Online communities are quickly becoming an important strategic initiative for major corporations, including the likes of Procter & Gamble and AT&T.

One company that knows the ins and outs of this field is, a Chicago-based online-community management company. Founded in 1997 by Alan Warms, a former Boston Consulting Group management consultant, is the primary outsourcer responsible for the design and management of the Internet communities of clients like IBM, Cisco, Compaq, and Ace Hardware. I recently chatted with Alan about the business value of online communities and the trends that IT professionals need to understand.

Freedman: Participate is focused on the online community marketplace. Help us understand what the trends are in the use of the Internet as a community meeting place.
Warms: I’ve been involved in Internet ventures since 1996, and I always thought that the Internet would be about people working together. I have always gone to ventures that connected people. I went to eShare—which at the time was a software company that sold message-board servers—because I realized that [having an] online community was critical to the success of e-business: If you couldn’t figure out a way to get communication happening [among] your partners, your customers, and your suppliers, you weren’t going to be successful.
I later learned that the difference between success and failure with an online community was not about the technology—the technology is not that complex. The success factors were the processes, the methodologies—the programs that are put in place to make the online community successful.

Freedman: So what does this mean to IT professionals?
Warms: What the Internet is about to the Fortune 500 is proliferation of channels. Big corporations used to be able to exert control over the way they sold products and services. New Net markets are emerging, and customers are getting more power and control and are deciding how they want to purchase. Your company’s ability to influence people who don’t work directly for you is becoming increasingly critical to your success.
For Cisco, for instance, we’re managing communities of Cisco certified network engineers. These people don’t work for Cisco, [but they]…are incredibly important folks to Cisco, and it’s important to us that we figure out how to make them relate [to each other] and make them loyal [to the company].
We’re fundamentally an outsourcing business; companies outsource the management of their online communities to us. People are realizing the trick is to present a compelling proposition so people actually want to go and join your community.

Freedman: So the hard part is creating a place where people go to communicate and learn and then come away with the feeling that they’ve accomplished something.
Warms: The next major trend, as the Web standardizes, is [figuring out] how to differentiate [your company]. We maintain that the only way to differentiate is through your customers themselves. If you’re a member of a country club and all your friends belong, even if a new club opens across the street with a better pool and better greens, you’re not joining that new country club. You’ve got your friends that all hang out together, and you can’t get them to switch because each of them has another bunch of friends who are members. The only assets your country club has that cannot be replicated are the relationships between and among their members. Our clients are figuring out that if they can leverage their existing relationships to create deep, sticky relationships with their most valuable customers, they’re creating something unique.

Freedman: How does online community integrate with other customer programs, like CRM?
Warms: The trend that’s really helped the Fortune 100 understand what this is all about is CRM. If you think about what customer relationship management applications are really all about—retention, loyalty, customer acquisition—those are the issues that corporate America is addressing now. What CRM doesn’t address is how intracustomer relationships are managed—the relationships between your most important customers. How do you take advantage of the fact that you don’t need to infer anything anymore? Now, all you need to do is listen!

Freedman: The customers, through their dialog with each other, are going to tell you everything you need to know.
Warms: Right! So the trick is creating programs that get them to participate. Online community plugs right into CRM—we’re the piece that covers your most committed customers, and we help you lock them in from a loyalty perspective.

Freedman: One-to-one marketing concepts stress the idea of differentiating between different types of customers and serving them differently based on their needs and their value to the business. How does online community help with this customer differentiation?
Warms: We’ve written a white paper about this. [We call] those customers who are involved enough to participate in communities “hyper-affiliated” customers, [and] these are your biggest customers. They want you to do certain things as a company to serve them better. What are you going to do to get them to participate? What makes you think that these busy people are going to spend time trying to figure out how to use your application or product or service? You’d better figure out a way to make this part of their lifestyle. You’ve got to create frictionless participation. It’s not just an opportunity—it’s an imperative. If you don’t do it, you not only run the risk of upsetting your best customers—[but you face the fact that] if you don’t do it, someone else will.

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