Should firms pay for online brand communities: Using lead user theory in analyzing two contrasting cases

Highlights

• Firms may not need to financially sponsor their online brand communities.

• Unpaid forum leaders increase consumers' participation for product innovation.

• Brand knowledge increases consumers' participation through brand trust.

• Brand knowledge directly increases participation in consumer-initiated communities.

• Brand knowledge only works through brand trust in company-initiated communities.

Abstract

Despite the importance and benefits of Online Brand Communities, there is little discussion in the literature about whether it is necessary for a firm to financially sponsor its online brand community. By incorporating brand trust, brand knowledge, and reciprocal behavior into Lead User Theory, this paper studies what influences consumers' participation potentials in new product development. Two online survey instruments are employed, and data is collected from two matchable well-known IT companies for two types of online brand communities: Company-initiated and Consumer-initiated. Two separate parallel Structural Equation Modeling analyses are conducted to test these two matchable samples and assess the research model. Our findings suggest that firms may not need to pay to sponsor their online brand communities. We infer our conclusion about company-sponsored communities from our findings that brand trust and brand knowledge play different roles for company-initiated and consumer-initiated online brand communities. Brand knowledge directly impacts consumers' participation potentials in consumer-initiated online brand communities, but only indirectly impacts through brand trust in company-initiated online brand communities.

Introduction

In the Internet era, global enterprises, especially those with decentralized business structures and geographically diverse operations, are facing a rapidly changing environment. These organizations use electronic knowledge-sharing networks to leverage expertise within the organization, reduce the costs associated with solving reoccurring problems, stimulate innovation, and learn from mistakes [[1], [2], [3]]. This use of knowledge-sharing networks, in turn, is leading firms to host virtual consumer environments [4] to attract customers' attentions and promote their involvements in product development and product support activities. One of the most commonly used types of virtual customer environments is an online community, a collection of consumers over an Internet platform [5]. Online communities engage in collective action [4] and connect organizations with their customers, employees, and business partners [6,7]. Online communities are also sources of product innovations and customer support [8,9]. They are capable of serving as platforms for deriving new business models [10]; providing the public with useful information [11,12] and emotional support [13]; creating sites for political and social discussion [14]; and facilitating social networks [15,16].

Microsoft's online brand community (i.e., “Microsoft Community”) uses the support provided by its “expert” customers in its online forums to preserve the level of product support services, and to collect valuable product improvement and development ideas [17]. Additionally, the Italian motorcycle company Ducati uses the technical knowledge of its customers to generate new ideas for its next-generation products through its online forum, called “Ducati Tech Caf蔹 [10]. Despite the importance and benefits of the online community, there is still little discussion in the literature about whether it is necessary for a firm to financially sponsor its online brand community. Jang, Olfman, Ko, Koh and Kim [18] classify online communities into two major categories of communities: consumer-initiated and company-initiated. In both types of online communities, firms use consumer participation to assist with product development. The present study focuses on these two types of online brand communities and is designed to answer the following research questions:

• Is it necessary for a firm to invest money in sponsoring an online brand community?

• Is a company-initiated or a consumer-initiated online brand community more successful at fostering brand trust?

• Is a company-initiated or consumer-initiated online brand community more successful at accessing consumer ideas for product feedbacks and innovations (brand knowledge)?