Managing customer lifetime value in client communities

Empirical implications of CLV measurement in client communities. Client communities implementation. Impact of client communities on companies performance. Factors of success derived from content analysis. Customer lifetime value: Marketing models.

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26.08.2017
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Introduction

A client has always been considered as a king for a company: without him, almost no enterprise would ever exist. Getting closer to customers is considered as a top priority for CEOs, according to the IBM CEO Study (IBM Institute for Business Value, 2010). Hence, it is extremely important for the firm's management to establish long-lasting relationships with a customer and try to engage him at every step of the communication process. Such communication process was given a widely used and accepted name - customer relationship management (CRM).

CRM is a complex term that may be interpreted either in broader or in a narrower sense. In the broadest interpretation, CRM covers all levels of an organization from strategy to individual operations. In a narrow sense, CRM is a complex system of IT solutions that provide collection and analysis of customer information that support the prompt interaction and integration of the client into the company's processes (Rozhkov, 2012).

One of the most systematic models in the area of CRM has been presented by Adrian Payne (Payne, 2006), whose strategic CRM scheme includes the process of strategy development, value creation, multichannel interaction, information management and results evaluation. However, from the customer's perspective, CRM may be divided into four main stages: Awareness, Evaluation, First purchase, and Ongoing retention (DiMauro, 2016). Each of these phases has its own characteristics, distinctive features, and client's goals, but what is more important, an enterprise can benefit from engagement of a customer at every stage of this process. The potential value of such engagement is what usually refers to customer lifetime value or CLV.

CLV can be broadly defined as expected gross margin of a company from one customer delivered through the whole period of collaboration (i.e. his lifetime). Within the large body of scientific literature, there exist many different models for CLV measurement, but it is impossible to claim that exactly one of them is true and may be applicable to every business regardless of the industry, firm size, and organizational structure.

The concept of CLV can be applied not only to E-commerce, but also to every business trying to collaborate with its customers by means of online interaction. One of the tools gaining popularity among today's corporations in terms of such interaction is represented by client (or customer) communities. A client community of a brand is a special platform on the company's website where customers can communicate with the firm's representatives and with each other. In other words, client community is a new branch of the forums development with new tools (such as knowledge base, integration with social networks, analytics, etc.) for effective customer service, gathering ideas, discussing products and services (Vasuk, 2014).

It is important to make a distinction between such terms as client community and social network. Despite the obvious difference that social network account is provided by external software distributors, while the client community is fully owned and managed by the enterprise itself, there are other sources of diversity that are not so evident at first sight. Like a social network, a client community allows customers to read, post, share, and respond to content by and for one another. However, an important objective of a client community (unlike for a social network account) is to bring resolution and outcome to what customers are saying, such as: resolve customer support issues, provide a forum to react to ideas, and answer pre-sales questions (Get Satisfaction, Official website).

Another crucial distinction is the difference between a client community and a brand community. Put simply, a brand community is always but a client community: it can be based in various social media, messengers, or even offline (when customers meet each other and discuss different questions concerning the company's products or services, quality of technical support, etc.). On the contrary, a client community is always considered to be a separate online platform, which allows customers to interact with each other and the firm's representatives, post questions and respond to them, generate ideas about the organization's development, etc.

The aim of the study is to discover ways of CLV increase within client communities. In other words, it is anticipated to find interconnection between customer's membership in the client community and higher CLV that he brings to the enterprise.

Within this broad purpose, the following objectives are expected to be fulfilled: marketing client empirical implication

Define CLV, client communities and show their role in strengthening customer relationships.

Find examples of successful client communities that helped companies enhance their CLV.

Identify the main impacts of client communities' implementation on a company's performance by means of content analysis.

Conduct a research proving the interconnection between customers' participation in client communities and higher CLV.

Develop recommendations regarding client communities' use to increase the level of CLV.

The object of the current research is customer lifetime value. Within this object, ways of CLV enhancement in client communities will serve as a research subject.

In the research, a combination of both qualitative and quantitative methods is used. Qualitative approach is actualized through the content analysis of sixteen case studies from the website of Jive Community (leading corporation in distribution of various client and partner collaboration tools), with eight categories of factors influenced by client communities' implementation being obtained. Quantitative side of the methodology includes questionnaire consisting of fourteen questions with nominal, ordinal (Likert), and interval scales. Sample for the second part of the research included 107 randomly chosen respondents with 41 members and 66 non-members of client communities. After gathering necessary information, the database was analyzed in SPSS software calculating average CLV for two groups of respondents (members and non-members of client communities) and comparing means between answers of the two groups on ordinal scale questions by deployment of Mann-Whitney U-test for independent, far from normally distributed samples.

