Strategies for Online Communities

How might the networked , asynchronous, low-cost and interactive nature of the Internet impact different strategies to increase demand for a firm’s product? Dr. Frances Fabian (ffabian@memphis.edu) in the Department of Management at the Fogelman College of Business and Economics and her co-authors offer some theoretical insights in the March 2009 issue of the Strategic Management Journal.

A major premise of the article is the importance of recognizing that social communities provide both an informational and socializing role that impacts what products people purchase. The rise of the Internet has made the ability to join specialized and niche communities substantially easier. Moreover, a key aspect of the online community is that members have both overall ratings and counts, but also access to commentary, to quickly assess the community opinion on new products, venues and brands. To the extent members trust their community, or seek to act consistently with their community’s identity, the authors hypothesize an impact on product demand behaviors. By simulating how community demand changes, sensitive to key parameters -- e.g., the propensity to learn from others, the threshold level of opinion needed to sway community members, and the probability of switching across communities – the authors were able to graph how community demand is likely to vary or converge over time, and the ability of firms to tilt demand in their favor to create a “bandwagon” effect.

The article is an important foundation for advancing Internet dynamics on product demand, and for aiding firms in the most efficient use of their resources to reach future consumers. The research team included Kent Miller at Michigan State University, and Shu-Jou Lin of Chang Gung University in Taiwan.