percent annually. And the added bonus, as your customers increase, so will your community meaning that you have more people offering free support to other customers.
Lower customer acquisition costs
Brand advocates elevate your brand through word of mouth, refer new customers, and give positive brand reviews. 90 percent of people believe brand recommendations from friends and 70 percent believe consumer opinions, which is way higher than the trust rate for advertisements!
That’s why it’s so important for businesses to include brand advocates. Advocates hold amazing power. If you can guide their passion, you’ll get more high-quality referrals and boost sales (at a lower cost).
Engaging your customers on a human level through online communities is an effective technique to cultivate advocates.
Communities also offer a perfect pre-sales environment. Prospective customers can learn from existing customers, ask real customers questions, and get an honest review from someone who has been in their shoes. Savvy organizations leverage their communities early in the customer journey to get the prospective buyer onboard fast.
Better serve your customers
Online communities help businesses better understand their customers and their needs and build better roadmaps for future products and services and refine their marketing and sales strategy. They can also make resources available to help members get even more value from their products and services.
Businesses can quickly learn about the things their customers want from their existing products and services, rather than waiting for the annual customer conference or satisfaction questionnaire. Lumity is an end to end benefits solution that launched HR for HR, a community to support HR professionals. The community enables Lumity to keep a pulse on evolving HR trends, hot topics, and challenges that help refine its overall marketing strategy.
Plus, the feedback and exchanges within communities are more authentic. In traditional research, people tend to change their behavior because they know they are being observed. This is referred to as the Hawthorne Effect and is way less likely to occur in an online community.
An invaluable asset to your business
The community benefits discussed in this article are by no means exhaustive, and of course, the benefits of an online community vary by the type of community. However, whether your community is designed for customer support and service, marketing, sales, or product development, there is no denying that if done well it will be an invaluable asset to your business.