HENLEY MANAGEMENT COLLEGE      THE EMERGENCE OF M-COMMERCE:EXPLORING THE BUSINESS POTENTIAL OF VIRTUAL  COMMUNITIES FOR TH...
AbstractThe idea for this research originated from a variety of sources. An important influencehas been the author’s growi...
telecommunication. In addition, the integration of wireless communication within on-line communities is strongly advocated...
Table of Contents1. INTRODUCTION.............................................................................................
1.Introduction1.1The Origins of the StudyThe idea for this research project has come from two different sources. Firstly, ...
these communities, are increasingly being used as the basis of new business models fore-commerce.Over the past three years...
includes a review of articles exploring the potential impact of future wirelesstechnology on virtual communities.The liter...
2.Literature Review2.1Virtual Communities2.1.1A DefinitionWhilst the term community is well-used, it is evident that peopl...
important to us in our everyday life. Third places, like the pub and the church forexample, are the arenas where people ca...
2.1.2The Business Case for Virtual CommunitiesBarnatt (1998) has identified a clear rationale regarding the benefits for o...
communities is their ability to provide rapid access to extremely rich information aboutcommunity members. Knowledge of cu...
you trust all become a real, valued and trusted independent financial     advisor” (Barnatt, 1998).As access to informatio...
enabling them to tailor and add value to the existing products and services. Ascommunity members represent customers with ...
ability to integrate information, trading and social interaction. They can      humanise the on-line high streets” (Barnat...
Members in                              Contributions to       community                                  member-         ...
fit Hagel and Armstrong’s view of the virtual community as an intermediary.McWilliam (2000), acknowledges the existence of...
and exhibitions between vendors and consumers, where people meet and exchangeideas, comments and gossip (McWilliam, 2000)....
with other members that they have come to trust. In this environment “opportunitiesabound, not only to broadcast one’s own...
2.1.3Segmentation in Virtual CommunitiesAs seen in the previous section, virtual communities gather together people with s...
relationships between members and exclude the building of relationships betweenmembers and vendors.This classification sys...
This definition shows a close correlation between Kozinets’ communities ofconsumption and Hagel and Armstrong’s communitie...
activity and the intensity of their ties with the community; the tourists, the minglers, thedevotees and the insiders (See...
Evans et al. (2001), however, argue that the role played by lurkers should not bedisregarded. They consider lurking to be ...
Hagel and Armstrong (1997).From a marketing perspective, it is the insiders (or builders) and the devotees (orbuyers) who ...
Data-                           Targeted                    gathering                        transaction                  ...
Hagel and Armstrong (1997), therefore, describe on-line communities as a mechanismthat will enable individually tailored m...
relationships become weak and the sense of community is lost. The organisers must,therefore, allow membership to grow with...
community (McWilliam, 2000). As the value of a community resides in therelationships and ties between members more than in...
1. To generate traffic by:   •   Using member-generated content to attract new members. Hagel and Armstrong       (1997) a...
Hours on-line                        Member-to-                                                            member         ...
quickly compare products and services. Members consequently realise the             benefits and savings that they can obt...
•   Accumulating and organising member-generated content. This gives members a       sense of ownership and belonging whic...
gather in a community which then becomes a ‘shared industry interface’. Virtualcommunity almagation is similar to Hagel an...
2.1.5Drawing Revenue from the CommunityThe main revenue streams available to community hosts are as follows: SOURCE OF    ...
community. Furthermore, the same research indicates that on-line advertising can bedistracting and have little effect on p...
nonetheless, out of reach until the number of members is high enough to attractadvertisers or to generate a sufficient num...
Vendor-                                                    Vendors in           marketing                                 ...
with anonymous nicknames and can begin to use the service. In SMS-based      forums, users have simple commands which allo...
Kenny and Marshall (2000) argue that successful marketing on the wireless Internet willnot aim to bring the customer to th...
“Good information is bundled information chosen and determined by the      user. ‘The spam should be kept in the can’” (Th...
opportunities to interact and the variety of topics of conversation. In the train whencommuting, in a coffee shop while wa...
3.Field Work3.1Research DesignThis project aims to explore the potential of virtual communities to be the basis for aprofi...
“By the term qualitative research we mean any kind of research that      produces findings not arrived at by means of stat...
communities in different ways, therefore, flexibility was required in the gathering ofdata. In-depth interviewing offers t...
3.4Data AnalysisThe primary data collected during the interviews was analysed using the ‘Framework’method, which has been ...
•   Charting - during which sections of the data are lifted from their original context    and re-arranged according to a ...
4.FindingsThe aims of this research project were fourfold: to explore how virtual communitiesfunction on wireless networks...
COMMUNITY MANAGEMENT  Relevance                                   QUOTATIONS TO SUPPORT of Feedback                 “It me...
In order to make themselves known to their target group, the communities studied haveeither associated themselves with a p...
Attracting                                     QUOTATIONS TO SUPPORT    Traffic    Initial       “They’d spent a lot of mo...
COMMUNITY MANAGEMENT Engaging                                   QUOTATIONS TO SUPPORT   People                “That is a c...
“You might set up a subject on a notice board, but you have to be                  quite ruthless with checking whether it...
(continued)     messages. It does work” (R.8 (wireless)).The communities under study have also used member-generated conte...
Once a user attempts to join in, the data emphasises the importance of ensuring that theyare never ignored:               ...
because it was just text. But with AOL, they actually put nice                folders, lots of chat icons and forum icons”...
something when there are lots of other people on board, so we                 have to make them believe and understand tha...
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
The Commercial Potential of Virtual Communities in the Wireless Internet
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The Commercial Potential of Virtual Communities in the Wireless Internet

  1. 1. HENLEY MANAGEMENT COLLEGE THE EMERGENCE OF M-COMMERCE:EXPLORING THE BUSINESS POTENTIAL OF VIRTUAL COMMUNITIES FOR THE WIRELESS INTERNET By - Thierry Busset - 2002
  2. 2. AbstractThe idea for this research originated from a variety of sources. An important influencehas been the author’s growing interest in marketing and mobile commerce. Consideringthe extent to which mobile telecommunication and the Internet have independentlyrevolutionised modern methods of communication and trade, their combined effect inthe wireless Internet constitutes the next wave of change and is expected to have aneven greater impact on social interaction and commerce.On-line virtual communities, which gather around Internet forums and chat rooms, haveattracted considerable interest from marketers in recent years. Wireless virtualcommunities are now appearing on the current wireless networks, but have receivedlittle attention within the academic literature to date. Consequently, this project sets outto explore the potential for virtual communities to generate revenue and growth whenused as the basis for business on the forthcoming mobile Internet. This is achieved bymeans of in-depth qualitative interviews with managers from five on-line and fivewireless virtual communities. Findings pertaining to the areas of communitydevelopment, marketing intelligence, segmentation and revenue generation arepresented.The findings strongly support the business case for wireless virtual communities, due totheir ability to shorten the developmental cycle and enhance the portfolio of revenuestreams. However, the technical limitations of current wireless networks are identifiedas the key barrier to the development of exclusively wireless communities at present.Consequently, a mixed model is put forward, in which the meeting ground of thecommunity remains on-line, but the interaction takes place primarily via wireless
  3. 3. telecommunication. In addition, the integration of wireless communication within on-line communities is strongly advocated due to the high demand for mobilecommunication and its potential to increase traffic and revenue. The relevance of theresearch for virtual community managers and ‘m-marketers’ is highlighted and possibleimplications for future practice discussed.