The paper consists of three chapters. In the first chapter, primary theoretical approaches to CLV measurement (Berger & Nasr, 1998; Jain & Singh, 2002; Zhang et al., 2010), CRM stages and their connection with client communities (DiMauro, 2016), and client communities' impact on CLV growth (Vasuk, 2013; Akulich, 2016; Diffley & McCole, 2015) are discussed. The second chapter aims at delivering results of the first stage of the research - content analysis, whereas in the third chapter, hypotheses and methodology of the current research are thoroughly explained, results of the second research stage are delivered and analyzed, and theoretical and managerial implications (as well as future research directions) are provided.

1. Theoretical foundations of CLV and client communities

1.1 Key terms used in the research

There are several points of interest that need to be addressed before the discussion can be initiated. In order to conduct a thorough analysis, we need to define such phenomena as customer relationship management, customer lifetime value, and client community.

Customer relationship management. CRM centers around optimization of customer profitability and CLV (Kumar & Reinartz, 2006; Reinartz, Krafft, & Hoyer, 2004), whereas in relationship marketing, the focus is mainly on building strong long-term relationships with customers (Lemon & Verhoef, 2016). In the broadest interpretation, CRM covers all levels of the organization from strategy to individual operations. In a narrower definition, CRM is the class of IT solutions that provide collection and analysis of customer information that support the prompt interaction and integration of the client into the company's processes (Rozhkov, 2012).

Customer lifetime value. In response to the current economic crisis, when the sales organization becomes increasingly complicated, there is an inevitable growth of the significance of tasks measuring the effectiveness of marketing activities as the basis for rationalizing structure of marketing programs. In this regard, of particular importance becomes the concept of CLV, as it directly relates marketing activities to the financial performance of the company. The emphasis on CLV concept belongs to the fact that this tool serves as a basis for current period decision-making for those decisions that bring increasing profit in the future. This concept is an especially useful technique for predicting future performance of the enterprise and considering prospects for maximizing the company's profitability. As it was previously stated, we define CLV as expected gross margin of the company from one customer delivered through the whole period of his commitment to the firm.

Client community. In regard to the client communities, it might be erroneously understood as company's accounts in social networks or simple website subscription. However, client community (also customer, or online brand community) is a much broader phenomenon, although it was often likely to evolve from the text forum on the company's website or from the group in social media. Client community, hence, can be determined as a specialized, non-geographically bound community based on a structured set of social relationships among admirers of a brand (McAlexander, Schouten & Koenig, 2002).

Client community turns out to be much cheaper and easier for an enterprise to create and maintain in comparison to a traditional offline brand community (Cova & Pace, 2006). Moreover, it is possible for one firm to create such a collaborative platform either by itself and its inner technology development department on the own website, or by means of external (third-party) platform, which is usually delivered by the companies which are particularly specialized in such business (for instance, Jive Software).

Having discussed the main terms that are widely used in the current paper, it seems to be expedient to pay attention to the primary approaches in the field of CLV measurement and to the corresponding models that exist to date.

1.2 Primary theoretical approaches to CLV measurement

Within a long historical time scale, the research on CLV was tied up with the rich body of literature. First attempts to analyze this term were related to a broader concept of customer profitability analysis (CPA), which is different from profit and loss statement of a company in terms of quantity of subjects under discussion - CPA deals with profitability of exactly one customer, whereas profit and loss analysis is usually performed taking all customers into account.

One of the first authors who wrote about CPA as common approach were Wang and Splegel (1994) - that is, calculating gross margin (sales revenue less costs related to all products sold) from a particular customer given a certain period of time. The traditional approach to the issue of CPA has a widespread appeal within a scientific context and is extended to higher levels of calculation. The next step is to subtract sales, administrative, and general expenses from the result of the previous phase receiving operating profit from one customer during his collaboration with a company (Cooper & Kaplan, 1991). Finally, this model is taken as a base for its development - calculating customer return on assets or, in other words, customer profitability divided by, for example, the sum of accounts receivable and inventory (Rust, Zahorik, & Keiningham, 1996).

Customer profitability then takes the form of future cash flows and consequently deals with the analysis of net present value (NPV). It is this moment when researchers begin discussing customer lifetime value, or CLV (Rust et al., 1996; Petrison & Blattberg, 1997). In their works, CLV was defined as the stream of expected future profits, net costs on a customer's transactions, discounted at some appropriate rate back to its current net present value.

