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Miraculously, I was right - detergent is detergent and consumers aren't interested in forming a community around the stains their detergent removes.

It only took a Deloitte Services study to figure out what some people (myself included) have been saying for quite some time.

Based on the information from Deloitte's 2008 survey, entitled "Tribalization of Business Survey," most online communities run by companies can be classified only as complete and utter failures.

The survey (which can be viewed here) "measured the responses of over 140 companies, including Fortune 100 organizations, which have created and maintain online communities today."

The result?

"A majority of the communities have fewer than 500 active members."

To be specific, 34% report fewer than 100 active members and 27% report 101 to 500 active members. Only 25% report more than 1,000 active members.

Do note that there is no definition provided for "active member" and different companies almost certainly define "active member" differently.

In my personal experience, community operators are fairly loose with how they count "active members" and thus I've found that these numbers typically get exaggerated, which does not bode well here since the reported numbers are already unimpressive.

Unfortunately, instead of raising the possibility that consumers simply don't want to build a community around a brand of detergent or toothpaste, Deloitte appears to want to fight common sense.

Despite observing that "a disturbingly high number of these sites fail," Deloitte's Ed Moran claims:

"Communities can extend the edge of the corporation in truly transformative ways -- tapping into new talent, helping design products and services, providing customer support and, most importantly, building the brand with the customer."

He goes on to argue:

"The survey data points to some growing pains, but companies are starting to see that online communities should be nurtured and leveraged for real business gain."

Right.

Things only get more goofy from there.

According to Deloitte, 35% of the companies surveyed "have seen an increase in word-of-mouth for their brands," 28% "have seen their overall brand awareness increase" and 24% think online communities are "helping companies increase customer loyalty and bring outside ideas into the organization faster".

Notwithstanding the fact that these still represent a minority of those surveyed, I would ask the following question: If only 25% of the companies surveyed have communities with more than 1,000 members, how exactly do 35% and 28% of them think that their communities have boosted word-of-mouth and overall brand awareness, respectively?

Clearly, the Tide community on Facebook for "America's Favorite Stains," for instance, which today still has less than 400 fans and looks like a ghost town with 12 photo albums and 19 wall posts, isn't realistically going to boost "word-of-mouth" or "brand awareness" for one of Proctor & Gamble's most recognized brands (Proctor & Gamble has a market capitalization of just under $200bn and generated over $76bn in revenues in 2007).

As I've pointed out many times before, if you're a big company, it takes a lot to "move the needle." A "community" of even 10,000 isn't likely to do it.

So what gives? Is there something funky with Deloitte's numbers? Or is it simply possible that marketing folks at many companies are hesitant to admit when their investments aren't fruitful?

I suspect it's probably (primarily) the latter.

That aside, in a sane world, a firm like Deloitte would probably follow the data to a logical conclusion, and suggest the possibility that there are relatively few brands that consumers want to build communities around. And that for those brands, an "official" community probably isn't needed because unofficial ones already exist in abundance.

Yet we don't live in a sane world, so Deloitte's study spins the results in a fashion that just so happens to fit the agendas of the survey's collaborators.

One collaborator, Beeline Labs, bills itself as a "marketing innovation firm" that "specializes in creating Marketing 2.0 strategies and programs." The Beeline Labs website says it all - "Marketing Innovation for the Social Media Age."

Beeline Labs partner Francois Gossieaux stated:

"The survey reveals that there are several disparities between companies' goals, how to measure success, and appropriate investment. The companies that commit the dedicated talent and resources to driving customer centric communities will be the winners."

Translation: you're not seeing results because you need to redefine ROI and you need to invest more money to make things work.

Of course, this has become the standard position of many social media marketers and proponents.

Not-so-coincidentally, one Beeline Labs partner, Lois Kelly, will be giving a workshop entitled "Online Customer Communities that Connect and Thrive: Creating the Right Mix of Purpose, Passion, People, and Platforms" at the upcoming Web 2.0 Expo in New York.

Amusingly, the description for the workshop states "we’ll share the results of a new industry study of 150 companies who are successfully using communities" despite the fact that the numbers demonstrate quite conclusively that the majority of the companies surveyed aren't successfully using communities.

It's also worth noting that the other collaborator was the Society for New Communications Research.

