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February 2001 |
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Talking it up
With new data to track ROI, e-retailers roll out the welcome wagon to online communities
By Mary Wagner
If you build it, they will come. Ah, but will they click and buy? E-retailers taking a new look at the power of online community and attempting to harness it to marketing goals are betting the answer is yes. To improve the odds, though, e-retailers will have to go beyond the purely aggregation models of earlier times. Borrowed from advertising-driven media and content sites simply out to acquire eyeballs, visitor aggregation models have yet to score big at the check-out counter. For while history has shown community to be a mighty traffic builder, it hasn’t necessarily been a spark to sales.
Just ask Garden.com—that is, if you still could. The Austin, Texas-based e-retailer shuttered its doors in December though it had assembled one of the most active communities of garden enthusiasts—or even of any kind—on the web. “Their traffic and the number of people who used the site as a resource or for communication with other gardeners were great. But they didn’t do such a fabulous job of nudging the people who were there for community or content into buying,” says Elaine Rubin, who chairs Shop.org, the association of online retailers that’s a division of the National Retail Federation trade group.
Stories like this one illustrate the opportunity and the challenge of community for web retailers. It’s not enough for web merchants to simply attach or assemble a community of users on their site—even a big one—and expect that alone to boost sales. Without the right tools to leverage community members’ affinity for the site into purchases—or mine other value such as market intelligence—the building and maintenance of communities can drain limited resources with little return. When New York-based dELIA*s Corp. closed down iTurf.com, a teen community site, in November, it cited the high cost of running the community in relation to the small percentage of traffic it generated for its network of sites.
In an age when the path to profitability must of necessity be shorter for e-retailers, a poorly managed or unmanaged community can be hazardous to a retail site’s health. The danger is that visitors get hooked on using the community features of a site for free, either for the information or resources offered, or for the people they meet, without ever hitting a buy button.
Lighten up
But coming on too strong poses risks for e-retailers as well. When visitors enter an online community in an information-seeking mode, pop-up ads and click-to-buy buttons can annoy rather than entice. Push too hard, and sales efforts can backfire, says Steve Glenn, president of PeopleLink, Santa Monica, Calif., which builds and manages online communities for e-businesses. “The community is amorphous, without a collective intelligence,” Glenn says. “But it’s remarkable how sensitive it is. When people get the sense that the community is too engineered or too censored they stop participating and go elsewhere.”
Today, smart e-retailers are looking at community differently from a few years ago. They’re realizing that community size alone doesn’t guarantee sales. They’re sifting through community data and linking findings more selectively to personalization tools and promotions in pursuit of what consultants regard as the Holy Grail of e-retailing—contextual selling. They’re taking a closer look at performance metrics like transaction size among community members versus site visitors who don’t use community tools. And the larger retail players who’ve invested in understanding and not simply massing an online community are beginning to realize quantifiable benefits.
Zeroing in
A late 2000 study of online communities by PeopleLink looked at Amazon.com, 800.com, Barnesandnoble.com and eToys.com, using Jupiter/MediaMetrix data from 50,000 users of those sites. The study found that regular users of community tools were up to two times more likely to purchase online than non-community users on the sites. They also were likely to return to the sites up to nine times more frequently than non-community users. More to the point, they buy more. “There’s been an implied belief that, as in a store, if you can get people in and they spend longer you have more of an opportunity for sales, but there haven’t been a lot of hard metrics to validate that,” Glenn says. Until now: the study also found that though community members made up only about one-third of all visitors to the sites, they were responsible for two-thirds of online sales.
A well-managed community can deliver similar results for smaller players, too. Auto parts retailer Wrenchhead.com, a client of Participate.com, a Chicago-based provider of online community services, tapped into a dynamic that’s no news to anyone who’s been to an auto show or racetrack: weekend mechanics like talking to each other about their cars as much as they like working on them. Its online message board, member spotlight and volunteer “Pit Crew,” all community features, have helped build site visits at White Plaines, N,Y.-based Wrenchhead to an average 20,000 per day since the site launched in March 1999.
And community members don’t just stay on the community pages. Though the most active community members make up only 5% of Wrenchhead’s total customer base, they drive 30% of all sales on the site, says Joseph Cothrel, vice president of research at Participate.com.
Adds Glenn: “E-retailing sites that use community features as part of their sales strategy benefit from higher customer purchase and retention rates and from increased visitor frequency.”
Why community?
But understanding the effective use of community for e-retail has been a long time coming. Web sellers early on adopted the model of ad-driven sites which were out to build as big an audience as possible, buyers or not. “In the mid-90s, there was a tremendous focus on the idea that first you needed to aggregate a community of loyal users and visitors, and then the next step would be to get them interested in purchasing from you,” Rubin says.
And there’s the first hurdle for those seeking to sell to existing online communities, or to create communities specifically to support retail goals: commerce must integrate seamlessly with content.
“It depends on why the community is there in the first place,” Cothrel says. “What was the promise when the community was built? It can be a different relationship down the road when you want to monetize the community, because sometimes the community gets very offended by commerce. And it’s not because commerce and community don’t go together. Whenever people tell me that, I tell them to check out the DVD discussion on Amazon.com. It’s just a matter of being straight with the community members about the fact that you’re a business organization, that these are your objectives, and here’s the value you want to provide to people as potential customers.”
Striking the right balance when folding commerce into community raises big questions right off the bat: Should the retailer brand the community it sponsors or operate it at a distance? What are the most effective community tools? And most importantly, what’s it going to cost, and what makes the cost worth it?
