Social Dollars: The Economic Impact of Customer Participation in a Firm-Sponsored Online Community
University of Michigan - Ross School of Business
Grant M. Packard
Laurier School of Business & Economics
The Stephen M. Ross School of Business at the University of Michigan
January 12, 2012
Many firms operate consumer-centered social networks or “communities” online. This is motivated by the belief that consumers who join the community become more engaged with the firm, and as a result, increase their economic activity with the firm. We label the revenue generated from the increased engagement as a result of joining the community as “social dollars.” This paper tests for the existence and magnitude of social dollars via a difference-in-differences estimator using data from a multi-channel entertainment products retailer that launched an online community. We find that 19% of the post-launch revenue from community customers can be attributed to their joining the community. This result is robust across a variety of tests. In addition, social dollars persist over time, arise in both online and offline channels and affect all product categories sold by the firm. The analysis of community data reveals that social connections – the number and importance of friend ties – and interactions – personal page displays – are positively linked to social dollars.
Number of Pages in PDF File: 36
Keywords: Virtual Communities, Online Communities, Online Social Interactions, Difference-in-Differences Estimation, User-Generated Content
JEL Classification: M31,M3working papers series
Date posted: January 13, 2012 ; Last revised: February 29, 2012
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