Virtual communities
Virtual communitiesalso provide opportunities for some companies to develop relation-
ships with their customers. Since the publication of the article by Armstrong and Hagel
in 1996 entitled ‘The real value of online communities’ and John Hagel’s subsequent
book (Hagel, 1997) there has been much discussion about the suitability of the web for
virtual communities.
The power of the virtual communities, according to Hagel (1997), is that they exhibit
a number of positive-feedback loops (or ‘virtuous circles’). Focused content attracts new
members, who in turn contribute to the quantity and quality of the community’s
pooled knowledge. Member loyalty grows as the community grows and evolves. The
purchasing power of the community grows and thus the community attracts more ven-
dors. The growing revenue potential attracts yet more vendors, providing more choice
and attracting more members. As the size and sophistication of the community grow
(while it still remains tightly focused) its data gathering and profiling capabilities
increase – thus enabling better targeted marketing and attracting more vendors... and
so on. In such positive-feedback loops there is an initial start-up period of slow and
uneven growth until critical mass in members, content, vendors and transactions is
reached. The potential for growth is then exponential – until the limits of the focus of
the community as it defines itself are reached.
From this description of virtual communities it can be seen that they provide many of
the attributes for effective relationship marketing – they can be used to learn about cus-
tomers and provide information and offers to a group of customers.
When deciding on a strategic approach to virtual communities, companies have two
basic choices if they decide to use them as part of their efforts in relationship building.
First, they can provide community facilities on the site, or they can monitor and
become involved in relevant communities set up by other organisations.
If a company sets up a community facility on its site, it has the advantage that it can
improve its brand by adding value to its products. Sterne (1999) suggests that minimal
intrusion should occur, but it may be necessary for the company to seed discussion and
moderate out some negative comments. It may also be instrumental in increasing word-
of-mouth promotion of the site. The community will provide customer feedback on the
company and its products as part of the learning relationship. However, the brand may
be damaged if customers criticise products. The company may also be unable to get suf-
ficient people to contribute to a company-hosted community. An example where this
approach has been used successfully is shown in Figure 6.15. Communities are best
suited to high-involvement brands such as a professional body like CIPD or those related
to sports and hobbies and business-to-business.
What is the reality behind Hagel and Armstrong’s original vision of communities?
How can companies deliver the promise of community? The key to a successful commu-
nity is customer-centred communication. It is a customer-to-customer (C2C) interaction
(Chapter 1). Consumers, not businesses, generate the content of the site, e-mail list or
bulletin board.
According to Durlacher (1999), depending on market sector, an organisation has a
choice of developing different types of community: communities of purpose, position
and interest for B2C, and of profession for B2B.1 Purpose– people who are going through the same process or trying to achieve a particu-
lar objective. Examples include those researching cars, e.g. at Autotrader
(www.autotrader.co.uk) or stocks online, e.g. at the Motley Fool (www.motleyfool.co.uk).CHAPTER 6· RELATIONSHIP MARKETING USING THE INTERNET
Virtual community
An Internet-based
forum for special-
interest groups to
communicate.