  4. 4. Table of Contents1. INTRODUCTION..............................................................................................1 1.1 The Origins of the Study 1 1.2 The Aim of the Study 22. LITERATURE REVIEW....................................................................................4 2.1 Virtual Communities 4 2.1.1 A Definition......................................................................................................................................4 2.1.2 The Business Case for Virtual Communities...................................................................................6 2.1.3 Segmentation in Virtual Communities...........................................................................................15 2.1.4 Building and Managing a Community...........................................................................................23 2.1.5 Drawing Revenue from the Community........................................................................................30 2.2 Virtual Communities on the Wireless Web 333. FIELD WORK ................................................................................................38 3.1 Research Design 38 3.2 Data Collection: The Choice of In-depth Interviewing 39 3.3 Reliability and Validity 40 3.4 Data Analysis 414. FINDINGS.......................................................................................................43 4.1 Comparison between the Management of On-Line Virtual Communities and Wireless Virtual Communities 43 4.2 Marketing Intelligence Within Virtual Communities 62 4.3 Segmentation and Targeting 69 4.4 Revenue Generation 745. DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS.....................84 5.1 Comparison between the Management of On-Line Virtual Communities and Wireless Virtual Communities 84 5.2 Marketing Intelligence Within Virtual Communities 89 5.3 Segmentation and Targeting 92 5.4 Revenue Generation 94REFERENCES..................................................................................................99
  5. 5. 1.Introduction1.1The Origins of the StudyThe idea for this research project has come from two different sources. Firstly, themajority of the author’s professional background has been in the mobiletelecommunication industry. In particular, he has been involved in the development ofnew technology to enable wireless data transfer and connection with the Internet viawireless telephones. Such technology enables people to access the Internet via theirmobile telephone free of any time or geographical constraints, thereby giving birth tothe wireless Internet. The ubiquity offered by this mobile connection to the web willrevolutionise methods of communication and trade in the next decade. People will havemore flexible access to information and be able to select products and services as wellas carry out commercial transactions without any geographical or time limitations.Secondly, over the past decade, developments on-line have led to the birth of e-commerce and to the creation of new applications for social and commercial interaction.Amongst these, virtual communities have become familiar features of the Internetlandscape. People with common interest are gathering around meeting grounds incyberspace in order to fulfil their need for social interaction. As these shared interestsrelate directly to consumption activities, on-line virtual communities have attractedconsiderable interest in recent years. Their ability to engender strong relationships basedon trust between members has led to the prediction that virtual communities couldbecome powerful intermediaries creating reverse markets. Gathered around corporateweb sites, they could also be a powerful tool to build or re-inforce a brand by creatingvirtual ‘product fan clubs’. Consequently, on-line forums and chat rooms, which foster 1
  6. 6. these communities, are increasingly being used as the basis of new business models fore-commerce.Over the past three years, virtual communities have emerged on wireless networksfollowing the development of technology, such as the Short-Text Messages Service(SMS) or the Wireless Application Protocol (WAP). Contrary to their on-linecounterparts, very little has been written about these wireless forms of virtualcommunity as they are still in their infancy.1.2The Aim of the StudyThis project aims to explore the potential for virtual communities to generate revenueand growth when used as the basis for business on the forthcoming wireless Internet. Inorder to achieve this objective, it focuses specifically on the areas of communitydevelopment, marketing research, segmentation and revenue generation. It investigateshow virtual communities function on the Internet as compared to those emerging onwireless networks by means of in-depth qualitative interviews with managers from fiveon-line and five wireless virtual communities.This paper begins with a review of the academic literature that has been published overthe last decade on the subject of virtual communities in marketing for e-commerce. Itdefines virtual communities prior to describing their potential use as a newintermediary, a brand management tool and a marketing intelligence system. This isfollowed by a review of the alternative perspectives on how to build and managecommunities, to profile their members and finally draw revenue from them. It also 2
  7. 7. includes a review of articles exploring the potential impact of future wirelesstechnology on virtual communities.The literature review is followed by a description of the qualitative research methodschosen for data collection and data analysis. The rationale for using personal in-depthinterviewing as the means of data collection is outlined prior to describing the‘Framework’ method to qualitative data analysis. The findings are then presented anddiscussed for both on-line and wireless communities in relation to communitydevelopment, marketing research, segmentation and revenue generation. 3
  8. 8. 2.Literature Review2.1Virtual Communities2.1.1A DefinitionWhilst the term community is well-used, it is evident that people attach a range ofdifferent meanings to the concept. Hamman (2001) offers the following sociologicaldefinition: “A community should be understood as meaning (1) a group of people (2) who share social interaction (3) and some common ties between themselves and the other members of the group (4) and who share an area for at least some of the time” (Hamman, 2001).This definition serves to demonstrate that a community is more than just a group ofpeople. The sharing of social interaction, common interests and a place, be it physical orvirtual as in the cyberspace, is integral to a community. Rheingold (1993), who was thefirst to coin the term ‘virtual communities’, hence defines them as: “Social aggregations that emerge from the Net when enough people carry on those public discussions long enough, with sufficient human feeling, to form webs of personal relationships in cyberspace” (Rheingold, 1993).Sociological research has highlighted the loss of sense of community that modernisationhas brought about (Hamman, 2001) and identified the loss of the ‘third place’ as themain reason for this. The ‘third place’ is the place outside of home and work that is 4
  9. 9. important to us in our everyday life. Third places, like the pub and the church forexample, are the arenas where people can interact with other members of thecommunity and come to know the ties they have in common. Third places are,therefore, essential to the establishment of a community (Hamman, 2001). TV, longerworking hours and commuting times are now eating into the time people previouslyallocated to social interaction in their local pub, corner shop or church etc. As a directresult of the disappearance of these traditional third places, people have been attractedto virtual third places to fulfil their need for social interaction and acceptance.Virtual communities offer a unique form of social interaction in that it is free from theconstraints that exist in a physical encounter. For example, you can remain anonymous,there are no geographical or time limitations, you are free to engage or end theconversation at any moment, body language is no longer important and cannot betrayshyness and there are no race or religious prejudices at first sight. Consequently, virtualcommunities have steadily grown over the past 10 years in conjunction with the growthof computer networks and the Internet. However, virtual communities have gonebeyond being purely a means to satisfy the need for social interaction and have becomethe primary feature of new business models for e-commerce: “Internet and networked computers have empowered people to disregard the limitations of geography and time and find one another and gather in groups based on a wide range of cultural and social affiliations. Because many of these affiliations are based upon consumption activities, virtual communities are of substantial importance to marketing and business strategists” (Kozinets, 1999). 5
  10. 10. 2.1.2The Business Case for Virtual CommunitiesBarnatt (1998) has identified a clear rationale regarding the benefits for organisations todevelop on-line virtual communities. In his view, communities can be used as: 1. An intermediary, which would replace the middleman, saving cost and time and expanding the range of products and services, but still maintaining a human element. 2. A tool to enhance a company’s market position. Virtual communities may serve to establish an organisation as a brand leader on-line. Innovative companies might be able to use virtual communities to build customer loyalty by allowing people to cultivate on-line human relationships with peer opinion leaders, industry experts and early adopters. 3. An ideal environment for cultivating customer relationships. 4. A vehicle for on-line customer service providing constantly updated policy documentation, advice and information. 5. A market research instrument providing a means of collecting rich customer data in a cost-effective manner to a level that no other tool can match.Essentially, two distinct strategic uses of virtual communities emerge from this list. Onthe one hand, virtual communities have the potential to become intermediariessufficiently powerful to lead to the creation of reverse markets by aggregating thepurchasing power of all its members and, therefore, shifting the bargaining powertowards the customer (Hagel and Armstrong, 1997). On the other hand, virtualcommunities gathered around corporate web sites could also be a powerful tool to buildup brands in addition to creating and nurturing customer relationships and loyalty bycreating virtual ‘product fan clubs’. Underlying these two strategic uses of virtual 6