One of the famous ecommerce experts, Vladimir Dimitroff, explains: CLV is always the NPV of the sum of all future revenues from a customer, minus all costs associated with that customer (OMETRIA, Official website). Further studies made a similar point on CLV analysis connecting it with another term - customer equity, which can be described as a function of the customer's volume of purchases, margin per unit of purchase, and acquisition, development, and retention costs traceable to this customer (Blattberg & Deighton, 1996; Wayland & Cole, 1997).

Considering concrete models to calculate CLV, almost all of them boil down to two steps:

1) calculating net cash flows from one customer over time;

2) calculating present value of those cash flows.

There are several formulas with more or less similar variables but different assumptions to evaluate CLV (here only three models are illustrated):

Nevertheless, the conventional viewpoint on CLV has undergone a profound shift in the emphasis of model variables from financial to non-financial factors. This approach (often referred to as indirect customer value) is considered to wield the most explanatory power in terms of current tendencies in the world economy. However, this concept implies difficulties in terms of translating firm's non-financial performance into usable indices and statistics.

The issue of gauging monetary explanation for indirect customer value is repeatedly discussed and receives wide support in recent studies. Ryals (2008) extended conventional knowledge on CLV measurement by adding such variables as learning, advocacy, and innovation benefits. Bermejo and Rodrguez-Monroy (2010) made an emphasis on the customer value in a B2B sector evaluating four types of potential: growth, base, learning, and networking.

The discussion of issues gets more specific in the work of Hogan et al. (2003), who proposed a model to measure contribution of indirect social effects, such as word of mouth, into CLV. Finally, widely accepted model of CLV measurement considering only financial metrics was significantly extended by Kumar et al. (2010) with such indicators as customer engagement value (CEV) including the CLV, the customer referral value, the customer influencer value and the customer knowledge value.

Overall, there is no unique and generally accepted approach to evaluate CLV, but the direction of scientific research proves a tendency to the multidimensional CLV approach that accounts for interrelated key-perspectives and results in superior resource allocation (Damm & Rodriguez-Monroy, 2011) rather than one-dimensional calculations.

1.3 Client communities, their role in CRM, and impact on CLV

Client communities and CRM stages

At the beginning of the current paper, several definitions were given including such terms as client communities and CRM. This part of the paper is considered to discuss the very phenomena of client communities and their place inside the whole corporate CRM system.

Talking about the CRM process from the customer's view, four main phases can be distinguished: Awareness, Evaluation, First purchase, and Ongoing retention (DiMauro, 2016). It seems to be expedient to discuss each stage in more detail emphasizing their connection with client communities.

Awareness phase. Distinctive feature of the Awareness stage is that customer has not yet finally decided what he is looking for. Consequently, this phase is considered to be the most crucial one among other CRM stages (DiMauro, 2016). The goal of the customer during the Awareness phase is to identify a broad list of possible options that have repeatable success solving the problem with their product or solution, is within general project parameters (budget, timeframe, standards) and, most importantly, is trustworthy (ibid.).

Client communities can be used in order to advance the Awareness phase of the CRM. In fact, 74% of survey respondents strategically use their communities to create content to drive organic search traffic, whereas 50% plan to use their communities to engage prospects earlier in the sales process (Get Satisfaction, 2014).

It is not useless to engage a potential customer by a client community early before the actual purchase for several reasons. First, community is usually easy to find by a simple inquiry due to well-designed search engine optimization. Second, the whole CRM system of the enterprise captures opportunities to follow prospective customers through all the following stages of CRM. And finally, making use of client communities at the Awareness phase as a whole provides early exposure to richness of products, services and customer engagement (DiMauro, 2016).

Evaluation phase. After collecting all the possible options, a customer needs to evaluate those options in more detail and closely examine the existing offerings. His primary goal at the Evaluation stage is to eliminate most of the firms surfaced during initial research from the awareness phase in order to focus deeply on the chosen few (DiMauro, 2016).

According to Multichannel Customer Service Survey (2014), 65% of customers cease all relationships with a brand after just single occurrence of poor customer service. Moreover, 72% of respondents claim that client communities provide better customer service (Get Satisfaction, 2014).

Therefore, a customer is more likely to purchase from the brand that already delivers the best service during the Evaluation phase. Better customer service can be achieved by deployment of client communities in the following ways (DiMauro, 2016):

- provision of on-demand answers to buyer questions;

- establishment and maintaining customers' trust through higher rate of responsiveness;

- acceleration of the first purchase;

- brand differentiation by means of unique collaborative experience.

