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The 2008 Tribalization of Business Study that was released last week led a lot of people to conclude that online communities do not work and that companies are spending too much money on making them happen.

Well - there is some of that and then there is a whole other side to the story that we uncovered as part of the study.

Let me use this post to clarify some of the misunderstandings in the interpretations of the business community study results.

Do most online communities indeed fail?

In fact we found many very successful community examples in the companies that participated in the study - many of them well known and well documented case studies, some less so. We should also point out that most communities that were part of the study are less than 1 year old - so we do not really know whether they are successes or failures.

It is true that many communities fail, and will continue to do so. When they do, however, they do so for very similar reasons - so you’d think it should be fairly easy to avoid the pitfalls.

The first reason is that many companies who embark on community initiatives are putting their company or product at the center of the effort. As many pointed out, that is obviously WRONG - you need to put the community member at the center and make sure that there is some passion around the initiative.

Do companies spend too much on Technology?

The second main reason for community failures, and one that got misinterpreted by many, is that companies are starting community initiatives by focusing on the technology first. It’s not that they are spending too much on technology, it’s that the technology platform is not what is going to result in the dynamics of increasing return that characterize successful communities.

Should all companies have community initiatives?

If you can create a place for your customers and prospects to come and share their passion, and that place does not yet exist, then you should absolutely try to have a community initiative. But don’t be blinded by “the not invented here” syndrome - maybe the best way for your company to leverage communities is to go on Facebook, MySpace or some other community that is user controlled, like the Tivo community used to be.

As some pointed out, there is another big reason why companies should always think about affiliating with other communities - and that is that people will only participate in a limited number of communities. I won’t participate in a Bank of America small business community and a Microsoft small business community and maybe a few others - I only have so much bandwidth.

When is $1M too much to spend on a community?

Many jumped on the bandwagon that it is unbelievable for companies to spend $1M on customer communities…[update 07/21 @7:45pm ET - only 6% of the companies who participated in the study spent more than $1M on their communities]

Maybe yes, maybe no…

If you are small startup, then $1M is definitely way too much. If you are a bigger company and spend $1M on designing a slick community with worthless technology bells and whistles, then that is too much to. But as I wrote by using the example of Bank Of America, in some cases companies are not spending enough to make a difference with their online community. If you are a Fortune 50 company with billions of dollars in revenues, and routinely spend multiple millions of dollars on advertising media, then only spending a few hundred thousand dollars or even a million dollars on your community will just not move the needle. And if the goal of everything you do is to create new customers in a way that will make a difference for your company, then you need to invest appropriately.

Now if you are going to spend $1M - you have to make sure that the investments need to be made in content creation, moderation and awareness development (no, I did not say advertising or direct mail ) to support large numbers of users.

Do CMOs get it?

Talk about a loaded question…but since many were quick to dismiss the capabilities of marketers it is one that I thought should be addressed.

And the answer again is - some do, some don’t, and many are trying to figure things out.

Some are indeed looking at communities as another channel through which to interrupt their customers and prospects with product messages - and most of them fail fast and miserably.

Some don’t quite get what they inherited and keep it small and contained so that it does not make it on their radar screen.

And some know that it is transforming their role and giving them a renewed chance to be the key market strategist at the executive table and the representative of the voice of the customer within their company - and those are the ones who are reaping all the gains.

So, again - do most communities fail?

Our study did not show that. But yes, many community initiatives do fail - either because nobody comes (or they come once and then never come again), or because they fail to move the needle for companies and do therefore not receive the executive attention that they deserve. As I said before, the reasons why they fail are very similar from one case to the next and should therefore be avoidable. But there are many case studies where companies delivered game changing results to their company’s bottom line - and the reason why they succeeded are very similar as well.

For the second time in six months I got to listen to the Fiskateer case study at last week’s ANA Conference on Marketing Accountability. This time it was co-presented between Jay Gillespie, the VP of Marketing at Fiskars and Spike Jones, the Firestarter at Brains on Fire.

The folks at Fiskars did a lot of things right in order to build this community - they found an area of passion, scrapbooking, and they put the users at the center of their community, not their company nor their products.

In a nutshell, the Fiskateer community is a community of passionate scrapbookers who are helping one another in every aspect of the hobby - from providing social interaction guidelines for the community to finding the right tools for the job. A handful of community leaders are paid by Fiskars, all others are volunteers.

What started as a modest PR project, with a goal of recruiting 250 community members within 6 months, ended up with a movement of 5,000 passionate fiskateers in 18 months. In fact they achieved their original goal of 250 members in less than 48 hours. Another goal was for them to increase chatter by 10%, which they instead grew by 600%. They also blew past their original goal of increasing store sales by 10% and instead increased store sales by 300%.

What’s even better is that the program, which was originally funded by Fiskars at the tune of $1M, is now fully paid for by the box stores.

