December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

The case for Online CommunitiesA McKinsey–Jupiter Media Metrix study

Winter 2001

Communities1.

Findings

3.

Methodology

2.

December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

Introduction1.

A McKinsey–Jupiter Media Metrix study of visits to Web sites by 40,000 consumers shows that chat rooms, bulletin boards, product review pages, and similar community features create substantial value for both retail and content sites.

What does "substantial" mean?

Users of community features at the Web sites we studied generate two-thirds of their sales despite accounting for only one-third of their visitors. Users who contribute product reviews or post messages visit these sites nine times as often as nonusers do, remain twice as loyal—and buy almost twice as often. Even users who read but don’t contribute to community exchanges are more frequent visitors and buyers.

Web sites of every kind are under pressure to show profits, so these findings suggest an important—and largely untapped—opportunity. Only one of the top ten apparel sites, for instance, and two of the top ten general merchandisers now offer community features.

The study reflects site usage in the year 2000. But Follow-up interviews with industry leaders, conducted in October 2001, confirmed the validity of the original findings: that the use of community features remains strong and is an essential element of on-line success.

Findings

3.

Methodology

2.

The case for Online Communities

December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

The seven e-business models

To identify the ways community features could affect the financial performance of on-line businesses, the study divided them between two categories—business to consumer (B2C) and business to business (B2B)—and identified seven broad business models, chosen on the basis of interviews with industry experts and managers of e-businesses, as well as the available data.

Methodology2.

Findings

3.

Source: McKinsey quarterly /electronic commerce

December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

How community features build value

The study then identified the relevant value drivers for each model and studied the impact of community features on 17 major consumer sites.

The analysis of B2C sites provided direct evidence for an on-line community’s impact on four of the six value drivers studied—and, in particular, for three of the five drivers of transaction sites and three of the four drivers of content sites.

Methodology2.

Findings

3.

Source: McKinsey quarterly /electronic commerce

December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

Findings3.

One-third of all users but two-thirds of sales

Users of community features represent about one-third of all visitors to the leading e-tailing sites studied but generate two-thirds of their sales.

Source: McKinsey quarterly /electronic commerce

December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

Findings3.

Users of community features are twice as loyal

The study found that the more a person uses the community features of a site, the more that person tends to visit it and to make purchases there. Users who contribute product reviews or post messages visit sites more than nine times as often as nonusers do, remain twice as loyal—and buy almost twice as often. Even users who read community exchanges but don’t contribute to them are more frequent visitors and buyers

Source: McKinsey quarterly /electronic commerce

December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

Findings3.

How community features enhance content sites

For both news sites (CNET.com, CNN. com, Weather.com) and entertainment sites (Discovery.com, ESPN.com), community features boost performance on several key metrics.

Users of community features visit sites more often than nonusers do, as well as spend more time, view more pages, and remain more loyal. As a result, sites can sell subscription services, offer advertisers a more targeted audience, and mine valuable market data

Source: McKinsey quarterly /electronic commerce

December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

Findings3.

What the best sites do

What constitutes best on-line practice? Top-performing sites excel in three key areas.

Source: McKinsey quarterly /electronic commerce

December 2001 © Michael Klemen / Company Private

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e-marketing .... the case for Online Communities

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