The Online Community Pay-Off

Social Media is ripe with marketing potential. However, it is doubtful if it will reach its potential if marketers see it as a new vehicle for product advertising and sales promotions. In my opinion the greatest potential will be reach through customer engagement.

According to a 2007 Economist Intelligence Unit study, executives worldwide overwhelmingly agree that customer engagement, not products, is the key to competitive differentiations. Good products are still important, but they are now the ante to get into the game.

Can social media engage customers online and produce measurable results?

According to a study by Rene Algesheimer and Paul Dholakia, online communities can get customers highly engaged and pay handsome dividends. (Harvard Business Review, Nov. 2006)

The study involved over 140,000 eBay customers. 79,242 were invited to participate in eBay's online customer communities, the remainder served as a control group. Within three months over 3,000 of them became highly active community enthusiasts. Another 11,000 plus became lurkers, reading other peoples posts without actively participating themselves.

During the course of the next year, the eBay involvement of community enthusiasts and lurkers was dramatically different from those in the control group.

Here are the highlights:

• Lurkers and enthusiasts bid twice as often as the controls, won up to 25% more auctions, paid final prices that were as much as 24% higher and spent up to 54% more money.
  
• Enthusiasts listed up to four times as many items on eBay and earned up to six times as much in monthly sales revenues as the controls.
  
• Compared to controls, almost ten times as many lurkers and enthusiasts become first-time sellers after participating in the online communities.
  
• The buying and selling activity of enthusiasts and lurkers generated millions of dollars of increased revenue for eBay.
  

Certainly, these results cannot be generalized to other communities or other types of social media marketing. They do, however, point out a critical link between online customer engagement and tangible economic results.