Episode 39 - The Retention Power of Customer Communities

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📰 Top Story: The Retention Power of Customer Communities

Communities or forums on a branded website, app or even exclusive Facebook or LinkedIn groups are typically used for four things: 

1. To help customers get support from one another when faced with problems 

2. To help customers get peer-led recommendations 

3. To crowdsource ideas for new products and services 

4. To motivate customers and to provide a sense of shared mission 

The mistake some brands make is putting a community in place to reduce customer service costs,  but from a retention perspective, this is not the right way to think about a customer community. 

An active online customer community connects people with shared interests or needs. 

Subscription business models and recurring revenue models built around membership are containers for long-term relationships, and well-designed online communities can be a key aspect of the ‘membership’.

But beyond that, online communities can also foster a sense of belonging while simultaneously creating value over and above the core product proposition. 

A key aspect of retention strategy is what Anne Janzer calls ‘value nurturing’**.  

Value nurturing is about: 

• Demonstrating the value of your product/service 

• Helping customers to be successful 

• Creating value beyond the solution 

• Aligning with customers' values 

Communities work in every aspect of value nurturing because: 

• There is no better demonstration of the value of your service than from other customers 

• Communities often give customers value beyond the core product or service 

• Communities can assist customers in overcoming specific challenges faced by others.

• In some cases, communities can also help your brand to align with your customer's values through a shared sense of mission 

Let's take some examples. 

Peloton's entire brand and product is built around a concept of shared values, shared goals and customer community. Peloton offers customers the ability to create tags to express their identity, high fives for encouragement, features to see concurrent users working out simultaneously, and the ability to connect with others online and via video. 

Sephora was one of the pioneers of an owned online community and has built an active platform where customers can get honest advice from other customers (even ex-movie make-up artists) on the best products to suit their needs. 

American Express's OPEN forum gives members (AMEX has always called customers members) a place to ask questions and share information with other small business owners. It is based on an ecosystem of content created by American Express to help customers be more successful.  

Effective communities drive retention because 

1. They offer a sense of exclusivity. As a customer or member of the brand's community, you are part of something more than the product. 

2. They are authentic. It's not the brand telling you what they think; it's real customers giving you real advice.  

3. They can help customers solve very specific problems if active enough. 

Communities tap into a whole range of behavioural science principles like

1. Social Proof - People tend to follow what others are doing, especially in ambiguous situations.  

2. Commitment and consistency - Once people commit to something publicly, they're more likely to follow through (like Peloton’s community)   

3. Exclusivity - Limited access communities (like Amex’s OPEN forum which is accessible only to customers).

4. Belonging - Humans have a fundamental need to belong to groups. 

5. Identity formation - Communities allow people to build and express identity around specific interests or values (like Sephoras make-up community)

The key, of course, is to grow and then keep the community active. There are a few ways to do this: 

1. Regular content from the brand 

2. Recognise community participants and reward them, particularly very active ones 

3. Ensure there is a strong value exchange for participants

4. Facilitate meaningful connection based on how your structure threads and conversation 

5. Use data to recommend content, threads and connections 

6. Gather feedback and act on it 

Final Thoughts

Customer communities shouldn't be considered a cost-saving tactic. In the right business context and executed well, they can be one of your business's most powerful retention levers. Insight shows that when customers connect with each other through shared experiences, they stay longer and spend more, and communities tap into deep human needs for belonging, identity, and authenticity.  

Until next week, 

Tom

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