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Why your online business benefits from an online community.

Monika London • 2016-08-15

Why would an online business even need an online community? Customers.

Any savvy business owner will tell you a new customer can cost up to ten times as much to acquire as it does to retain an existing one. Most business already know that managing our existing relationships are important, and that’s why so many chose CRM software to aid in that. But managing your existing relationships is only part of the story. There is a key metric to care about in any business: Customer Lifetime Value (CLV)[1]. It may seem callous to boil your customers down to a value number, but doing this allows us to explore how to improve CLV. That means, in simple terms, you want your new and existing customers to not just spend more money on your products, but to do it more often and for a long time.

There are three strategies from Monika (Muut Inc) to focus on in order to enhance CLV: Increasing per customer sales, retaining customers longer, and lowering the cost to serve[2].

An online community is essential for any online business using these three strategies.

Increasing per customer sales.

Online communities give your customers the unique experience of mingling with others passionate about your product(s). This means customers can learn about new products, add-ons, or special offers through your community. Customer engagement is a key driver in conversion[3][4]. Conversion is the act of transforming flyby visitors into paying customers. It can also represent a mechanism for increasing the average dollar amount per transaction or Average Sales Price (ASP) for your existing customers.

Social networking is a great path for interacting with your customers — any business should have this presence — but these sites should be a funnel to get visitors to your site. Using a community on your page gives you control and access social networking just can’t give you.

Seeing what is on the mind of your community helps you tailor sales, events, and your product(s) to what your best customers value. Some community software even allows integration with other business building software to improve those leads and give you access to a whole new stream of potential customers. Why? It’s likely you’ll have users who aren’t yet paying customers interacting with each other in an active community. Your customer may not even know they want a particular item, until they see someone else using it. A more informed and engaged customer is more likely to buy, and to be a repeat customer.

Customer retention.

This is the star of any CLV strategy and where an online community really shines. An active community separates you from competition. Think about what makes Apple different than it’s competition. It’s this sort of brand differentiation that creates fiercely loyal customers, and online communities give a customer a value they can’t get elsewhere. Communities create social bonds, investment, and give access to your home grown and staff experts.

That access your community gives your customers also lends itself to better outcomes[5]. A bakery’s customers could find recipes, advice, and serving suggestions from experts and regulars. Community-side support from those same experts and regulars, something we’ll explore later, offers visitors and customers things that traditional behind the scenes support can’t.

When you allow your community experts, fans, and regulars to engage and support their own, it gives them a sense of ownership and helps forge a social bond. When support becomes transparent it allows users to see customer service in action thus enhancing customer confidence. Furthermore it shows brand value, and helps customers feel listened to. You or your team can respond to feedback, adapt your product(s), or even develop new ones. And when you do it with the help of your community, it furthers their investment, loyalty, and desire to maintain those relationships.

Listening to your customers through an online community can take a lot of forms, don’t be afraid to get creative: Modcloth used their Be The Buyer[6] program to use crowdsourcing and community engagement to control and augment their inventory[7].

The customer perceptions you forge through listening to your community, transparent support, and differentiation shouldn’t be in the hands of your competitors. Nothing in the world can give you complete control of perception, but with your own community you have the opportunity to shape customer perception of your brand, your competitors, and your industry. Perception monitoring, whether positive or negative becomes centralized in a community. As a result you’ll get earlier leads on customers who might be slipping away.

Lowering support cost.

Lowering support cost isn’t the only goal. The cheapest support is zero dollars for none, but customer satisfaction doesn’t seem to appreciate zero support. We want to have excellent and efficient support for a low cost. Excellent support means your support agents will spend less time addressing individual customer’s needs. Helping one customer correctly now, means not having to help them 10 times tomorrow. Support costs drag down your CLV fast. Skyrocketing support cost can impact every part of a business, and can even be a symptom of any number of problems: perception, production, and/or people cost. An online community — while it can’t turn things around overnight — comes with the opportunity to reduce those costs. Communities hand you the tools to offer better support, improve perception, and keep you better organized as you connect support to production.

Earlier, we touched on the benefits of peer-to-peer support: forging social bonds, a sense of ownership, and investment in your brand. Experts advising new users — as well as typical users becoming experts — is not just a path to individual investment, it’s a second and first line of support for many users. Placing support in the able hands of both you and your community creates collaborative answers that are more complete and detailed than traditional support funnels. That sort of transparency leads to the discovery of production or service issues a traditional support structure might never uncover.

The benefits aren’t only for you. Your users will discover how others are using the product(s) giving them the opportunity to improve their own experience and outcomes. The better your customer’s satisfaction and outcomes, the less you’ll spend on support. Decentralizing your support, also, benefits users who don’t want to or can’t use traditional support systems.

Peer-to-peer support in tandem with your staff expert support on traditional and community platforms will lead to greater customer satisfaction, outcomes, engagement, and investment. And from there, you’ll see lower cost to serve and support.

Your Business + Community = <3

Investing in a community is one of the most essential investments any online business makes. Whether it is to manage a growing user base, or as you break into the online market an online separates your brand from your competition while bringing you closer to your customer base.

No more paying for the luxury of your customers and fans seeing your posts. Connecting your customer base on your terms puts you back in the driver seat.

[1] “Customer Lifetime Value", Wikipedia, last modified April 1, 2015 http://en.wikipedia.org/wiki/Customerlifetimevalue.

[2] “The Only 3 Strategies that Increase Customer Value”, Genroe, http://www.genroe.com/blog/the-only-3-strategies-that-increase-customer-value/1787.

[3] “Conversion (Marketing)“, Wikipedia, last modified January 25, 2015 http://en.wikipedia.org/wiki/Conversion_marketing.

[4] “Customer Engagement”, Smart Insights, http://www.smartinsights.com/customer-engagement/.

[5] “How Your Online Community Can Increase Customer Retention", Salesforce, November 4, 2013 https://www.salesforce.com/blog/2013/11/online-customer-community.html.

[6] “What is Be the Buyer?”, Modcloth, http://www.modcloth.com/help/what-is-be-the-buyer.

[7] “Using Crowdsourcing to Control Inventory”, Inc. Magazine, http://www.inc.com/magazine/20100201/using-crowdsourcing-to-control-inventory.html

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