Internet Marketing & e-Commerce
Ward Hanson
Kirthi Kalyanam
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Part Two: Chapter Ten
Creating Commitment
“No company should ever take for granted the idea that
managing customers for loyalty is the same as managing them
for profits.”
Reinartz and Kumar, The Mismanagement of Customer Loyalty
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Online Community and Loyalty
• Focused social gathering places
• Multi-directional communication
• Community value > individual value
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Online Community and Loyalty
• Focused social gathering places
• Multi-directional communication
• Community value > individual value
Results?
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Online Community and Loyalty
• Focused social gathering places
• Multi-directional communication
• Community value > individual value
Results?
• Online community activities can build
good will and lead to word-of-mouth
support, donations or purchases
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Online Community and Loyalty
At the Stanford Alumni Association, alumni who
receive e-newsletter @Stanford lead annual giving.
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Online Community: Types and Functions
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Challenges to Creating Community
• Gaining attention and building traffic
• Losing member focus as community
grows or changes
• If members disengage, content
creation lags and retention drops
• Firms accustomed to controlling the
message reluctant to let go
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Signs of a Healthy Online Community
• Content Attractiveness: More content =
more value = more members
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Signs of a Healthy Online Community
• Content Attractiveness: More content =
more value = more members
• Member Profiles: Opportunity for
individual outreach by sponsors
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Signs of a Healthy Online Community
• Content Attractiveness: More content =
more value = more members
• Member Profiles: Opportunity for
individual outreach by sponsors
• Member Loyalty: Commitment fosters
participation, creates audience
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Signs of a Healthy Online Community
• Content Attractiveness: More content =
more value = more members
• Member Profiles: Opportunity for
individual outreach by sponsors
• Member Loyalty: Commitment fosters
participation, creates audience
• Transaction Offerings: Selling linked to
interest area attracts other vendors
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Community Tools
• Communication Rings
– Email most important community tool
– Instant Messaging and SMS
– Growth of simulations, online gaming tools
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Community Tools
• Communication Rings
– Email most important community tool
– Instant Messaging and SMS
– Growth of simulations, online gaming tools
• Content Trees
– Discussion groups, web sites bring
organization and focus to handle flow of
information
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True Community?
• Optimistic view – Online communities
offer new ways of relating, and give
companies new ways to build and
retain loyal customers
• Pessimistic view – Online tools have
stifled true community building and
depleted face-to-face interaction
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
True Community?
Male
Female
Email
23.50
27.53
Internet browsing
22.10
15.18
Instant messaging
3.31
4.14
Newsgroup/Message boards
3.01
2.20
Chat rooms
2.13
1.65
Creating/Maintaining web sites
2.26
1.47
Social networking
0.53
1.13
Total Internet/Email time
56.84
53.29
Online time, minutes per day from six-hour time slice
SOURCE: Niie, Simpser, Stepanikova and Zheng, ‘Ten Yearks After the Birth of the Internet,’ December 2004
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Member Produced Content
• Less expensive member content
results in extensive content areas,
often attractive to advertisers
• Member content reflects current
interests and issue
• Quality varies, but often very creative
• Access-controlled communities lend
credibility to online recommendations
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Member Produced Content
• Other distinguishing features :
– Contributions are skewed toward frequent
contributors, which can be promoted
– Broad participation can expand and
enhance nature of online discussions
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Member Produced Content
• Other distinguishing features :
– Contributions are skewed toward frequent
contributors, which can be promoted
– Broad participation can expand and
enhance nature of online discussions
• Potential problems:
– Lack of control can result in off-color,
offensive messages
– Partial control can create legal exposure
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Community and Customer Insight
• Content attractiveness
– Access frequency, content diversity, contributor
edits, emailed articles
• Member Loyalty
– Access frequency, access duration, referrals,
church or opt-out rates
• Member Profiles
– Database completeness, user update frequency,
email bounces
• Transaction Offerings
– Sales revenue, active vendors, customer LTV
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Community and Customer Insight
• Interaction Measures such as email
campaigns offer direct measures of
community strength
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Community and Customer Insight
• Interaction Measures such as email
campaigns offer direct measures of
community strength
• Netnography moves traditional social
group study of ethnography online
– Self-interested helpers
– Multiple-motive consumers
– Consumer advocates
– True altruists
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Community and Customer Insight
Using email and homepages to identify communities of interest
SOURCE: Culotta, Bekkerman, McCallum, ‘Extracting Social Networks and Contact Information from Email and the Web,’
American Association of Artificial Intelligence, 2004, p.2
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Creating Consumer Dialogue
• Understanding the customer base
– Analyzing customer loyalty, profitability
– Loyalty programs build commitment
– Extending loyalty with switching costs
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Creating Consumer Dialogue
• Understanding the customer base
– Analyzing customer loyalty, profitability
– Loyalty programs build commitment
– Extending loyalty with switching costs
• Building customer dialogue
– Email outreach to possible defectors
– Follow up with high value customers
– Tipping points and trigger moments
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Creating Consumer Dialogue
Categories of Switching Costs
SOURCE: Adapted from Burnham, Freis and Mahajan, “Consumer Switching Costs: A Typology, Antecedents, and Consequences,’
Journal of the Academy of Marketing Sciences 31, no. 2 (2003): 109-126
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Creating Consumer Dialogue
Customer state and appropriate contact questions
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