The internet is getting busier. The digital world is becoming crowded with increasing online ads, content, and clicks fighting for your attention! Like a vast digital city where countless billboards are popping up in more places than you thought possible, highway traffic is growing, and vehicles are driving faster than ever before.
AI Prompt: Busy Digital city with lots of billboards
Attention spans are deteriorating, and a variety of other factors are causing Customer Acquisition Costs (CAC) to rise faster than the popularity of avocado toast at your local hipster cafe. So you might wonder, “What’s the next strategy brands and businesses should be focusing on?
Well, you’ve come to the right place. Buckle your seatbelts, and join me on a quick ride to learn more.
My name is Dan Rodman, Co-founder at CoUnity, a community engagement agency focused on delivering systems and strategies to build sustainable customer loyalty. We started with success in the web3 space where community is critical, we’re now evolving to work with traditional brands. Because, let’s be honest community is everywhere!
Now, no texting and driving. Consult the AI Mapquest graphic below for directions and turn down a road of understanding for what your business needs to focus on to grow.
First, let’s start by taking a look through the stats and facts that summarize the reality of increased digital acquisition costs across a few areas. I broke these heavy-hitting facts into E-Commerce, Google (SEO), Social Media, and GDPR.
92% in search engine market share [Source] & generative AI answers [Source]
80% of marketers [Source] & 5.2% Facebook reach [Source]
Despite this very real data for customer acquisition online, in the world of marketing agencies and brands, they are still very much using the same old playbook. There’s an allure to the tangibility of acquisition metrics and the immediate gratification these campaigns might bring. New users? New contracts? New customers? More traffic? Keep the sexy talk coming, and mmmmm the vanity metrics...so smooth and so clean.
And of course, the companies/clients love this crystal clear information.
Ai Prompt: Clean Data
I love a well-worn cliché, and the conversation around acquiring a new customer costs more than retaining an existing one is currently more valid than ever. Recent studies show that on average (with variations by industry), it's approximately 5 to 7 times more costly to acquire a new customer than it is to keep an existing one.
But we’re humans we’re attracted to what is well-defined and “new”. As my distracted boyfriend meme below displays...
So, let’s get our head on straight, distraction-free, and show a little more love for the customers we’ve got. Don’t get me wrong fueling business growth and getting more market penetration from acquisition is important. It is not a matter of either, or - it is about making the right decision on the balance of focus. And currently, the scales seem out of wack to me. Here’s some research to back it up...Only 40% of companies and 30% of agencies have an equal focus on acquisition and retention.
Keeping customers engaged with your business is an area where you are leaving money on the table.
In a recent study analyzing Customer Lifetime Value by Frederick Reichheld of Bain & Company (the inventor of the net promoter score), we see that increasing customer retention rates by 5% increases profits by 25% to 95%. Let’s pull the clutch in and rev-match the engine with these companies to see how they address it.
Better Customer Experience + Customer Service = Increase in Customer Satisfaction + Customer Loyalty.
McKinsey did a study on customer care in 2022 and found across 160 different industry leaders their key focuses in retention were to improve the customer experience (CX) and reduce the volume of support contacts made.
Strategically it makes sense, to ease the friction in your product and create a simpler smoother customer experience which in turn will reduce the amount of customer service required. And if, customer service is required, make it a smooth, easy, resolving journey.
Sounds easy!
But of course, there are difficulties associated...
Customer Experience: It can often be difficult to get the right information to make the improvements that matter to the customers. Collecting this information can be costly, from incentivizing feedback forms to bringing in consultants! Once information is collected then the investment has to be made to implement those changes.
Customer Service Teams: The great attrition of people quitting their jobs hit the customer service industry hard over COVID. I mean who doesn’t love getting yelled at all day about an effect your company or product had on a customer? (Yes...I’m being sarcastic)
And speaking of increasing customer retention, you also have to think about employee retention when it comes to well-performing and experienced customer service employees! Especially with more technical products as it can be arduous to train new hires here.
So with increased compensation and training for new roles, it can become an expensive avenue for companies.
AI Prompt: Futuristic Customer Service
Another large research study from Microsoft (Global State of Customer Service) also confirms the importance of customer service right in their introduction, “90% of respondents indicated that customer service is important to their choice of and loyalty to a brand”.
And speaking now to loyalty, not only are customers expecting more with customer service but with the increasing digital age it brings even easier access to more options in brands.
Gen Z are not afraid to explore their options. Jess Huang from McKinsey put it well in an interview:
“It’s not that consumers are necessarily becoming less loyal. Now it’s just so much easier to access them and so much easier for them to try something new. So brands are really trying to figure out a way to develop and maintain that relationship with the consumer.”
AI prompt: Brand loyalty
Let’s take a quick pit stop and do a little summary check-in.
We understand the value of retaining our customers. But collecting valuable customer feedback to improve the experience, ensuring responsive and helpful customer service, and cementing our brand loyalty can be daunting.
This is where I’d live to dive into a solution that can be the compass of customer experience, the perfectly shaped piece to the puzzle of customer service, and the magnet to alluring brand loyalty.
COMMUNITY.
Let’s get over to the onramp and pull into the suburbs. One of the first places some of us start to think about our local communities, but for the case of this article let’s keep it digital.
There are many definitions of community, here’s how I look at the word itself. Let’s break it down into two words, “common” + “unity”... put it together fast and say it 10 times, and voilà.... Community.
Seriously though it is all about creating a space where people are aligned with a common union. What sets it apart from social media is the connection capabilities, degree, and direction.