As to the branding issue, the short answer is: it depends on what the e-retailer is after. Beauty.com, owned by Drugstore.com, operates MakeupAlley.com, one of the web’s largest online communities of cosmetics enthusiasts. There’s nothing on the Makeup Alley home page to identify Beauty.com as the site owner. Heavy on user message boards and community features such as a cosmetics swap for members, the site delivers market intelligence for Beauty.com. Monitoring community posts from the sidelines supplies Beauty.com with consumer soundings on the pros and cons of products and emerging brands, data it cranks into merchandising operations on its retail site. And when users click on member reviews of a featured product, there is a link to Beauty.com to buy.
Luxury goods seller Ashford.com took a different approach when it acquired TimeZone.com, an international online community of timepiece enthusiasts some 80,000 strong. Though not actually branded as an Ashford.com property, TimeZone is visibly linked to Ashford with a click-through button on the home page. Several TimeZone features such as “Sales Corner” and “Watch of the Moment” also link back to Ashford, though the site also delivers plenty of independent user-driven content through its public forum. “When we as a commerce site bought a community site, we had to be very respectful of why TimeZone had been formed in the first place. Before Ashford acquired it, TimeZone was just individuals posting information on watches. We wanted not to intrude, but to add value,” says Mary Lou Kelley, Ashford’s vice president of marketing. Ashford has done so by providing technical support to the site, she adds.
Kelley won’t share conversion data, but she believes that as many as 50% of active TimeZone community members have clicked through to Ashford. “If the community knows it can post a question about a watch they’re considering and get a blunt answer, it adds value to both sides,” she says.
Who’s got the clout?
Ashford’s experience with TimeZone underscores a fact first established for e-retailers by Amazon: consumer product reviews are the most influential feature on community sites. “In the sites we studied it was the most important community feature by far,” says Glenn. While only 1% of community members actually contributed to the review, they wield considerable influence: more than a third of site visitors read them, spending 45 seconds or more on review pages.
Greenwood Village, Colo.-based eBags.com is acquiring a travel community, Virtual Tourist, now some 100,00-plus members strong, that it’s hosted on its site since September. Virtual Tourist was the creation of travel enthusiasts who developed software applications to bring fellow enthusiasts together online; eBags has added more applications, such as giving members the ability to scan in and send photo postcards of their travels along with trip recommendations. Not only do such community features increase participation in the site, members’ communication with each other gives eBags marketing opportunities at no added cost. For example, postcards go out to members as text links in e-mails that also carry the offer of $10 off the recipient’s next $50 eBags purchase.
Maintain the integrity
“It actually costs us nothing to be a ridealong,” says Peter Cobb, vice president of marketing and an eBags co-founder. Cobb says ebags eventually hopes to link more personalized sales opportunities to topics of interest to community members. “For instance, if someone was looking at Paris, Milan and Florence, we might have our upper-end Italian handbags as a link, because people going there probably have more interest in those products. There are definitely integration opportunities, you’ve just got to make sure they maintain the integrity of the community.”
While Cobb cites the essentially free marketing opportunities eBags has gained from hosting the travel community, e-retailers must be highly creative to squeeze out such benefits without incurring what can be major costs. Depending on their existing set-up, e-retailers looking to build, acquire or partner with communities on their sites may face some or all of costs including research, strategy development, and added software and hardware to construct, manage and integrate the community onto their site.
But consultants say it’s the ongoing labor costs even more than technology that can make community an expensive marketing tool for e-retailers. And indeed, it’s not cheap. For example, clients of Participate.com, a pool that includes several Fortune 1,000 companies, pay from $300,000 to $3 million a year for research and community maintenance services alone. Sites that offer something unique, such as learning or development opportunities, to vendors of community services may pay less.
That’s the case at hardware and home gear e-retailer OurHouse.com, where fees fall below the lower end of Participate.com’s usual scale, although the company won’t say by how much. Evanston, Ill.-based OurHouse launched online in May 1999 with the aim of becoming a one-stop shopping site for advice and products for home improvement. “Giving consumers a place to come and ask questions and share ideas was about the most important thing we could do from the perspective of building loyalty and retention,” says Geni Burke, marketing director.
With the help of Participate.com, OurHouse.com built its community of home enthusiasts from the ground up. To lure consumers to the community, OurHouse offered live chat opportunities with home improvement experts and launched a series of discussion boards. It interweaves sales opportunities into community features with a deft touch that gives buying opportunities a consistent presence on community pages, but at the user’s option. How?
For example, a text link will offer a community member writing a question about a hammer the chance to click on that word and go directly to the site’s retail page on hammers—but only if they choose to do so. “We do the reverse as well,” offers Burke. “If shoppers are looking at the lawn and garden product area of our site, for instance, there’s a button inviting them to the lawn and garden discussion board. We give our shoppers a way to get to the community to ask their questions, and we give our community members information on ways to shop with cross linking.” The result? Active community members at OurHouse on average buy 30% more than customers who are not members of the community.
The e-retailers leading the way in integrating community features have found them an important part of their sales strategy. Now that the heavyweights have figured out how to make community pay, community features are starting to make the cut at other e-retailers as well. No doubt, emerging data linking community tools with sales increases have helped accelerate their interest, but online community planners say that effectively managed, community can provide more over the long haul than simply a shortened path to profits. “There are two reasons to build communities: relationships and insight,” Cothrel says. “The byproducts of good relationships with customers are transactions, retention; all the things retailers want. The insight is the ongoing learning you get from a community you can’t get any other way.” 
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