And just like we found with our own study on how companies leverage communities, they had some unexpected benefits from their community, including:

• The participation of the community in the R&D process
• Having the community members create better advertising than they used to
• Having community members take over much of the customer support function
• Having the community rally around the company when they had a PR crisis on their hands.

The key to success, said Fiskars’ Jay Gillespie, is to keep yourself accountable to the fans - not the company.

When companies deploy successful communities, the benefits are not level-setting; they are truly game-changing.

I was invited to blog the latest ANA marketing conference on marketing accountability in Dana Point earlier this week. Due to the lack of Wifi at the conference and the launch of the 2008 Tribalization of Business Study yesterday I have not been able to get to write up some of the great points that were made at the conference. I will do so here and over at the marketing 2.0 blog over the next few days.

Bob Loidice, the President and CEO of the ANA, opened the conference with a pretty strong message to attendees - It’s Time to Reinvent Marketing. With technology having put the customer in charge, you need to think about all aspects of marketing differently - think differently about the buyer, think differently about media, manage your brand differently and think differently about your measurement platform.

It’s a message that I had not heard at a variety of other advertising conferences which I attended in the last 18 months - where most attendees and speakers were still very much in denial of the tsunami that is currently hitting marketers all over the world. Although I think I did hear Bob say that there are new tools for consumers to “receive” messages, a glitch which I’ll attribute to a lifetime of working in the advertising industry, his message was very strong and well informed.

In his welcome address he listed companies who are doing it well - including:

• GE, which developed a complete new system for marketing management
• IBM, which completely transformed itself (although I believe that would not have been possible if they had not experienced a “near death” experience)
• Google, with its Adwords business model
• Apple, with the iPod
• Toyota, with their extreme Six Sigma focus
• Burger King, where they outsourced just about all marketing to consumers
• Philips Norelco, with their clever Men Grooming campaign
• Mastercard, with their Priceless campaign
• Unilever, with Dove redefining beauty
• Best Buy, with their organizational changes that eliminated the importance of “face time”
• P&G, with their content driven pampers campaign

He also reviewed some of the depressing stats that characterize the state of marketing accountability in companies today - including the fact that 40% of marketing departments have goals that are internally focused instead of goals that are in support of corporate objectives, and that 30% have no measurement system in place whatsoever. No wonder that the marketing budgets are the first ones to go when the economy hits the skids - apparently with 60% of marketing budgets being decreased in this latest downturn.

The study on tribalization of business which we (Beeline Labs, my new company), Deloitte and the Society of New Communications Research (where I am a senior fellow), produced this spring/early summer is out.

There were some real interesting takeaways from the study, many of which I have been writing about in more detail over the past few months. They include:

• The worst practices (i.e., build it and they will come, focus on technology first, etc.) for managing communities are well entrenched and will continue to cause many community efforts to fail.
• Business communities have the potential to transform the role of the CMO, but for that to truly happen it will take some new management thinking
• There is a significant mismatch between the goals that companies set for themselves and their size and the associated investments and measurements that they use to measure the success of those communities.

If you would like a briefing on the findings, please contact me (francois [at] beelinelabs.com or 617.899.1698) and I will arrange for you to get one.

On July 30th, you can also join us for a webinar debrief which will be hosted by Deloitte and for which you can register here.

Over on the Marketing 2.0 blog, I wrote about the importance of thinking big about your corporate community efforts if you want to have a real impact on your business and if you want to make it onto the CMO’s agenda. I would love your feedback.

Thinking about the issues of scale that large companies need to be able to achieve in order to make a difference also made me think about the importance to affiliate with others in order to provide a valuable service to a community. If a company needs hundreds of thousands or millions of small business community members to make a difference, they will never succeed if 10 other companies are vying for those same members by creating their own separate communities. If, however, they could find a set of partners who deliver complementary products and services, then together they could attract a critical mass of members and achieve their goals…

More on this thought later - I would also appreciate your feedback.

While Facebook is a great place to bring like-minded people together and engage with them, it is also an extremely painful environment for community moderators to manage their communities.

As some of you may know, I started a Marketing 2.0 community on Facebook, intended for marketers to discuss the future of marketing. The group took off rather nicely and we were able to conduct many interesting open mic discussions with industry thought leaders. As the group became larger a couple of things happened:

• I no longer had the opportunity to communicate with the community members (after 1,000 members or so, some bright Facebook person decided that you should no longer be able to communicate directly with your community members)
• The group slowly became overtaken with spammers - and with the lack of tools to manage spammers, it became unmanageable to clean up the space without spending an incredible amount of time on the task.

Since I still wanted to create a space for marketers to talk about the future of marketing, I created a new group at www.marketingtwo.net with a companion thought leadership blog at www.marketingtwo.com - both of which are taking off nicely, another proofpoint that there is a need for this kind of community/conversation.