  11. 11. communities is their ability to provide rapid access to extremely rich information aboutcommunity members. Knowledge of customer’s needs and tastes can be increasedthrough precise member profiling, allowing marketers to define their future productsand services better, as well as their customers’ segmentation and targeting.Virtual Communities as a New IntermediaryAccording to Hagel and Armstrong (1997), virtual communities draw together peoplewho have the same distinctive focus, which means that they are likely to have the sameconsumption needs and interest in relation to that focus. They argue that members areinitially attracted to a community by their passion and interest. After having establishedrelationships with the other members, they can access unmatched levels of informationand also benefit from other members’ experience and feedback. Interesting contentattracts new community members and an adequate means of communication allowsthem to exchange ideas with one another, bond and develop strong relationships viafrequent social interaction. Information is, therefore, provided by trusted friends, viatwo-way conversations with no limit in time. This information is consequently muchricher than the ‘published’ material that can be found in corporate catalogues, web sitesor is provided by a company’s sales force. This is illustrated by Barnatt (1998), whohighlights that: “In some industries, other customers are already critical in determining competitive advantage and it is on the recognition of that fact that business value creation within virtual communities will depend: go into your high street bank and every other customer in front of you in the queue is a nuisance, go into your financial on-line bank and the fellow members that 7
  12. 12. you trust all become a real, valued and trusted independent financial advisor” (Barnatt, 1998).As access to information is a key determinant of the bargaining power in anycommercial transaction, Hagel and Armstrong (1997) argue that virtual communitieshave the power to greatly alter the relationship between companies and their customersas they use networks, like the Internet, to enable customers to take control of their ownpurchasing power. Virtual communities, therefore, have the potential to become a newform of intermediary, enabling the creation of ‘reverse markets’, where the powerbelongs to the customer and where consumers seek out vendors and deal with them on amore level playing field in terms of information access (Hagel and Armstrong, 1997).This view is shared by Kozinets (1999), who hypothesises that the existence of unitedgroups of on-line consumers will shift the power away from marketers towardsconsumers. This power shift would also have the effect of reducing the vendor profitsurplus similar to that of the auction model (Hagel and Armstrong, 1997).By definition, virtual communities are groups of people who share common interests,norms of behaviours and modes of social interaction. These groups are themselvescomposed of a multitude of smaller gatherings: “Although organised at one level of interest, community members endlessly re-organise themselves into increasingly identity-specific ‘factions’” (Kozinets, 1999).From the vendor’s perspective, a community, therefore, acts as a segmentation tooland provides marketers with a pool of customers that are easier to target, in addition to 8
  13. 13. enabling them to tailor and add value to the existing products and services. Ascommunity members represent customers with similar needs, they form a pool of buyersfor whom demand is easier to forecast and where economies of scales can be achieved(Schubert & Ginsburg, 2000).Hagel and Armstrong (1997) believe that demand is also boosted by customers’propensity to buy as they have a high level of trust within the community and hence alower perceived risk of purchase. In addition, they argue that once the community hasreached a critical mass of members, the ‘reverse market’ effect is re-inforced by theaggregation of purchasing power of all members and by giving their members access tocompeting publishers and vendors. Hagel and Armstrong (1997), therefore, concludethat: “Virtual communities will become cyber shopping malls and end up attracting people more by the aggregation of power than the access to common interest” (Hagel and Armstrong, 1997).It is worthy of note that the common focus and need for social interaction that Hageland Armstrong (1997) claim are central to community existence paradoxicallydisappear in their vision of future virtual communities, where attraction is no longergenerated by content and relationships, but by deals and savings. Cyberspacecommunities, whose members only join for the deals, would cease to be a communitydue to their limited desire for social interaction. Their long-term sustainability would,therefore, be questionable. As Barnatt (1998) concludes: “The most important aspect of on-line virtual communities is arguably their 9
  14. 14. ability to integrate information, trading and social interaction. They can humanise the on-line high streets” (Barnatt, 1998).Consequently, if the focus is exclusively placed on trading to the detriment of socialinteraction, the community will cease to exist.Virtual Communities as a Brand- and Loyalty-Building Marketing ToolMcWilliam (2000) offers a different perspective on virtual communities and exploresthe opportunities they represent for consumer-goods’ companies to build their brandsand strengthen their relationships with customers. McWilliam (2000) argues thatorganisations can build upon existing brand relationships established with their loyalcustomers to create ‘brand communities’ (i.e. brand-based on-line communities). Brandcommunities give customers a unique opportunity to position themselves as partners inthe organisation loyalty ladder, leading to the creation of ‘virtual product fan clubs’.Hoey (1999) shares this view and suggests that virtual communities are best used purelyas a new interface with existing loyal customers.In traditional brand relationships communication flows between the vendor and theconsumer. In brand communities, however, the dialogue occurring between consumersenables members to form genuine relationships with like-minded people. Both thecontent and the possibility of forming relationships with other buyers and with thebrand’s managers then act as a magnet, drawing consumers back to the site on afrequent and regular basis (McWilliam, 2000). Hagel and Armstrong (1997) agree withthis view that the ability to form relationships creates loyalty to the community. Theyargue that this is driven by a self-reinforcing cycle: ‘the loyalty’ loop, which contributesdirectly to revenue growth (See fig. 1). 10
  15. 15. Members in Contributions to community member- generated content Member Hours of relationships usage Member Loyalty Member churn Customised rate interaction Fig. 1 - The Member Loyalty Dynamic Loop (Hagel & Armstrong, 1997)As described in figure 1, the self re-inforcing dynamics of this loop mean that the morethe members participate in discussion forums, the more they create personalrelationships with other participants. Members then become increasingly loyal to thecommunity as the strength of these relationships grows through more participation inpublic discussions in either forums or chat rooms. However, as Hagel and Armstrong(1997) typically focus on commercial returns, they prefer defining loyalty in terms ofrepeat purchasing and, therefore, believe that the creation of loyalty within communitieswill be based on product performance and not the brand. They merely regard brand andestablished customer relationships as useful resources. This is likely to stem from theirstrong belief in the reverse market effect within virtual communities, which annihilatesthe power of the brand and is, therefore, not compatible with the concept of a brand-based community. It is, however, worthy of note that Hagel and Armstrong (1997) usemany examples of unique vendor’s corporate web sites, such as AOL, Disney, Heinekenor Bosch, to describe successful virtual communities. One could argue that thesecompanies’ web sites fit McWilliam’s definition of brand communities better than they 11
  16. 16. fit Hagel and Armstrong’s view of the virtual community as an intermediary.McWilliam (2000), acknowledges the existence of the reverse market effect in virtualcommunities and considers that it represents an important difference between brandbuilding in the real and the virtual world: “The power is in the members, and when managing communities, marketers require a truly bottom-up view of brand building, whereby the customers build the content, and are in a sense responsible for it. This contrasts markedly with the top-down view of business where products and services are created by organisations and sold to customers” (McWilliam, 2000).Kozinets (1999) agrees that the reverse effect is a feature of communities ofconsumption, but suggests that it could also have a negative impact on brandcommunities: “The power is not just shifting in terms of bargaining power, but also in terms of influence on the products they have adopted. As virtual communities of consumption build ties between devoted, loyal consumers of products, scrutiny of and wariness towards the marketers of those products heightens” (Kozinets, 1999).It is, however, difficult to imagine that wary customers would sustain their membershipto a brand community they no longer trusted.The concept of brand communities in cyberspace mirrors meeting places that alreadyexist in the real world, such as traditional business-to-business user groups, conferences 12
  17. 17. and exhibitions between vendors and consumers, where people meet and exchangeideas, comments and gossip (McWilliam, 2000). These events tend to be occasional,whereas the brand community seeks to establish a quasi-permanent dialogue with itscustomers/partners. As Rheingold’s (1993) definition of virtual communities describesthe need for “enough people to carry on public discussions long enough” in order tocreate a community, not all brands will be able to gather enough enthusiasts for asufficient amount of time to support a brand community.Hagel and Armstrong (1997) measure the community’s success according to its directfinancial returns and only believe in a community as an intermediary. Used as a brandbuilding/re-inforcing tool, as suggested by McWilliam (2000), the success of thecommunity cannot be easily measured in terms of direct financial returns. The case forbrand communities is, therefore, more difficult to justify. Evans et al. (2001), however,conclude from their research that: “There appears to be commercial benefits for organisations providing virtual communities on their web sites. Many of the respondents taking part in the research fieldwork claim to have a more positive opinion about the owner of the sites that they use and with many also wanting to use virtual communities to communicate with the company itself” (Evans et al., 2001).Virtual Communities as a Marketing Research ToolWhether one considers virtual communities as powerful independent intermediaries oras effective means of building brands, they are unanimously recognised as an extremelyefficient marketing intelligence system. Communities create an environment wheremembers feel safe to exchange information about their needs, tastes and behaviours 13
