Social Dollars: The Economic Impact of Customer Participation in a Firm-Sponsored Online Customer Community

Abstract

Many firms operate customer communities online. This is motivated by the belief that customers who join the community become more engaged with the firm and/or its products, and as a result, increase their economic activity with the firm. We describe this potential economic benefit as “social dollars.” This paper contributes evidence for the existence and source of social dollars using data from a multi-channel entertainment products retailer that launched a customer community online. We find a significant increase in customer expenditures attributable to customers joining the firm's community. While self-selection is a concern with field data, we are able to rule out multiple alternative explanations. Social dollars persist over the time period observed and arose primarily in the online channel. To assess the source of the social dollar, we hypothesize and test whether it is moderated by participation behaviors conceptually linked to common attributes of customer communities. Our results reveal that posters (vs. lurkers) of community content and those with more (vs. fewer) social ties in the community generated more (fewer) social dollars. We found a null effect for our measure of the informational advantage expected to accrue to products that differentially benefit from content posted by like-minded community members. This overall pattern of results suggests a stronger social than informational source of economic benefits for firm operators of customer communities. Several implications for firms considering investments in and/or managing online customer communities are discussed.

Keywords: Online Customer Communities, Online Customer Behavior, Social Networks, User-Generated Content, Retailing, Field Data

JEL Classification: M31, M3