First purchase. Having made the first purchase, customers are finally able to objectively evaluate product or service offering of the enterprise. This phase is considered to be delicate because clients' expectations before the actual purchase are really high and the learning/experience curve can be steep (DiMauro, 2016).

The moment just after the first purchase is usually described as a start of deeper relationships with a customer and possibility to expand buyer's exposure to the brand. However, enterprises often lose control over communication process with a new customer at this very phase. The client's primary goals after making the first purchase include quick engagement with the product or service offering and communication with other customers in order to learn more about their own experience.

Client communities may serve as a vital tool of customer engagement at the stage of the first purchase as well. DiMauro (2016) distinguishes the following ways of online communities' exploitation after the first purchase phase:

- Educating the new customer (FAQs, tutorials, peer-peer ideas, case studies);

- Building connections (customer connect with peers, access to a broader group of leaders within company);

- On-demand support (fast answers to questions from internal experts);

- Listening and engaging (ability to share ideas and suggestions);

- Trust-building (firm responsiveness validates they made the right choice).

Ongoing retention. So-called renewal phase is a critical decision point both for an enterprise and for a client. The latter usually looks back at his previous experience of relationships with a firm evaluating it regarding three main factors: project's or purchase's success, internal attitude to the brand, and company's customer support.

The key goals of a satisfied customer at the ongoing retention phase consist of validation of the fact that their choice was superior, deepening their relationship with the firm through additional contracts and services, and sharing their success story to gain additional PR and marketing value for their firm (DiMauro, 2016).

According to Get Satisfaction survey (2014), 74% of B2B firms believe that client communities have helped to significantly improve company's knowledge of its customers. What is more, 57% of such enterprises believe communities help prevent churn and increase up-sell opportunities.

During the final stage of CRM process from the customer's view, client communities also play an important role in engaging buyers into subsequent relationships with an organization, which is possible by deployment of the following actions:

- Providing clients with a platform where they are becoming able to tell their success story;

- Driving peer-based customer support with connection of newly came clients with experienced ones;

- Enabling on-demand learning in order to improve customers' experience regarding use of company's products or services;

- Offering additional products and services to the retained buyers;

- Giving advanced customers a possibility to initiate various inquiries regarding new products, services, and features.

Consumers expect that client communities will help them and provide reliable access to necessary information at all stages of the purchase or selection of goods and services, as well as their exploitation in the future. Integration of social applications allows the true co-creative nature of the CRM process to be recognized (Diffley & McCole, 2015) and client community, hence, is one of the most crucial elements of the whole company's CRM at every stage.

Impact of client communities' implementation on CLV growth

Is has not yet been proved that a company's relationships with a customer within the borders of client community have a direct positive impact on CLV. However, enterprises need to attract customers to the client communities at least because of the following benefits (Vasuk, 2013):

Sales growth. American Express World Service whitepapers prove that properly organized online support helps to increase level of trust, reduce negative attitudes and boost loyalty. The survey among one thousand consumers was conducted, and the results showed that 17% of them requested company's help through online channels on average once a year, whilst increasing their spending on goods and services of the company by 21%, providing they receive timely and competent support. There were also respondents who had never addressed brands through client communities and social networks, but who were interested in the very possibility of such type of communication. These respondents affirmed that they were ready to spend 11% more providing they get adequate service in social media channels. It is also worth mentioning that 71% of clients with positive customer experience recommend the brand to their friends.

Increased customer loyalty. Publicity and human attitude of the company's employees towards its customers allow them to deal effectively with negative attitude, enhance customer loyalty and improve corporate reputation.

Reduced support costs. Client communities always work around the clock and allow customers to help each other. Moreover, the knowledge base incorporated into the community can significantly reduce burden for brand representatives.

Crowdsourcing. The head of Social Media Marketing department of Bank24.ru, Yana Gannik, once said: When there is no direct link between consumers and producers, it is extremely difficult to provide service for people. Inside the community, our clients have the opportunity to communicate directly with the bank's management and decision-makers, to influence its business processes. After establishment of the client community, Bank24.ru began to receive hundreds of ideas from customers, which allowed them to prioritize and immediately implement some of the proposals.