That left me pondering on what to do with the Facebook group. On the one hand it was becoming too time consuming to keep it clean and on the other hand I did not want to give up on a community of 9,500+ members without at least trying. But I also did not want to have it become a public spam pit. So as a first step I closed down the group and invited some other volunteers to help me manage the space. That worked…and for people who requested to join the group I would send them a nice note explaining what we were doing and how they should/should not engage. After sending out 10 or 20 of those notes, I got a warning message from Facebook that I was spamming members and that they would shut me down.

So some other brilliant community person at Facebook now decided that I should not be able to communicate with people who request to join a community which I set up and manage… WTF????

The laws of increasing returns associated with communities is what will make people stick with Facebook in the long run, even if some other and better mousetrap appears on the horizon in the near future. Doing everything possible to make communities NOT work within Facebook is one of the biggest mistakes that Facebook is making.

One of the all time success stories in the gaming world was the Halo series of games for Xbox and Xbox Live. It still puzzles me that the games were rated M (mature) as there are a lot of T (teen) games that have a lot more gore and fighting in it than Halo. At some point I thought it was a clever marketing ploy to make people want the game even more.

Many of us bought the game for our teenage kids, and while I do not have exact numbers, I bet you that a majority of players were teens.

The game keeps evolving through the download of special maps - blueprints for specific game play. If you do not have the latest maps you cannot play games with friends that use them.

All of sudden Microsoft decided to prevent child accounts (less than 18yo) from downloading Halo maps. The only way kids can play the new maps is by starting a new account and lie about their age. That of course wipes out all of their standing in the game - something many kids are very proud of, and which is totally part of their online persona.

That’s not all - apparently Microsoft also decided that Live Messenger is not for teens, so they cannot use that either. I wonder what market research showed that Live Messenger would not be of interest to teens or could potentially be harmful to them…

What are they thinking? Not only are they alienating an audience that is key to their future success, they are also alienating the parents of those teenagers. I like to think that I am in charge of what my son will watch and play with, and that I do not need the help from Microsoft to make that decision for me.

Or is this another example of the tyranny of the minority - where a small group of freakish parents contaminates the well for the rest of us?

As a product marketer I have always been a big believer in verticalizing. After all, and unless you have an inherently horizontal solution like accounting software or customer relationship management crap software, the context in which your solution will be used will be very different depending on the industry in which it will be deployed. So if you are selling a collaboration/enterprise 2.0 solution to an automotive supply chain buyer, or to a team of people in pharma who will use it to support their clinical trial process, the issues that you will face and the barriers that you will need to overcome to ensure a successful deployment will be very different. So different in fact that it might make sense for you to rename parts of your product to better fit the process and the industry that it will support. This combined with the fact that early majority buyers prefer to buy based on recommendations from peers from within their own industry is why you need to verticalize.

This week someone asked me what industry we were focusing our marketing innovation firm on. When I told him that we had clients in a variety of industries he seemed surprised. In reality, and especially when you focus on big M marketing as we do, the issues are fairly similar across multiple industries. This week I was fortunate enough to speak with clients or potential clients from within a variety of industries - ranging from apparel retail, to a large retailer focused on small businesses, a large consumer software company, a large enterprise software company, a small startup in the mobile space, and a large professional services company. Guess what? Their issues were all very similar - how do we reach customers and prospects who don’t want to hear from us but would rather hear from peers? How do we measure progress and success of programs and know that we are doing OK in this new social media space? How do we build new products with a higher likelihood of success? And more…. And the answers to all these questions and across all industries are very much the same. In the end it all comes down to understanding individual people behavior - it is the same person who buys clothes at the retail store over the weekend, buys desktop software for the home computer, and makes multi-million dollar purchase decisions for enterprise software.

In fact marketers could benefit greatly from cross-industry learning.

Of course, and because of the referencability issue with early majority buyers we still need to make sure that we quickly have multiple referencable customers within one industry before jumping to the next, but the need for verticalization in marketing is otherwise not needed.

In speaking with Victoria Axelrod a couple of weeks ago it dawned on me that the reason why I have over 9,000 people in the marketing 2.0 group in Facebook and already over 200 in the LinkedIn Marketing 2.0 group is not so much because those 9,000 people want to discuss the future of marketing but because they want to have the marketing 2.0 moniker associated with their profile. That would also explain why the Facebook group was overtaken by spammers and why far fewer people are joining the marketing 2.0 group which was set up as a companion discussion to the marketing 2.0 group blog.

Another great reminder about the fact that people do not care that much about what you do - they care about themselves in the context of what you do. In this case they care about their association with something 2.0…not the discussion itself.

Following Wednesday’s post on how not to treat social media as another channel, which got a fair amount of reaction, I expanded on the idea over at the Marketing 2.0 group blog.

In the post I took a closer look at how social media totally transformed all aspects of the marketing game except the end goal - creating a customer. The rules, the players, the scope, the tactics and the added values all changed because of the advent of social media - a widespread platform of participation.

I hope you will be able to join us in the conversation in the Marketing 2.0 community.