Itself founded by "new media" types, it was previously involved with a study that praised Dell's social media efforts, despite the fact that Dell's social media "expert" Richard Binhammer was directly involved with a member of the team that conducted the study.

Frankly, I find that the " Tribalization of Business Survey " is yet another prime example of just how difficult it is to implicitly accept " research " as credible on face value alone, no matter how prominent and " reputable " its source because sadly, it seems today that so many are willing to cast aside their reputations to support the vested interests of partners, collaborators, etc.

Apparently, Deloitte has no problem telling others that companies that have more often than not found their commercial community initiatives to be failures by any reasonable measurement simply "have not yet harnessed the true potential of these communities."

For the rest of us, detergent remains detergent.

I think it may be time for me to conduct my own survey entitled "The Vaporization of Money."

I suspect some of the 6% of companies surveyed by Deloitte that have spent more than $1m on their community initiatives may find it interesting.

Drama 2.0

Published 30 July, 2008 by Drama 2.0

237 more posts from this author

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James Wilson, Business Development Director at Paradigm Interactions Limited

The commercialisation of communities seems in the main to follow the idea that the World Wide Web is another channel to be plundered. Unfortunately it never has been, it a network of networks which is why social networking has arisen. Social networking is a focus upon personal objectives, desires and fixations.

Commercialisation will only work by agreement with users or they simply go elsewhere, the notion of brand building through social networking is pointless unless users find something in it for themselves.

about 8 years ago

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francois gossieaux

Frankly I think that you are missing the point in a lot of the findings that came out of the study. I was an active participant in the study, alongside many marketing, new product development, customer service and social media experts who have build credible reputations for themselves.

As you may have noticed from the study, a majority of the companies interviewed were B2B companies - so a community with just a few hundred people for them can lead to tremendous customer insights in new product innovation as well as increased word of mouth.

Now it may be true that some companies have a difficult time admitting failure, but in this case we cannot conclude that. More than 50% of the respondents have been at it for less than a year and it is therefore too premature to conclude that they succeeded or failed. Furthermore, many are totally under-investing in their communities - which results in neither here or there when it comes to failures.

Lastly I was a little confused by your analysis of who the players were who conducted this study. Unlike you we have been 100% transparent about who we are, what we do, why we did it and how to reach us.

Thanks for continuing the conversation.

almost 8 years ago

Drama 2.0

Drama 2.0, Chief Connoisseur at The Drama 2.0 Show

Francois: thanks for your response. Unfortunately I think you miss the point.

First, let's be clear: you have every reason to "spin" this survey favorably. According to your website, your entire business is predicated on the notion that social media is viable and worthwhile.

I, on the other hand, am an internet entrepreneur and Web 2.0 skeptic who will lose no money if Web 2.0 and social media fail. If they succeed, I'll simply look like an idiot and frankly, I don't have a big enough ego to care in this regard.

Now that our individual "risk-reward ratios" are established, let's discuss your survey.

As a financially-disinterested observer, I look at the results and just don't see a whole lot to be positive about.

If 35% of the companies surveyed "have seen an increase in word-of-mouth for their brands," 65% have not.

If 28% "have seen their overall brand awareness increase," 72% have not.

If 24% think online communities are "helping companies increase customer loyalty and bring outside ideas into the organization faster," 76% do not.

Whether a community operator is a B2B company or a B2C company, if its community has fewer than 1,000 "active members," it's hard to believe that it's going to provide much tangible benefit to a company.

49% of the companies you surveyed reported annual revenues of $10mn or higher.

If you want to tell me that a community with less than 500 "active members" is going to do amazing things for a $25mn company or that a community with 2,000 "active members" is going to make a tangible impact on a company with $3bn in annual revenues, I'm afraid that my version of common sense is different than yours.

Did you ask the companies surveyed if they were able to measure whether or not their community initiatives impacted the bottom line (in any form, whether it be through revenues or cost savings, etc.)? Did you ask them if they considered their community initiatives to be "profitable"?

In other words, your survey seemed to avoid showing anyone the money. For good reason I suspect.

Frankly, I think your argument that "more than 50% of the respondents have been at it for less than a year and it is therefore too premature to conclude that they succeeded or failed" is a bit disingenuous, especially when one considers that Deloitte's Ed Moran, your collaborator, is on the record as stating that "a disturbingly high number of these sites fail."