The aforementioned factors (such as sales growth and reduced support costs), in turn, have a positive impact on CLV increase because of the very formula for CLV calculation, which includes gross margin from every customer. Increased customer loyalty and crowdsourcing are beneficial for the company's performance as well: such improvements are always considered to be positively correlated with escalation of the firm's profits (Akulich, 2016). Talking about the overall effect of client communities on the firm's CLV, it is possible to conclude that, in general, direct and positive impact of relational information processes on customer and financial performance demonstrates the strategic and marketing benefit of integrating social networking sites into organizational routines (Diffley & McCole, 2015).

Conclusions from the academic literature analysis

The current chapter of the paper is considered to carefully discuss and analyze the existing body of literature on the issue of CLV creation, measurement, and enhancement. As a result of the conducted theoretical research and literature review, several conclusions were drawn:

- There is no any consensus regarding the exact model to measure CLV in a corporation. However, management of the enterprise is able to make use of one model with only 3 variables (at the first stage): margin, retention rate, and discount rate. The model proves to be both predictive and detailed, although simultaneously not excessively accurate;

- Client communities play a crucial role in engaging a customer at every stage of CRM process from the buyer's perspective: Awareness, Evaluation, First purchase, and Ongoing retention;

- Within the large body of scientific literature, the idea of interconnection between client communities and their positive impact on the corporation's performance has already been carefully discussed. However, no influence of the use of client communities on CLV growth was directly stated.

The following chapter will consider one of the most crucial elements in the whole strategy of a corporation on the business unit level - client communities - and their possible impact on CLV increase. The chapter deals with the analysis of existing cases of client communities implementation by enterprises of various sizes, structures, and industries, as well as from different countries. Results of the content-analysis are grouped and analyzed.

2. Empirical implications of CLV measurement in client communities

2.1 Client communities implementation: best practices

In order to better understand the problems, objectives, and results of client communities' deployment, it is needed to discuss several cases, where all the necessary information is thoroughly, but concisely presented. Five corporations from the following content analysis were chosen to serve as so-called best practices in the area of client communities use: T-Mobile, EMC, HomeAway, Tableau, and Schneider Electric. The data were gathered from the website of Jive Software - one of the leading global providers of various kinds of platforms including Jive-x, a widely used platform for client communities' implementation and management.

T-Mobile

T-Mobile USA is a national provider of wireless voice, messaging, and data services, with over 43 million customers and 38,000 employees (Jive Software, Official website).

Problem. Corporate culture at T-Mobile has always been putting customers at the first place, but in 2013 it became even more evident because the company decided to give up a traditional contract and launch a new one with no strings attached, being the first corporation in the world to create such offer. It was a brave step, and the only thing that could somehow retain existing customers was quality of their experience. However, at the moment of modification, possibilities for customer communication were limited with only conventional client forum used on the company's website and no content stored. Hence, the firm needed additional platforms for maintaining knowledge base and video hosting.

Solution. T-Mobile's management was already familiar with Jive technologies having implemented a platform for internal community for employee collaboration. The next reasonable step was creating an external community based on the Jive-x platform for customer support and engagement.

Results. By launching a single client community, the company provided its customers with a centralized hub for literally everything, from user discussions and knowledge base articles to official documents and how-to videos. Moreover, all these sources could easily be found in the community by a single query, which, in turn, dramatically decreased the amount of time needed retrieve necessary data.

T-Mobile Customer Support Community allowed for considerable improvements in other areas as well. Customer satisfaction level increased by 31%, call deflection rocketed by 40% and call-backs plummeted by 10%. We have 17 internal call centers, 18 international centers, 2,000 retail stores, 70,000 points of distribution, 4 unique brands, 43 million customers, all served by Jive - Scott Tweedy, T-Mobile Vice President of Customer Service.

EMC is a global leader in IT transformation, using cloud, big data and security technologies to help companies deliver information technology as a service. Based in Massachusetts, the company has over 53,000 employees in 70 different countries (Jive Software, Official website).

Problem. In 2010, the company faced difficult external circumstances represented by uncertain state of economy and flat budgets. Jeremy Burton, CMO at EMC, claimed it was obvious that the company needed to use tools for enhancing customer engagement: We needed to make it easier for customers to interact with each other and with EMC. The ultimate goal was to create broader, more connected relationships that turn prospects into buyers and buyers into brand advocates.

Solution. As a result of cooperation with Jive, EMC decided to unite all its disjoint external communities in 2010 in order to create a centralized platform that could be both easy-to-use and easy-to-access - EMC Community Network (ECN). The new community allowed company's prospective customers, current clients, developers, and partners not only to look for necessary data regarding EMC offerings, but also to actively participate in so-called sub-communities each of them being dedicated to a particular subject about EMC solutions.