  18. 18. with other members that they have come to trust. In this environment “opportunitiesabound, not only to broadcast one’s own private information, but also to partakepublicly in the private information of others” (Kozinets, 1999). This makes virtualcommunities a ‘public-private hybrid’ (Kozinets, 1999), allowing marketers uniquepublic access to private and, therefore, richer information about consumers for the firsttime. This interactive media enables marketers to sense market forces withunprecedented accuracy and efficiency, overcoming the limitations of today’s one-wayresearch methods by providing a faster and more naturalistic research process(McWilliam, 2000). By allowing and promoting member-to-member communication inchat rooms or bulletin boards, where consumers can interact freely with each other,marketers can follows consumers’ perceptions of and feelings about the brand in realtime (McWilliam, 2000).However, as for any research in the cyberspace, maintaining the highest standards ofethics must be of prime concern to community managers, not only for legal reasons, butalso to protect and strengthen the relationship with their members. Members exchangeinformation with each other in an environment that they have come to trust and despitethe fact that this environment can be defined as ‘public’, members potentially releaseinformation about themselves that they wish to stay private. It is extremely difficult toestablish guidelines for ethical research on-line as there is a seemingly unavoidableconfusion over ‘public’ versus ‘private’ spaces on the Internet (Jones, 1994). However,respect for the individual must prevail and always needs to be considered before usinginformation collected within the community. 14
  19. 19. 2.1.3Segmentation in Virtual CommunitiesAs seen in the previous section, virtual communities gather together people with similarinterests, needs and behaviours. It is, therefore, important for marketers wanting toextract value from these on-line gatherings to understand how they are organised. Thissection reviews different attempts to classify virtual communities and within them, sub-groups of members with homogeneous profiles.Community ProfilingAccording to Hagel and Armstrong (1997), there are four different types of virtualcommunities and each of them fulfil one basic need of their users: TYPES OF COMMUNITY COMMON FOCUS The common focus in these communities is the sharing of a personal interest. This is where people Communities of Interest with the same passion, hobbies, professional interests etc. come to meet together. The common focus is the sharing of personal life experiences. Senior citizens, people with cancer or Communities of Relationships aids, new parents etc. are good examples of these communities. The common focus shared in these communities is entertainment and fantasy. Multi-User Dungeons are Communities of Fantasy virtual playgrounds for people engaging in role-play and are a popular form of communities of fantasy. Information about products and services as well as Communities of Transaction the purchase and sale of products constitute the common focus of these communities.Hagel and Armstrong’s communities of transaction bear some similarity withMcWilliam’s brand communities, although they only envisage the building of 15
  20. 20. relationships between members and exclude the building of relationships betweenmembers and vendors.This classification system correlates with a study carried out by Evans et al. (2001)which showed that individuals using virtual communities primarily communicate withfriends and work colleagues, in addition to people who share the same interests. Theformer demonstrates a need for relationships, whilst the latter illustrates a need forinterest and transaction. Whereas Hagel and Armstrong (1997) argue that allcommunities have the capacity to address all of these needs and that all communitieswhich succeed in doing so will generate revenue, Barnatt (1998) highlights that it isunlikely that all companies will be able to build up their own community and satisfy allfour of these needs. For example, in the financial services sector, it seems unlikely thatmany people would want to regularly visit a financial service virtual community as itscapacity to meet the need for relationships, interest and fantasy will prove somewhatlimited. Attempting to classify virtual communities is the first step towardsunderstanding their internal dynamics in order to design marketing strategiesappropriate for each of them. This is, however, extremely difficult. For example,Kozinets (1999) focuses on what he calls ‘communities of consumption’, which hedefines as: “A specific subgroup of virtual communities that explicitly centre upon consumption-related interests. They can be defined as affiliative groups whose on-line interactions are based upon shared enthusiasm for, and knowledge of, a specific consumption activity or related group of activities” (Kozinets, 1999). 16
  21. 21. This definition shows a close correlation between Kozinets’ communities ofconsumption and Hagel and Armstrong’s communities of transaction. Kozinets (1999),however, subsequently divides his communities of consumption into four distinct types,‘bulletin boards’, ‘chat rooms’, ‘lists’ and finally ‘dungeons’ as described in figure 2below. The latter are clearly what Hagel and Armstrong (1997) refer to as communitiesof fantasy. Bulletin boards and chat rooms are the most popular meeting places for on-line communities. One could view them as structural elements featuring in all types ofcommunities rather than types of communities per se. Kozinets (1999) puts forward aninteresting point, however, when he argues that boards, rooms, dungeons and lists eachdefine a type of community because they are the home of a predominant mode ofinteraction (i.e. recreational, relational, informational or transformational). One can notethe correlation between Kozinets’ modes of interaction and Hagel and Armstrong’sclassification of communities (i.e. recreational mode for communities of fantasy;informational mode for communities of interest; relational mode for communities ofrelationships) which further highlights the importance of interest, relationships andfantasy in the making of communities. Social Structure Loose Tight Information Exchange Boards Rings and Lists Group Focus Social Rooms Dungeons Interaction Fig. 2 - Types of Virtual Communities of Consumption (Kozinets, 1999)Member ProfilingAccording to Kozinets (1999), boards, rooms, dungeons and lists host four differenttypes of members depending on the intensity of their interest in the consumption 17
  22. 22. activity and the intensity of their ties with the community; the tourists, the minglers, thedevotees and the insiders (See figure 3).• Tourists maintain only passing interest in the community and its consumption activity.• Minglers maintain strong social ties, but are only marginally interested in the consumption activities.• Devotees maintain strong interest and enthusiasm for the consumption activity, but low social ties to the community.• Insiders maintain strong social ties to the community and interest in the consumption activity. High Self-Centrality of Consumption Activity Devotee Insider Weak Social Strong Social Ties to Ties to Community Community Tourist Mingler Low Self-Centrality of Consumption Activity Fig. 3 - Types of Member in Virtual Communities of Consumption (Kozinets, 1999)Unlike Kozinets (1999), McWilliam (2000) does not consider tourists to be communitymembers as they do not contribute to the life of the community. Their passive behaviourdoes not indeed contribute to the social interaction that generates a sense of community. 18
  23. 23. Evans et al. (2001), however, argue that the role played by lurkers should not bedisregarded. They consider lurking to be a major activity within communities, tofacilitate ‘word of mouth’ and thus the impact of the message generated by theparticipants, especially by community influencers. Besides, all influencers are likely tohave been tourists themselves at the beginning of their involvement in the community.Indeed, Kozinets (1999) suggests that tourists attracted by salient content relating totheir particular interest become insiders and minglers when they develop theirknowledge in parallel with their social relations. According to Kozinets (1999), studiesshow that virtual community members follow a similar pattern of behaviour. They startby merely browsing for information to learn more about a particular consumptioninterest; a car, for example, that they are thinking of buying. Consumers eventually findsites with content and feedback from other consumers sharing the same consumptioninterest. Finally, they make contact, exchange questions and ideas about the products,bond and involve themselves in the community.This view of the members’ stages of development is shared by Hagel and Armstrong(1997), although they typically apply a more commercial perspective to it and classifythe member stages as follows: • Browsers surf, come in and check out the community. • Users or Lurkers, like Kozinets’ tourists, visit the community occasionally, benefit from it, but do not contribute to the member- generated content and do not purchase products. • Builders are more passionate about the community and spend a lot of time in it, actively contributing to the member-generated content. They bind the community together. • Buyers actively purchase products and services from the community. 19
  24. 24. Hagel and Armstrong (1997).From a marketing perspective, it is the insiders (or builders) and the devotees (orbuyers) who tend to represent the most important targets for marketing: “In virtual communities, insiders and devotees are the opinion leaders, they set the standards and constantly assess and critic the corporations whose products are important to them. Identify the insiders and devotees and target them, share important information with them. Concentrate your efforts on these people as you cannot reach everybody in the whole of the community” (Kozinets, 1999).This relates directly to the pareto rule that 80% of profits are made by 20% of customers(Kozinets, 1999). It is, consequently, extremely important to study patterns of behaviourin the community in order to identify the insiders and devotees. Kenny and Marshall(2000) believe that for a destination or corporate web-site to make economic sense, itmust attract repeat visits from customers, with each visit adding ever-greater incrementsof information to a customer profile. As described in figure 4, this is precisely what theself re-inforcing dynamics of the ‘member profile’ loop provide (Hagel and Armstrong,1997). 20
  25. 25. Data- Targeted gathering transaction capabilities offerings Advertising Member Transaction revenue Profiles volume Advertising Targeted click through advertising Fig. 4 - The Member Profile Dynamic Loop (Hagel & Armstrong, 1997)The better the members are studied, profiled and understood, the more successful thesegmentation and commercial targeting can be, thereby attracting more vendors andadvertisers resulting in greater member transaction. The customer database becomesricher, thereby enabling members to be studied in more depth, profiled and betterunderstood: “If communities are successful – as a measure of numbers of participants, amount of time spent in the community and transaction activity – the profiles they create on individual customers will yield rich data sets about both individuals and customer segments. These data sets will create detailed transaction histories, at the level of the individual customer, that can be used to predict future opportunities to transact with a given customer” (Hagel and Armstrong, 1997). 21
