Do Customer Communities Pay Off?

Ducati, the Italian motorcycle manufacturer, involves customers in every marketing function from communications to product design. LOMO, the Russian camera maker, has invited its customers to join a global enthusiasts community and contribute to a global image archive, square off against one another in snapshot duels, and compete in a photography contest called the LomOlymPics. And eBay has famously built its business around the community concept, offering dozens of online venues such as discussion boards, clubs, and chat rooms for members. Customer-community marketing programs like these are all the rage. But how well do they work? To find out, we conducted a yearlong field experiment in collaboration with eBay Germany’s managers that involved 140,120 eBay customers. These customers were all active eBay users who had bought or sold on the site within the past three months but had not participated in eBay’s online communities before. From that group, 79,242 randomly selected customers were invited via e-mail to participate in eBay’s customer communities at the beginning of May 2005. They were offered prize incentives such as iPods—worth about €3,000 in total—for doing so. The other 60,878 customers, who were not invited to join the communities, served as the control group. Within three months, 3,299 of the invitees became active community participants, posting messages, joining in discussions, and helping other members. We call these customers the “community enthusiasts.” An additional 11,242 users became “lurkers,” reading others’ posts without actively participating in the communities themselves. Over the course of a year, we compared the behavior of community enthusiasts and lurkers with that of the control group. The differences were astonishing. Lurkers and community enthusiasts bid twice as often as members of the control group, won up to 25% more auctions, paid final prices that were as much as 24% higher, and spent up to 54% more money (in total). 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 control users. The findings on first-time sellers were even more impressive: Compared with the controls, almost ten times as many lurkers (56.1%) and enthusiasts (54.1%) started selling on eBay after they joined and participated in customer communities. The increased buying and selling activity of enthusiasts and lurkers generated approximately 56% more in sales during the year that our experiment ran than in the previous one. With a take rate (the fraction of sales that eBay earns as revenue) of 10.3% and a gross margin of 82%, eBay earned several million dollars in profit from the increased trading behavior of the community participants in the experiment. Our results show that customer communities pay off handsomely for eBay and suggest that any online company will benefit from nurturing its communities. It seems plausible that investments in customer communities by bricks-and-mortar companies will reap similar rewards—but the jury’s still out.

Do Customer Communities Pay Off?

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