The Online Service Equation
Communities are more cost effective than content-focused services because they positively influence each of the four factors in the online service equation:
- Members create content which reduces the cost to produce the service.
- Active members establish reputations within the community, become committed to remaining and tell friends about it. These dynamics contribute to increasing the average customer life and decreasing the average cost of customer acquisition.
- Marketers will pay more for access to committed, active community members who constitute a tightly-focused target market.