  26. 26. Hagel and Armstrong (1997), therefore, describe on-line communities as a mechanismthat will enable individually tailored marketing and lead to ‘the segment of one’. Whilstagreeing that virtual communities provide a wealth of valuable information about theirmembers, Kozinets (1999) believes that, as a group of consumers, virtual communitiesare less accessible to one-on-one processes. He, therefore, disagrees with Hagel andArmstrong’s view that this information could be used for one-to-one marketing (Hageland Armstrong, 1997): “Marketing must move beyond the individualistic to more cultural and collective types of understandings” (Kozinets, 1999).Kozinets (1999) emphasises that virtual communities, however united they appear, infact comprise a multitude of niches and micro-segments. He, therefore, advocatesfragmentation-based segmentation as the means to understanding the bases of customerloyalty within communities. Fragmentation-based segmentation involves analysing acommunity’s different ‘tasteworlds’ in order to identify the different ‘factions ofmembers’ that operate within it. According to Kozinets (1999) fragmentation-basedsegmentation not only leads to the creation of new customer segments, but leadsmarketers to new product enhancements and ideas.The same argument is put forward by Hagel and Armstrong (1997), but this time as ameans to control the growth of the community. The notion of growing to a critical massbefore introducing commercial activities means that, operationally, communitymanagers run the risk of aggregating too many members. One member can onlycommunicate with a limited number of other members if meaningful relationships are toemerge from this social interaction. With too many other members to share time with, 22
  27. 27. relationships become weak and the sense of community is lost. The organisers must,therefore, allow membership to grow without losing the community spirit (Hagel andArmstrong, 1997).According to Hagel and Armstrong (1997), communities must have fractal depth, whichthey describe as the degree to which a community can be segmented. In the same wayspecial interest groups are sub-entities of user groups in the real world, a communityshould be segmented into smaller sub-communities centred on specific topics of interest(McWilliam, 2000). Community managers can then maintain the focus and strongmember ties whilst allowing the community to grow. The risk attached to creating sub-groups within a community is that the sense of belonging to a sub-faction leads to asense of clique. Insiders can, therefore, prevent newcomers from joining in and thus haltthe growth of the community. Hagel and Armstrong (1997) consequently introduce thenotion of fractal breadth, as opposed to depth, as a means of growth management andan indicator of long-term expansion. They define fractal breadth as the ability toexpand beyond the community’s original focus by incorporating new sub-communitieswith distinct but related topics in order to expand the reach of the community.2.1.4Building and Managing a CommunityCommunities need to reach a critical mass of members before any commercial activitiescan take place with success (Hagel and Armstrong, 1997). Indeed, Evans et al.’s (2001)research shows that many members do not like participating in communities that areperceived as overly-commercial. It is, therefore, important to focus on establishingeffective social interaction prior to introducing commercial activities. The volume ofcommunication and interaction generated between consumers is indeed where the valueof the community lies. The more communication and interaction, the stronger the 23
  28. 28. community (McWilliam, 2000). As the value of a community resides in therelationships and ties between members more than in the members themselves, afundamental feature of virtual communities is that their value increases exponentiallyeven as they grow incrementally (Plant & Willcocks, 1999). In order to establish acritical mass of members, marketers need to consider ‘community before commerce’(Hagel and Armstrong, 1997) and meet the three challenges represented in figure 5:The defining features of each of the above developmental stages, as described by Hageland Armstrong (1997), are outlined below. Additional contributions by other authors inthe literature are also included: Lock in Traffic (i.e make it difficult for members to want to leave once they have joined) Concentrate Traffic (i.e. make members stay longer on the site) Generate Traffic (i.e. get people to pass through their site) Successful entry (i.e. path to build a critical mass of members) Fig. 5 - The Three Stages of Entry (Hagel & Armstrong, 1997) 24
  29. 29. 1. To generate traffic by: • Using member-generated content to attract new members. Hagel and Armstrong (1997) argue that the greater the member-generated content, the bigger the attraction. This results in a greater number of members and, thus, more member- generated content etc. (See figure 6). The self re-inforcing dynamics created by member-generated content rely on the assumptions that content attractiveness is the key source of member attraction and that the key source of content attractiveness is member-generated content. • Keeping the registration process simple in order to enable members to join in more easily. • Generating awareness by identifying real-world opinion and community leaders who have a connection with the central focus of a specific virtual community (i.e. magazine, head of association etc.). Awareness could also be generated in the virtual world by having a presence on web sites that potential members are likely to visit on a regular basis. • Establishing partnerships with vendors with strong brands, existing customer relationships and strong distribution capability. 25
  30. 30. Hours on-line Member-to- member interaction Content Member- Attractiveness generated content Marketing effectiveness Members Member churn Fig. 6 - The Content Attractiveness Dynamic Loop (Hagel & Armstrong, 1997)2. To concentrate the traffic by: • Injecting an element of fantasy and relationships (i.e. the two needs which generate the most traffic) by creating on-line games and competitions, bulletin boards and chat rooms. • Increasing the incentive for people to return by: - Understanding members’ interests and needs through the tracking of usage patterns. Watching clusters of conversations on bulletin boards and chat rooms and creating sub-communities around more focused interests in order to enhance members’ focus and deepen their interest. - Making it easy for vendors to join the community. Members can then access a broad range of competing and complementary vendors and can 26
  31. 31. quickly compare products and services. Members consequently realise the benefits and savings that they can obtain from the aggregation of their individual purchasing power. - Establishing a calendar of special events to encourage repeat visits at regular intervals. McWilliam (2000) also advocates using well-known guests to take part in chat rooms and answer questions. - Encouraging participation and making sure people are not ignored (McWilliam, 2000). McWilliam (2000) emphasises the importance of codes of behaviour. She suggests supervising volunteer managers, who remove empty chat rooms, delete obscene content and repetitive questions as well as answer, motivate and reward members. She views the ability to do this successfully as one of the key skills required for community managers. The challenge here is very similar to any organiser of events, charity events, discussion groups and leaders of communities, such as religious groups (McWilliam, 2000).3. To lock the traffic in by: • Fostering personal relationships between members via bulletin boards and chat rooms. These personal relationships constitute strong barriers of exit, which increase in strength with time. For a member to switch from his home community to a new one, the other members he trusts and has bonded with in his home community would need to switch too. 27
  32. 32. • Accumulating and organising member-generated content. This gives members a sense of ownership and belonging which lay the foundation for loyalty. • McWilliam (2000) also suggests devising a means of communication that rewards individual members for their continued support and interest and also recognises the passage of time and the strengthening of relationships.Managing a community is a subtle balancing act. The organiser requires the ability toallow the community to grow organically without being ‘overplanned’ or‘overmanaged’ (Hagel and Armstrong, 1997). Ownership has to be given to themembers for the community to exist, therefore policing becomes a delicate matter asmuch of the power is given to the members to police the community themselves. Thiscan, consequently lead to abuse. The Internet, as a medium, has revolutionisedcommunication because it has offered total freedom of speech and anonymity. Thesetwo characteristics affect community management greatly (McWilliam, 2000). Thelevel of control that needs to be exercised is often difficult to gauge for communityowners.Barnatt (1998) suggests that in some industries, building up a community from scratchis not necessarily the most appropriate way in for marketers who want to reap thebenefits of hosting virtual communities. He believes that the number of regular visitorsin financial service virtual communities, for example, is unlikely to be sufficient tojustify the investment in establishing and managing a virtual community from scratch.Instead, Barnatt (1999) proposes two alternative options. The first, ‘virtual communityalmagation’, is for organisations with limited hope of gaining a critical mass of regularmembers. An intermediary is created where various providers of related services can 28
  33. 33. gather in a community which then becomes a ‘shared industry interface’. Virtualcommunity almagation is similar to Hagel and Armstrong’s (1997) notion of fractalbreadth. They do not, however, consider this as a valid starting point, but rather as theindication of the community’s potential for growth beyond its original critical mass ofmembers.The second option put forward by Barnatt (1999) is ‘virtual community inhabitation’.This involves offering your product or services to an existing community which hasachieved long-term members’ affiliation. “Consider J&J’s campaign for Clean and Clear, a skin care product line for teenage girls. Resisting the temptation to create yet another ill-fated destination web site, J&J establishes a presence within pre-existing on-line teen communities. The company gives teenage girls, many of whom spend their free time chatting on-line, the chance to send one another talking electronic postcards that offer free skin analysis and a sample of Clean and Clear” (Kenny & Marshall, 2000).Barratt (1999), hence, argues that not all companies need to establish and manage theircommunity from scratch, but suggests that all companies should have a presence incommunities. 29