Results. A client community dramatically increased customer participation level of EMC: before its existence, only several hundred individual attendees took part in a single product launch, whereas now the number of them per event accounted for more than 10,000 online participants. At the same time, the company was able to significantly decrease its launch costs by approximately $750,000 and drive the number of online viewers to 100,000 per year.

According to Jonathan Martin, Senior Vice President of Corporate Marketing at EMC, customers who are engaged and participating in the Jive-powered ECN community spend 240% more than customers who aren't engaged. Apart from considerable direct sales growth, EMC managed to expand its geography in terms of the audience that it was able to reach and to get immediate customer feedback.

HomeAway, Inc., based in Austin, Texas, is the world's leading online marketplace of vacation rentals, with over 742,000 paid listings of vacation rental homes in 171 countries (Jive Software, Official website).

Problem. Despite the fact that the company's motto sounds like Let's Stay Together, HomeAway in 2011 had scarce resources to effectively communicate with its own customers and other stakeholders. Pushing customer feedback to a limited number of sources (phone calls, emails and survey data), collaboration was conducted mostly from the firm's perspective. Meredith Daniels, Online Community Manager at HomeAway, claims that the corporation needed a dynamic platform to engage with customers and other users in an authentic, conversational way.

Solution. In January 2011, HomeAway launched its own client community on the Jive-x platform - Community from HomeAway. Having made the first successful attempts of client community's implementation in the US, the company's management decided to expand the community to the UK and France.

Results. Daniels argues that Jive has made HomeAway a much more customer-centric organization. It helps us understand market needs, strengthens the voice of the customer and offers a rich source of insight and feedback.

During two years of the community's existence, the number of unique visitors increased tenfold: from less than 12,000 in 2011 to nearly 120,000 per month as of March 2013. Statistics on the amount of registrations in the community was also outstanding with a year-over-year growth of 379%. The enterprise reported huge cost savings as well: over 100 staff hours of labor were saved by simply replacing real-life events and seminars by online webinars delivered via the community.

Eventually, by launching the client community, HomeAway consolidated its reputation among customers as a trusted resource and partner being able to create an invaluable source of customer feedback and insight at the same time, which, in turns, exerted a tremendously positive impact on the quality of the firm's products and services.

Tableau Software is a global leader in rapid-fire, easy-to-use business analytics software, helping people see and understand their data (Jive Software, Official website).

Problem. In Tableau, the only way of communication with its customers before creating an online community was a support forum where clients were able to only post questions and respond to them. Dustin Smith, Community and Product Marketing Manager at Tableau, explains that there were two big shortcomings. First, to make even minor transformations, groups of the company's specialists had to wait for necessary web development resources for very long time. Simultaneously, the firm wanted an environment where people could really engage and belong, create content, collaborate and help each other in a variety of ways.

Solution. As a result of productive and collaborative work, in early 2011 Tableau Software launched a client community that fully represented the organization's brand. Apart from a single community, Jive platform allowed Tableau to fully transfer all the existing content from the previous forum to the newly created client community.

Results. One of the most evident and immediate outcomes of the client community deployment was improving support, but Smith argues that there were other equally valuable and significant benefits as well:

- Increased sales.

- Ideation (with the help of additional Jive Ideation module): Users can vote ideas up and down, and our product developers are taking the top suggestions and using them to improve the product.

- Brand building, etc.

Overall, it is possible to assume that the client community has become a key to the company's success providing both Tableau's representatives and its customers with real, meaningful conversations and, as a result, driving enormous value for the firm and its clients.

Schneider Electric is the global specialist in energy management, with operations in more than 100 countries (Jive Software, Official website).

Problem. As in nearly every case study before, Schneider Electric system of communication with customers was represented by twenty-five separate platforms - namely, one platform per task. The consequences of such situation were obvious: insurmountable costs of maintaining a system of dispatched platforms and constant efforts to go through numerous logistical obstacles.

Solution. In August 2013, Schneider Electric finally solved all its issues regarding interrelationships with customers by creating a client community named Exchange. Today, the community serves as a single destination for customer support, partner enablement, product ideation, online education, events execution, and developer engagement. Before launching external community, the corporation's management has already got acquainted with the existing technology by developing an internal community for its employees. As a result, a new client community brings many of the same possibilities to the customers as an older employee community does for personnel.