Social media is a 1-to-many-connection type. There is a creator/brand/business and then there are the consumers that receive the flow of the content. See my extravagant graphic design skills showing the flow of info content being a one-way street.
Whereas, Community is a many-to-many connection type where people can have conversations with each other, give suggestions, contribute, and even self-organize under the umbrella of this common unity or shared interest. Another way to define this difference is to think about it in terms of, do you have an audience who views your content or do you have a community that helps you define, refine, and create it!
Community Business Value 💼
There’s a great framework (SPACE) from the clever folks at CMX that outlines what the most common types of communities exist and the value associated. You’ll notice that some of these community personas directly address the large retention issues mentioned above.
So double-check your seatbelts, plot twist, this car is a flying car and we’re taking a brief detour vertically, up into SPACE!
*To follow the links here in this graphic^, click here
We at CoUnity know there is a large advantage in creating systems that integrate the different benefits of each type of (SPACE) community. It’s just about finding the right recipe of systems, incentives, and goals to drive a higher combined community value for the target cuisine.
CMX’s Community Value and Metrics report polled more than 500 community builders and asked which of the SPACE-type communities they believed were the most relevant to their community.
No surprise, similar to the research before the SPACE framework, Customer Support ranked as the most popular response (see chart below).
So let’s dig into the customer service use case with more details.
APPLE 🍎
I’m a big fan of some rough napkin calculations, so let’s go through a little rough analysis of the example that I gave above in the Support type community, Apple.
The Apple Community gets multiple questions every minute. I flipped through the forum a few times at different hours throughout the day and found an average of roughly 420 questions asked every hour. This extrapolates to roughly 10k questions a day!
AI Prompt: Community supporting Apple
Now if we utilize a little Glassdoor compensation search we see that a base level Apple Technical Support Advisor averages around $19 an hour (USA). Now this is an unburdened wage, so If we look at the additional costs to Apple with health benefits, etc., a conservative 25% could be added to calculate a cost of $23.75 / hr.
Let’s say Mr./Mrs. Support Advisor was able to resolve an issue every 5 minutes. Now I’m not going to dive into Apple work-life culture, as I’m sure it’s pretty awesome, we’re going to assume this support tech is working from home. If he works 8-hour days with an hour lunch and 2 breaks, he gets about 6.5 hours of focused work in a day, which is 390 minutes of work, for a $190 cost to Apple per day, where they resolve 78 problems.
Getting to the bottom of my napkin, I can see that this is a cost of $2.44 per question. I’ve made a lot of assumptions and I’d assume Apple is pretty efficient but here’s an example from Gorgias (helpdesk product) where the cost per ticket for an e-comm store was $2.73, so I don’t think I’m crazy far off.
Finally, after all those quick maths, we can see the rough cost for Apple to answer all the questions in the community themselves each day would be roughly $2.44 * 10,000 = $24,400 per day. Or almost $9 million per year!
AI Prompt: Apple burning Money
Now, I made a lot of assumptions here and you know what they say about assumptions (they make an a$$ out of you and me)...
So how great would it be if an experiment could have been done where Apple removed access to their community and then monitored and measured the cost of not having that community support there?
Well... let me tell you, there’s a hero case study done here by a leader in the community space, Richard Millington, and his community consultancy business Feverbee.
I call it a hero case study because he managed to convince a client to do something pretty crazy. He convinced them to actually do this experiment; They shut down access to their community and measured the impact. I’ll give the TLDR but his article overview of this experiment is a great read and can be found here.
This client of theirs had 93% of the traffic to their community coming from search engines. So they removed that traffic source. This resulted in an 83% drop in traffic, some people still clearly had bookmarks or found other listed links to get into the community. This then caused the following...
The number of tickets to other support channels increased by 58%
Overwhelmed support team dropped their average response time by 35%
Customer satisfaction scores dropped from 4.3 (out of 5) to 3.8.
Ouchhhhhh this is a train wreck ....
AI Prompt: Train wreck about to happen
This was no napkin math. The actual cost calculation for this company driven from the data (not my assumptions) looked like the following...
This community attracted 2.95 million unique visitors per month
1 out of every 207 visitors to the community contacted support
With typical support channels costing $18 per contact
The community was reducing support costs by $213,000 per month
With a community budget taken into account of $725,000 per year, the community can deflect roughly 142,000 calls and support tickets.
This results in a cost per contact from the community at roughly $5.10 or 72% cheaper than the standard support channels
💡💡💡💡💡💡💡💡💡💡💡💡💡💡💡💡💡
Once the experiment was over, we found that the conversation within this company shifted from whether a brand community is worth the cost to how do we drive as many people as possible to visit the community before calling support?
- Richard Millington (FeverBee)
So if you're on the fence about it, you can see that there is quite a bit of value and use-case possible for a community to play an important role!
I believe Communities undoubtedly offer tremendous value, but they're not without challenges! From moderation difficulties, potential loss of control, and privacy issues to the risk of becoming echo chambers and member burnout, it's essential to approach community building with foresight and preparation.
Having navigated the NFT world with a Marketing Agency, I've found a deeper purpose in shaping community spaces to enhance consumer experiences. My conviction in Community's potential only grows, and it's at the heart of my endeavors at CoUnity.
If the power of community resonates with you, and your curiosity is triggered, I invite you to connect. There are a variety of ways to get in touch with me here...
➡️➡️➡️ Contact me ⬅️⬅️⬅️