  34. 34. 2.1.5Drawing Revenue from the CommunityThe main revenue streams available to community hosts are as follows: SOURCE OF TYPE OF DESCRIPTION REVENUE REVENUE Subscription A fixed monthly-charge for participation in the fees community. A charge based on the number of usage hours, the Usage fees number of pages accessed or a combination of the Users two. Content A charge for downloading specific information, such delivery fees as a magazine article. A charge for specialised services, such as a Service fees notification service. Advertising Banners, e-mail, icon-type advertisements. Transaction Charge to the vendor on each transaction. Vendors and commission Sale or rental Sale or rental of lists of members’ profiles to Advertisers of member vendors. profile (Hagel and Armstrong, 1997)As on-line consumers are likely to develop long-lasting relationships with thecommunity organisers if they are treated as special members with special prestige andbenefits, Kozinets (1999) regards the membership or subscription model as the mostpertinent for virtual communities. The subscription model, however, makes it moredifficult for members to join and can, therefore, impede membership growth. Hagel andArmstrong (1997), consequently, recommend that community organisers focusexclusively on revenue generated from advertising and transactions in order to avoid theundesirable dampening effect on member acquisition created by subscription or usagefees. This is supported by research from Evans et al. (2001), which suggests that manyusers would not be willing to pay a subscription to become a member of a virtual 30
  35. 35. community. Furthermore, the same research indicates that on-line advertising can bedistracting and have little effect on people (Evans et al., 2001). These conclusions,however, were based on advertising on common web-sites as opposed to virtualcommunity sites. Analysing the impact of carefully targeted advertising with a highdegree of relevance to the community focus could lead to a different conclusion.Besides, when consumers are allowed to purchase a product by pressing on an icon inthe advertisement itself, the distinction between advertising and selling becomes blurredfrom the customer’s point of view (Barnatt, 1998) and the impact of advertising alonebecomes difficult to measure.Revenue from advertising is also difficult to generate before a critical mass ofcommunity members is reached, which creates a near-term economic challenge forcommunity hosts (Hagel and Armstrong, 1997). In the early stages of communitydevelopment, subscription and usage fees are the sources of revenue immediatelyavailable to the community organiser, but are also likely to slow down the growthprocess: “One revenue source immediately available to the community organiser is member fees (especially subscription or usage fees), which can be charged from the first day. However, charging member fees is likely to slow growth of membership substantially. That is turn could delay readiness to tap into other attractive revenue streams: advertising and transaction commissions” (Hagel and Armstrong, 1997).On the other hand, attractive revenues upon which long term profits can be built comefrom advertising and transaction commissions. These sources of revenue are, 31
  36. 36. nonetheless, out of reach until the number of members is high enough to attractadvertisers or to generate a sufficient number of transactions. Revenue generation byvirtual communities in the near term is, therefore, likely to be quite limited (Hagel andArmstrong, 1997).When a sufficient number of members is reached, revenue from advertising andtransactions can, however, grow extremely fast due to the re-inforcing effects of twocycles. The first is the ‘member profile’ loop (Hagel and Armstrong, 1997). Aspreviously discussed, this loop has the power to yield a better understanding ofmembers’ needs and behaviours; the better the members are profiled, the moresuccessful segmentation and commercial targeting can be (See figure 4). Importantly,this loop also results in an increase in the revenue generated through commission andadvertisements because efficient segmentation and commercial targeting will attractmore vendors and advertisers. Revenue from commission on transaction can be furtherenhanced by the second of these cycles, the ‘transaction offering’ loop (Hagel andArmstrong, 1997), which advocates the widening of the commercial offering within thecommunity (See figure 7). As the portfolio of products and services available tomembers gets broader, more members are attracted and more transactions are carriedout. More vendors are then themselves attracted by the increasing pool of consumers inthe community and, therefore, the more varied the portfolio becomes (Hagel andArmstrong, 1997). 32
  37. 37. Vendor- Vendors in marketing community spending Vendor- marketing Transaction effectiveness Offerings Members in community Attractiveness Member to vendors willingness to spend Fig. 7 - The Transaction Offering Dynamic Loop (Hagel & Armstrong, 1997)2.2Virtual Communities on the Wireless WebNetworked computers have significantly reduced the limitations of geography and timethat people face when trying to communicate with one another. Wireless networksremove any remaining limitations in that they offer a means of communication that istruly ‘anywhere, anytime’. The imminent introduction of new technology, such asGPRS or 3G, should give birth to what Kenny & Marshall (2000) term the ‘ubiquitous’Internet, i.e. an Internet accessible from anywhere at anytime via wireless telephones,palmtop or laptop PCs with wireless connections. Virtual communities have alreadybeen built on such wireless networks, using SMS or WAP technologies or simply voice: “Mobile users typically join a community via an interactive voice responder (IVR) server, answering a few profile questions to determine preference. A registration message and micro-tutorial is then sent back. The user responds 33
  38. 38. with anonymous nicknames and can begin to use the service. In SMS-based forums, users have simple commands which allow them to search and navigate using keywords, themes, nicknames, geographical areas or search words to find discussions on shared interests. Users can browse the text messages available and post their own, replying on a many or one-to-one basis. In the case of a voice-based forum, the messages are voicemails left under the user’s nickname, to which users listen and respond again, to the individual or the community at large. These features support the development of relationships and transactions, allowing users to progress from an interest in, say music, to buying or swapping discs, and from finding out about events in their city to meeting up” (Traisnel, 2001).An ethnographic study recently carried out throughout Europe, the USA, Asia andAustralia to analyse the relationship between people and their mobile phones revealedthat, throughout the globe, people want devices that make them feel wanted, needed andsocially accepted (The Context-Based Research Group, 2000). People, therefore, want amobile phone to fulfil their need for social identity and social interaction. Ashighlighted in the first part of this literature review, the need for social interaction isalso central to virtual communities. There is, therefore, a strong similarity between theneed for mobile telecommunication and the attraction of virtual communities. Thewireless Internet is, hence, likely to be extremely fertile ground for the growth of virtualcommunities: “Building communities and strengthening the experience of doing things together will be an increasingly strong driver for applications of the mobile Internet“ (Andersson, 2000). 34
  39. 39. Kenny and Marshall (2000) argue that successful marketing on the wireless Internet willnot aim to bring the customer to the site, but alternatively take the message directly tothe customer at the point of need: “The companies that can anticipate and meet the real needs of their customers based on where they are located, what they do, and which communities of interest they belong to, will be valued partners. The companies that cannot will be dismissed as pesky nuisances” (Kenny and Marshall, 2000).Kenny and Marshall (2000) further suggest that the emergence of the ubiquitousInternet will see the birth of a new kind of intermediary; the mobilemediary: “The mobilemediary will be able to break into the value chain at any point, bringing information and transaction capabilities to customers whenever and wherever they are ready to buy a product or a service” (Kenny and Marshall, 2000).Giving customers what they want when they are likely to want it will, however, be adifficult balancing act to achieve. Drawing the line between spamming (i.e. the massmailing of unwelcomed messages) and delivering tailored messages and information tocustomers at the point of need presents a challenge. Marketers will need to avoid theperception of harassment, which comes with unsolicited, albeit timely, offerings fromunknown and, therefore, untrusted sources: 35
  40. 40. “Good information is bundled information chosen and determined by the user. ‘The spam should be kept in the can’” (The Context-Based Research Group, 2000).Instead, the Context-Based Research Group (2000) suggests that applications orservices that connect people with common interests through shared enthusiasm aredesired because they give people the ability to interact opportunistically. Wirelessconnections will give customers the opportunity to contact trusted virtual friends toobtain advice whenever and wherever needed. Virtual communities indeed have thepotential to be strong mobilemediaries because any solicitation coming from within thecommunity will be treated with a much higher level of tolerance from the members.Hagel and Armstrong (1997) point out that the churn rate in wired communities is high:people come and go and surfing rules. Cellphone users are more impatient than Internetusers and do not benefit from the user-friendliness of the PC’s big screen and keypad:the paradigm here, therefore, is not surfing (Rao, 2000). The community will add valueto their members by being a one-stop shop offering fast and reliable access to rich andtrusted information without having to surf for it.The author anticipates that the ubiquity offered by mobile telecommunication willimpact directly on the dynamics of virtual communities. Social interaction will not justtake place when all members are sitting at their PC; it will be continuous and triggered,as well as fuelled, by the ever-changing physical environment in which each member islocated. The opportunity for people to participate in an on-line community will radicallyincrease as they will always be ‘on’ and will not need to own a PC to join in. Theirwireless device will be their unique gateway to the community (Cothrel, 2000). The linkbetween real-life situations and virtual social interaction will increase the number of 36
