Social Dollars: The Economic Impact of Customer Participation in a Firm-Sponsored Online Customer Community

Abstract

M any firms operate customer communities online. This is motivated by the belief that customers who join the community become more engaged with the firm and/or its products, and as a result, increase their economic activity with the firm. We describe this potential economic benefit as "social dollars." This paper contributes evidence for the existence and source of social dollars using data from a multichannel entertainment products retailer that launched a customer community online. We find a significant increase in customer expenditures attributable to customers joining the firm's community. While self-selection is a concern with field data, we rule out multiple alternative explanations. Social dollars persist over the time period observed and arose primarily in the online channel. To assess the source of the social dollar, we hypothesize and test whether it is moderated by participation behaviors conceptually linked to common attributes of customer communities. Our results reveal that posters (versus lurkers) of community content and those with more (versus fewer) social ties in the community generated more (fewer) social dollars. We found a null effect for our measure of the informational advantage expected to accrue to products that differentially benefit from content posted by like-minded community members. This overall pattern of results suggests a stronger social than informational source of economic benefits for firm operators of customer communities. Several implications for firms considering investments in and/or managing online customer communities are discussed.

Does “Liking” Lead to Loving? The Impact of Joining a Brand's Social Network on Marketing Outcomes

“…Consistent with this perspective, Manchanda et al (2015) showed that the positive effect of brand SNs was driven by those who post content, with no increased purchasing among "lurkers" -those who joined the community but did not post content.…”

“…However, the difference-in-difference approach cannot differentiate pure treatment effects (brand community membership causes people to buy) from treatment-by-selection effects (community membership drives buying for those predisposed to joining) (Greene 2012;Lechner 2011). In either case, however, as Manchanda et al (2015) conclude, the observed effect is unlikely to be driven purely by selection.…”

“…Recent research has made significant progress in statistically inferring this counterfactual (Manchanda, Packard, and Pattabhiramaiah 2015): Customers were invited to join a firm's new online community, and purchasing behavior before and after launch was compared between those who joined versus did not join. Based on a difference-in-differences analysis, approximately 19% of the post-launch revenue was attributed to a causal effect of the brand community.…”

The Mystique of Customers’ Saturation in Online Brand Communities

“…Others such as Hagel and Armstrong [23] established a more commercial view of online communities, which they saw as a potential business model and a new platform for marketers to influence consumer's behavior. Through this commercial view, online communities were seen as a source for stronger brand-consumer relationships [11,24,31] and higher revenues [32][33][34][35].…”

Customer Attitude from Social Media, Customer Satisfaction Index, and Firm Value

“…High volume of customer-generated content on the company may indicate that the (current and potential) consumers of the firm are highly involved and committed to the brand/product. Research has shown that individuals who actively participate in a community are more likely to engage with the focal brand/product in offline as well as online communities (Algesheimer et al 2005), are more committed to the brand (Jang et al 2008), and are likely to have greater expenditure on firm's products (Balasubramanian and Mahajan 2001;Manchanda et al 2015).…”