I'm curious as to how you concluded that "many [companies] are totally under-investing in their communities."

First, I'd be fascinated if somebody would actually explain just how much money companies *should* be investing in their communities and just what they should expect to get in return for increased investment. Unfortunately, most social media proponents seem to be unable to elaborate on this beyond "spend more money and change your definition of ROI."

Second, while I would not disagree that underfunding any project will likely lead to failure, let's be honest here. Social media has been sold as a "cost-effective" marketing/PR platform. Your statement seems to indicate that the costs required to achieve "success" are not as low as advertised.

Your own survey indicates that, combined, more than 70% of the companies surveyed found "getting people to join" and "getting people to engage" to be the biggest challenges to "making communities work."

This isn't surprising and I have enough experience with online media to know that throwing more money at these two challenges is not a sensible strategy.

In other words, if you've invested $50,000 in your community and have a paltry 250 "active members" to show for it, investing $1mn isn't going to guarantee that you will grow it to 5,000 "active members" (or that, more ideally, you will be able to spark viral growth that gets it to 50,000 "active members").

Your apparent position is akin to the CEO who, when informed by a middle manager that "The company is losing money on every product it sells" turns around and responds, "Don't worry - we'll make it up in volume!"

Throwing more money and resources (including human) at a community WILL NOT lead to growth and engagement because you can't create success by scaling failure.

And why are these communities failing?

You don't need to survey anybody other than an average person walking down the street to figure it out.

It's quite simple - the reason "getting people to join" and "getting people to engage" is difficult is because the average person doesn't care to regularly participate in a community about detergent or a community run by their employer's enterprise software vendor.

Few companies have a "lifestyle brands" that consumers want to engage in community around. Until you recognize that truth, companies investing in unsuccessful communities will continue to fail and lose money while doing so.

almost 8 years ago

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Robin G

I've got to agree that it seems like very little has been achieved with these corporate sponsored online communities. HOWEVER - someone, somewhere (even in this 150?) has had some success - and this study and/or artilce would be better if it analysed that. Rather than (the study) try to make weak numbers look good...

almost 8 years ago

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Vincent

As usual, some people will always be selective with statistics.

What about:
"49% of the companies you surveyed reported annual revenues of $10mn or higher."
- So 51% are small businesses.

Consider that with the following statement:
"Whether a community operator is a B2B company or a B2C company, if its community has fewer than 1,000 "active members," it's hard to believe that it's going to provide much tangible benefit to a company."

- In light of the previous fact, you must agree that even 250 active members is significant for many small businesses, and could respresent a large percentage of their cuistomer base.

Don't agree with the following euther:
"because the average person doesn't care to regularly participate in a community about detergent"

- Surely this is just down to how appealing you make it. As far as I know, there are millions of discussions all over the Internet with people asking and sharing tips related to stain removal etc.

Another thing that may have been usefull in the survey, would have been to have a few basis stats on the participating companies Web sites. It may just be that they don't get much traffic to their main sites anyway, and hence make it even more difficult to push users into the community site. Their goes another ratio for us all to measure huh? ;-)

almost 8 years ago

Drama 2.0

Drama 2.0, Chief Connoisseur at The Drama 2.0 Show

Vincent: let's talk small business. 250 "active members" may or may not do anything for a small business. It really comes down to what they're "contributing" to the business and what they're expected to "contribute" (ROI).

The bottom line, once again, is that out of all the companies surveyed, only 35% "have seen an increase in word-of-mouth for their brands," only 28% "have seen their overall brand awareness increase" and only 24% think online communities are "helping companies increase customer loyalty and bring outside ideas into the organization faster."

That speaks for itself. Of course, when two of the entities involved in a survey already assume certain things to be valid and have a vested financial interest in their assumptions, you already know the likely outcome of any study they perform that pertains to their assumptions.

Look at it this way - Beeline Labs' website tagline says "Marketing Innovation for the Social Media Age." Do you think Beeline Labs would produce a survey that came to the conclusion that "Social media is a waste a companies should ignore it?" Of course not.

Finally, as it relates to stains, I think you need to consider what a "community" is. Posting a question about a stain in an online forum for instance (i.e. "What's the best way to get rid of a stain caused by red wine?") does NOT mean that you want to become an "active member" of a stain-oriented community.

almost 8 years ago

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