  41. 41. opportunities to interact and the variety of topics of conversation. In the train whencommuting, in a coffee shop while waiting for someone, any idle moment in the daybecomes an opportunity to interact with members of the community; an everyday eventor a decision can become a reason to do so. Hours on-line will also increasesignificantly: “The basic mobile phone provides an interesting medium for realising communities. Its combination of voice, data communication and compact size make it an intimate companion, which can be called on readily when there is free time or a desire to communicate” (Traisnel, 2001).Similarly, the author anticipates that the speed with which relationships will beestablished and the depth of these relationships are likely to increase as members willhave more things to talk about and will talk about them more frequently. Furthermore,interaction will no longer be restricted to text; voice will also be a means of exchangingmessages. This will enrich the communication as intonations, hesitations and laughterwill be heard. This might, however, engender some problems as it will reduceanonymity; accents, for example, could lead to prejudices. Finally, the propagation of‘word of mouth’, as well as the update of information, will be faster, giving customersgreater knowledge and, therefore, power. 37
  42. 42. 3.Field Work3.1Research DesignThis project aims to explore the potential of virtual communities to be the basis for aprofitable business model for the mobile Internet. For this purpose, the study focuses onthe following three questions:• How do virtual communities function on the wireless Internet as compared to those on the wired Internet?• What are the practical issues involved in analysing behaviours, needs and tastes in order to segment and target community members?• What are the practical issues related to generating revenue?This project is, hence, concerned with collecting ideas, stories and insights by tappinginto the experience of people who manage mobile and on-line virtual communities. Thisresearch can, therefore, clearly be categorised as ‘exploratory’, according to thefollowing definition: “The major emphasis in exploratory research is on the discovery of ideas and insights” (Churchill, 1999).Marshall & Rossman (1995) in Remenyi et al. (1998) argue descriptive or exploratoryresearch is best carried out using qualitative research methods. It is evident from theliterature that definitions of qualitative research emphasise its superiority in dealingwith data that is not easily quantifiable: 38
  43. 43. “By the term qualitative research we mean any kind of research that produces findings not arrived at by means of statistical procedures or other means of quantification. It can refer to research about persons’ lives, stories, behaviours, but also about organisational functioning, social movements or interactional relationships” (Strauss & Corbin, 1990). “Qualitative research is research based on evidence that is not easily reduced to numbers” (Remenyi et al., 1998).Considering the nature of this research and its objectives, it is unlikely that the evidencecollected will be easily quantifiable. Qualitative methodologies have, consequently,been applied to both data collection and analysis.Finally, qualitative research methods are also useful when subject matter is not wellunderstood (Remenyi et al., 1998). This is of particular relevance to wireless virtualcommunities as they are a social, interactive and complex field of study, which is at anembryonic stage of evolution and, hence, constitutes uncharted territory. Furthermore,the early stage of development of these types of mobile virtual communities alsoimplies that the sample of wireless community hosts will not be large. Carrying outstatistical research would, therefore, not necessarily yield representative results.3.2Data Collection: The Choice of In-depth InterviewingSeveral data collection techniques are associated with qualitative research. From thesemethods, ‘in-depth interviewing’ or more specifically ‘semi-structured, undisguisedinterviewing’ was chosen for this project as it is the method best suited to exploratoryresearch (Churchill, 1999; Remenyi et al., 1998). Community hosts manage their 39
  44. 44. communities in different ways, therefore, flexibility was required in the gathering ofdata. In-depth interviewing offers tremendous scope and flexibility in that it allows therespondent to raise topics and issues of particular importance to them, in addition tothose covered by the researcher.3.3Reliability and ValidityA number of measures have been taken throughout this project to safeguard thereliability as recommended by Remenyi et al. (1998). The research design, datacollection and interpretation have been systematic and all attempts have been made toensure the transparency of this. Retest reliability has also been allowed for by providinga clear account of the method used and the data collected. This should enable the data tostand independently, so that another researcher could analyse it and reach the sameconclusions.Similarly, all attempts have been made to protect validity. The limitations andboundaries of the study and the location of the sample are clearly indicated (Mason,1996). In order to demonstrate the validity of the method used to generate data, theresearcher has emphasised the match between the research method and the researchobjectives, attempted to relate the data to the current literature and presented theselection criteria used to ensure the relevance of the research sample (Mason, 1996).Finally, to demonstrate the validity of the interpretation of the data, the researcher hasmade all efforts to clearly explain how that interpretation was reached (Mason, 1996). 40
  45. 45. 3.4Data AnalysisThe primary data collected during the interviews was analysed using the ‘Framework’method, which has been developed by the Social and Community Planning ResearchOrganisation (Ritchie & Spencer, 1994). The ‘Framework’ method involves a numberof distinct, although highly inter-connected stages (Ritchie & Spencer, 1994). Whilstthese stages will be listed in a particular order below for ease of presentation, they arenot to be viewed as denoting a purely mechanical process as they allow for flexibilityand the re-working of ideas. The technique relies on the analyst’s ability to elicitmeaning and identify connections, suggesting an element of subjectivity in theconclusions drawn, which naturally impacts upon the reliability of the approach.However, as stated above, all attempts to allow for retest reliability have been made.The approach involves a systematic process of sifting, charting and organising the dataaccording to key issues and themes. The five inter-connected stages to the ‘Framework’analysis are as follows:• Familiarisation - whereby the researcher gains a sense of the material as a whole and becomes familiar with its range and diversity. In this study, familiarisation was born out of the transcription of the recorded tapes and extensive reading of each transcription• The identification of a thematic framework - whereby the data is examined and referenced using the recurrent themes that emerge from it• Indexing - whereby a classification system or index is systematically applied to the data in its contextual form 41
  46. 46. • Charting - during which sections of the data are lifted from their original context and re-arranged according to a thematic reference, thereby allowing a picture to be built up of the data as a whole• Mapping and interpretation - which describes the process by which the range and pattern of views in the data are assimilated and interpreted as a wholeThe findings and associated recommendations resulting from the mapping andinterpretation stage are reviewed in the next section. 42
  47. 47. 4.FindingsThe aims of this research project were fourfold: to explore how virtual communitiesfunction on wireless networks as compared to on-line, to investigate the practical issuesinvolved in analysing members’ behaviours and needs, to evaluate segmentation andtargeting within virtual communities, and, finally, to analyse how revenue can begenerated from wireless communities.This section presents a review of the common findings from the on-line and wirelesscommunities studied for each of these objectives in turn. A table detailing quotations insupport of the researcher’s interpretation of the data is provided for each finding. Forconfidentiality the names of the interviewees and their communities have been replacedwith R1 to R12. Other company and product names have also been abbreviated to theirfirst initial.4.1Comparison between the Management of On-Line Virtual Communities andWireless Virtual CommunitiesAll the managers interviewed displayed a similar level of experience with the virtualcommunity model (i.e. approximately 1.5 years). In order to assess their knowledge ofthe concept and the relevance of their feedback, they were asked to give their owndefinition of a virtual community. The definitions given demonstrated a sound andconsistent understanding across the sample of interviewees and made reference to thedefining features detailed in the literature: a) a place to meet for b) a group of peoplewith c) a common interest and d) where people are given the means to communicatewith one another: 43
  48. 48. COMMUNITY MANAGEMENT Relevance QUOTATIONS TO SUPPORT of Feedback “It means a meeting place, an area for people to come together, people with a common interest or people who would like to develop a common interest and to come together and to be able to bond in a comfortable environment” (R.5 (on-line)). Managers’ “A community is a group of people who have a shared interest, it Definitions could be a hobby, it could be anything but, and I think that is the of a Virtual most important, they are given the opportunity to get in touch with each other” (R.7 (wireless)). Community “For me, the community consists of two things. One, it’s a hard core group of users […] and then the second factor is that you give them the opportunity to talk to you and to each other” (R.4 (on- line)).When analysing the data relating to the creation of the communities under study in thisresearch, a model of community development common to both on-line and wirelesscommunities emerges from the samples collected. This model consists of the followingfour key stages in the management of the community members: 1. Attracting Users 2. Engaging Lurkers 3. Safeguarding Conviviality 4. Rewarding Heavy UsersElaboration of each of these developmental stages is presented below:1. Attracting Users 44
  49. 49. In order to make themselves known to their target group, the communities studied haveeither associated themselves with a pole of attraction for the target group or used aninitial advertising campaign: COMMUNITY MANAGEMENT Attracting QUOTATIONS TO SUPPORT Traffic “We have a unique relationship with U., they are in a way our sister company and the students are sent through them to us” (R.5 (on-line)). “We are a joint venture between ‘R.4’ and T.. So, T. has a somewhat similar demographic, female audience and obviously we leverage our position in terms of that relationship to get Partnership ourselves into their consciousness as much as possible” (R.4 (on- with a Pole line)). of “People come to ‘R.3’ in many different ways. ‘R.3’ is a Attraction recognised brand name” (R.3 (on-line)). “We pushed ‘R.9 ’ very hard to ‘C.’ users saying, “Hey, if you like doing this [C.], you’re gonna love this [R.9 ]!” So we pulled them across to there” (R.9 (wireless)). “At the start, we did an initial 2 weeks of advertising by fly-post around London. London only. We had a small radio broadcast on Initial Kiss FM for two weeks and that was it. That got some people to the site” (R.2 (on-line)). Marketing Campaign “I think, originally, a lot of people are drawn to the site for things that we have sent out, like competitions, like viral marketing things” (R.5 (on-line)). COMMUNITY MANAGEMENT 45