Results. Among the most noticeable benefits of the client community establishment at Schneider Electric were considerable growth of brand awareness and loyalty while pushing down costs at the same time. Todd Moran, Director of Social Enterprise at Schneider Electric, says that so much of what the community brought to the table was around customer support and call deflection, allowing the community itself to answer their questions and reduce the case load on the customer support personnel.

As in most success stories, the newly created client community became a part of Schneider Electric's brain trust, enabling the company to crowdsource key solutions and innovations. The positive effect of the community's exploitation expanded further to such areas as time-to-market, product success, and margins.

2.2 Impact of client communities on companies' performance

Content analysis was used as the main method for analyzing qualitative data. As the first step of the research and as a basis for the data further obtained from the survey of respondents, analysis of available secondary information was conducted.

The aim of the current content analysis is to reveal certain categories of success factors influenced by implementation of client communities. The sample for the analysis consisted of sixteen case studies of client communities' establishment that were selected from the Jive Software website - one of the leaders in the field of corporate communities, digital workplace, and client communities. One of the company's key products (Jive-x) is designed specifically for being used as a platform for the future client community.

From sixteen case studies, factors about areas of the client community's influence on the firm's overall performance were derived and compiled together (Table 1).

Table 1. Client communities' impact on the companies' performance

Case

Factors

1

Cerner

Better alignment, connection and engagement

Improved knowledge-sharing and innovation

Increased efficiency, agility and productivity

Stronger client and vendor relationships, greater satisfaction and deflected service requests

2

Akamai

Improved self-service

Community members - support agents

Stronger relationships with and among customers and partners

Improved customer satisfaction and gains in business development

Reduced e-mail

3

Penn Foster

High adoption and usage (75,000 students enrolled, more than 8,000 active users/day, hundreds of thousands of pieces of content created, tens of thousands of questions answered)

More engaged and connected students

Streamlined, flexible and effective student support services

4

Northwestern University

Greatly enhanced value of the program allowing informal learning outside the classroom and traditional LMS

Rapid onboarding

Students are part of a single community of learners

Ongoing engagement

5

FireEye

Increased customer satisfaction

Reduced support costs via peer-based support and case deflection

Closer customers relationships; direct engagement and insights

New revenues via premium cyber intelligence service

6

Premier Farnell

Large global audience: More than 325,000 registered users and over 6 million unique visitors per year, with support for 10 languages

Rapid growth: 40% year-over-year increase in registrations and 50% growth in overall participation

Translates education and enthusiasm directly into sales:

9% of all visitors to the community click through to the e-commerce site

40% of those who click through and buy are net new customers

5% of click-throughs complete a purchase - a higher conversion rate than those who go to the e-com site without first visiting the community

7

StrongView

86% adoption rate by strongview customers

58% login to Spark regularly

95% received answers to their questions or had issues resolved via Spark

69% search for an answer in Spark first, before contacting support

50% have decreased their usage of technical support

90% find Spark helpful

Easy way to connect and share information with other clients

Impressed with the level of access, participation and responsiveness

Customers answering other customers' questions

Customer engagement

Strengthening connections with the company's customer base

Productivity gains (reduced frustration and abandonment rates + centralized knowledge base that is not only topical and pertinent but accurate and searchable)

8

T-Mobile

Replaced multiple forum, knowledge base and video hosting systems

Customer satisfaction improved 20% after moving to Jive and an additional 40% when upgrading to Jive's latest version

> 1 million unique visitors per month

15% of visits result in call deflection

9

EMC

More engaged customers = greater marketing ROI, higher sales

Highly responsive and cost-effective channel for customer communications and marketing initiatives

A whole new level of dialog with and among customers and partners

Customers who join the community generate 240% more bookings than those who don't

10

HomeAway

Better brand reputation

Significant cost savings (saves an estimated 100 staff hours of labor per month)

Much more customer-centric organization

Number of unique visitors has expanded tenfold over the last two years

Registrations have increased 379% year-over-year

Invaluable source of public feedback and insight

Strengthened voice of the customer

11

ADTRAN

Fewer calls, shorter calls

Better service

Enhanced efficiency

Better external communications

Mobility

Higher customer satisfaction more retention and business for the company

Helping internal staff

12

Tableau Software

Most customer questions are answered by fellow community members

Thousands of potential cases solved online, reducing support costs

Rich insight into customer sentiment, issues, trends

Cultivation of brand advocates and product champions

Major source of new product ideas

Drives new sales, satisfaction and retention

13

Schneider Electric

A single destination for customer support, partner enablement, product ideation, online education, events execution and developer engagement