  50. 50. Attracting QUOTATIONS TO SUPPORT Traffic Initial “They’d spent a lot of money on quite a flashy marketing campaign” (R.1 (on-line)). Marketing Campaign (continued)However, beyond the initial marketing efforts to generate traffic, most of the on-linecommunity managers emphasised their reliance on ‘word of mouth’ to attract people totheir site as opposed to sustained advertising: COMMUNITY MANAGEMENT Attracting QUOTATIONS TO SUPPORT Traffic “A great deal of the attraction is triggered by word of mouth” (R.3 (on-line)). “I think that a lot of it is about word-of-mouth. Our marketing, at the moment, has not been very good up until this point” (R.5 (on- line)). Word Of “Word of mouth and the odd search engine, but mainly word of Mouth mouth” (R.2 (on-line)). “We are not advertising. Word-of-mouth is very important” (R.11 (wireless)). “It has marketed itself, e-mail, word-of–mouth […] The mobile channel has not had any marketing budget for the past 9 months, but also we do not need it” (R.8 (wireless)).2. Engaging LurkersOnce people have been attracted to visit the community web site, the next challenge isto encourage them to take part and make their first contact: 46
  51. 51. COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People “That is a challenge, getting people to communicate and take some The ownership […] If you are lurking, you’re just looking, there is Challenge nothing we can do” (R.2 (on-line)).In order to succeed at this stage, careful consideration must be given to the user’s firstimpression when entering the site. Consequently, it is extremely important to presentattractive and relevant content, as well as to show that the site is a popular meetingplace. People are attracted to communities by their desire to find a space where they canmeet and interact with other like-minded people or people sharing similar interests.They will, therefore, leave straight away if they enter an empty space: COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People “To give people a feel that this was a place where they could come to pick up information before they found it elsewhere or different Appropriate information than they would get elsewhere” (R.1 (on-line)). and Attractive “To actually drive membership, which is a slightly different question to traffic, the challenge there is to get things up on the Content site that people want to become a member for” (R.4 (on-line)). COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People Impression “If you go into a chat room and there is nobody there, it is pretty bad” (R.2 (on-line)). of Popularity 47
  52. 52. “You might set up a subject on a notice board, but you have to be quite ruthless with checking whether it’s caught on. If it’s not, pull it out” (R.1 (on-line)). “That’s a worry for us if people find themselves in a situation where they think they’re the only person there, then they’ll leave” (R.9 (wireless)).The editorial team evidently plays a key role in triggering participation and calls upontools, such as provoking questions, topical subjects, polls and competitions, toencourage visitors to make the initial contact: COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People “You need someone in there kind of agitating, throwing things about” (R.4 (on-line)). Promote “So you would write pieces, get people to respond to it, do competitions, do as many traditional tools of the trade as it were Participation to kick things off” (R.1 (on-line)). and Stimulate Interactivity “What we have got to try and get you to do is to click and chat or somewhere in the text, put a text that says, “What do you think? E-mail us”. At some point you have got to convince the users to take action, to do something. That’s the key” (R.2 (on-line)). COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People Promote “Polls are excellent for just keeping people engaged; member of the day, gaming fan of the day, quote of the day or best comment Participation of the day from a discussion board.” (R.10 (wireless)). and Stimulate Interactivity “I tried to kick start the community more by putting in some 48
  53. 53. (continued) messages. It does work” (R.8 (wireless)).The communities under study have also used member-generated content to complementthe content published by the editorial team in order to stimulate interactivity betweenmembers. Content received from individual members, for example, is broadcasted backto the rest of the community and member-generated content is transferred between thedifferent sub-communities that occupy the community site: COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People “We try to convert the e-mails because they are just one-to-one, Member- “Let see what everybody else thinks, can you post your Generated comments on the discussion boards?” to try and get something with interactivity” (R.2 (on-line)). Content Cross- “Sometimes, we have conversations going on and then we’ll take that topic and put it on the message board for the rest of the Pollination community to answer and to discuss and that will again prompt Between more conversations about it within the chat” (R.5 (on-line)). Sub- Communities COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People Cross- “You might set up a subject on a notice board […] See what else is going on in other areas of the web site that you might be able Pollination to feed into or pull across” (R.1 (on-line)). Between Sub- Communities (continued) 49
  54. 54. Once a user attempts to join in, the data emphasises the importance of ensuring that theyare never ignored: COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People “If you go into a chat room and there are forty people there and you say, “Hi, everybody” and they all ignore you, then you have an issue” (R.2 (on-line)). “Everybody is very open and very chatty and tries to include the others”( R.5 (on-line)). Sense of “When someone joins the community or the forums, first of all they Inclusion get a welcoming message saying, “Welcome to the forum, this is the way you have to do it”. You are not left on your own” (R.11 (wireless)). “We’ve now implemented what we call a ‘hostbot’, which is an automated robot, which wanders around the community, looking for people who are trying to chat with somebody, but have not got a response” (R.9 (wireless)).At this stage of community development, the findings indicate that the visualstimulation created by the richness of the content plays an important role in enticinglurkers to engage with other community members: COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People Visual “I was really impressed with AOL, it spoke to you, it had wonderful sounds and colourful screens. I showed my mum AOL, she liked Stimulus that. She could see it, she could visualise it in her mind easily, whereas I was young enough, I think, to map this Internet to myself and my mum was not able to, “Look, this is a community. This is a discussion forum” and my mum said, “Yes, but it is just text”. But I could view the community through the text and she could not 50
  55. 55. because it was just text. But with AOL, they actually put nice folders, lots of chat icons and forum icons” (R.2 (on-line)).The community managers highlight, however, that rich and attractive content cannot bedownloaded or displayed on mobile phones due to the limitations of current wirelesstechnology and the user interface of cellular handsets. SMS technology is limited to 160characters of text. The speed of data download with WAP technology is extremely slowand the graphics that can be displayed on the screen of current mobile phones are small,black and white and of poor resolution. The current wireless technology cannot,consequently, generate strong visual stimuli. Furthermore, text restriction makes itdifficult to demonstrate popularity: COMMUNITY MANAGEMENT Engaging QUOTATIONS TO SUPPORT People Inadequacy “I guess the two things are the lack of visual stimuli on a wireless device, particularly as we live in a visual world. It is quite of Current important when we talk about communities. So that’s one issue Wireless that we had to think about and the second one, which is a much Technology more practical one, is that a wireless device, it’s a lonely pursuit, it’s just you and your mobile phone. How do I know there’s anybody out there in that world? Because there is no way of seeing, there is no way of knowing. When I’m on the web, I can tend to see activity, but if I’m on my phone, I don’t see activity. These two things are quite important for us to convey to people. One, because visual stimuli helps us set the environment the community is operating in. Two, people only want to join 51
  56. 56. something when there are lots of other people on board, so we have to make them believe and understand that there’s a lot of people out there. That can be quite hard to do on a mobile phone with text messaging” (R.9 (wireless)). “In terms of the volume that you can send over SMS, the information has to be concise and to the point and relevant, which is a challenge for a content-rich site as we are. Not a lot of our content per se is suitable for SMS” (R.4 (on-line)).Virtual communities are born out of groups of people using ‘many-to-many’ interactionin a public space, where they can choose who to meet, develop relationships and bondwith one another. It is, therefore, vital to enable members to locate each other bycreating a comfortable environment in which they can interact. Although the data showsthat it is technically feasible for innovative and resourceful community hosts to enablemembers to find one another in today’s wireless space (i.e. without having to visit anon-line web site), wireless technology and devices do not currently allow communitymanagers to make this space user-friendly and easily accessible: COMMUNITY MANAGEMENT Community QUOTATIONS TO SUPPORT Development Inadequacy “When we set up the mobile chat service, we really wanted to be of Current absolutely only mobile-based, with no web site. We recognised Wireless that this was just going to be impractical and we would be doing Technology ourselves a disservice. So, we have created a web site, which, I think is a more important point than we originally thought it (continued) would be” (R.9 (wireless)). “For finding other members the on-line side of things is essential. There is no way from your phone to actually find other members […] The main problem is that you can’t really browse a profile information about a user from a handset and if I want to 52

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