Enabling users to:

Quickly search for and find information wherever it lives

Post questions and get fast answers from peers

Connect with like-minded users and collaborate in public and private groups

View trending content, follow people and places and receive personalized activity streams to stay informed on persons and topics of interest

Participate in events including user group meetings and conferences

Contribute ideas and feedback to improve the community, products and services

14

National Instruments

Serves as a center of peer-based support, customer advocacy and feedback, leading to increased sales, greater loyalty and more competitive products - while deflecting cases and saving millions of dollars in support costs

A place where customers and developers exchange code and knowledge, answer each other's questions, and suggest new product ideas

Not only are active community members more satisfied, but they're more likely to purchase products, and to refer NI to others

15

Vistage

It's allowed our business to be more productive and our membership to maximize the value of their Vistage experience

Has proven so effective, it's become the central hub of communication and collaboration for all

More productive staff

> 60% of members are logging in on a regular basis

Members leave comments on each other's work, collaborating around business problems + get answers and take action

16

McAfee

26% - decreased call volume

17% - increased first-call resolution

50% - decreased support staff onboarding time

25% - increased customer satisfaction

33% - increased customer loyalty

2.3 Factors of success derived from content analysis

After gathering all the necessary data, factors were grouped into categories with a corresponding frequency distribution of their mentioning in the case studies (see Appendix 1). For the next step of the research, it is necessary to distinguish these categories connected with customer experience in order to create a questionnaire based on all the categories of factors mentioned.

Seven groups of factors derived from the content analysis served as a basis for statements of the questionnaire (one category - reduced support costs - was considered as not closely connected with customer experience). As it can be seen from the bar chart, the most frequently mentioned category was better connection and relationships with customers mentioned in 75% of cases, whilst higher public feedback and insight was the least frequently mentioned category (37.5%). Increased customer satisfaction and call deflection are also among the most important factors of client communities' impact on the organization's activities (mentioned in 56.25% and 68.75% of cases, respectively), whereas three groups of factors - higher level of customers' engagement, improved knowledge-sharing, and higher public feedback - were considered by the companies as equally important in terms of mentioning frequency.

Five categories (better connection and relationships with customers, greater customer satisfaction, higher level of customers' engagement, improved knowledge-sharing, and higher public feedback and insight) were provided with three statements with answers based on the Likert scale from 1 (absolutely disagree) to 5 (fully agree); the other two categories (call deflection and increased number of sales) were mentioned in the questionnaire as two separate parts. As a result of such question split, the following basis for the questionnaire was obtained:

Table 2. Success categories and questions to them

Category (group of factors)

Questions / statements

Variable

1

better connection and relationships with customers

,

, /

Ordinal (Likert scale)

2

higher level of customers' engagement

Ordinal (Likert scale)

3

improved knowledge-sharing (more peer-based customer support)

/ ,

/

Ordinal (Likert scale)

4

increased number of sales (provided by community members)

/ ?

( )?

Scale

5

greater customer satisfaction

/

/

Ordinal (Likert scale)

6

call deflection

/ ?

?

Scale

7

higher public feedback and insight (source of new ideas and innovation)

/

/ ,

/ , (, )

Ordinal (Likert scale)

Apart from statements and questions for the aforementioned categories, the following questions regarding retention rate were asked:

1) ?

2) 6 ?

3) ?

The final questionnaire can be seen in Appendix 2. Based on the purpose of further research and data analysis in SPSS, all answer choices to the questions were transformed into labels from 1 to n, where n is the last possible answer so that the higher value could represent the next answer choice or a higher interval for questions regarding questions with intervals (such as age, average purchase, average frequency of calls to the technical support, etc.).

Conclusions from the case studies and content analysis

First of all, it is necessary to mention that no company in the sample for content analysis indicated any negative outcome from the client community's implementation. The results have shown that speaking about consequences of such modification, even large corporations tend to make an emphasis only on positive impact created by client communities.

Results of the content analysis of sixteen case studies included eight categories of factors influencing overall companies' performance distinguished. Those categories can be perceived as certain areas of improvement for organizations that do not have any external online community for its customers yet with better connection and relationships with customers being the most popular among the case studies analyzed and higher public feedback and insight being the least frequently mentioned.

Based on the categories derived from the content analysis, questions and statements for the questionnaire necessary in the last chapter of the paper were designed with scale being determined for every group of variables for further analysis in the appropriate statistical software.

...

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