Musing about Communities and Pricing

Spirog4Soon everyone on earth will be connected. It’s over.

People are getting connected. Things are getting connected. Whole communities are getting connected. And when communities get connected, other things begin to happen. They become markets. Entire markets in themselves. And at the same time participants in larger markets. It’s fractal, small pieces exhibiting the same characteristics as the larger whole they form part of.

Life used to be about things physical. And in the physical realm, shops were where you went to inspect and sometimes buy products and services. Shops were collections of products and services; shopping malls were collections of shops, larger aggregates of products and services.

Communities, on the other hand, are collections of relationships. Not products or services.

These relationships in turn lead to conversations. Which in turn lead to transactions.

Relationship before conversation before transaction, as Doc Searls reminded us in The Cluetrain Manifesto. An amazing book, now nearly 13 years old, one that laid out for us in glorious Technicolor what’s happening now in communities and markets. If you haven’t read the book, stop reading this post and go visit www.cluetrain.com and read the book. Better still, go buy the book, it’s worth it. [Disclosure: The Cluetrain Four are my friends. Good friends. And I was asked to contribute a chapter to their 10th Anniversary Edition.]

The Cluetrain Four: David Weinberger, Christopher Locke, Rick Levine and Doc Searls, seen here in a rare “together” time at Defrag (a great conference) a decade after publication of their seminal book.

Customers are now to be found in the communities rather than in the shopping malls. And when they do go to the shopping malls, they remain in community, in relationship with each other. Relationships that are more powerful than the bonds between customer and product or service. Which is why companies are finding that their brands and reputations are now in those communities, exposed to the elements as it were.

Customers acting in community buy in community, not in isolation. Which would not be a problem if customers were homogeneous; but they’re not. Customers are people like you and me. Organic. Amorphous. Sometimes rational, often not. Influenced more by our relationships than by anything else we experience, see, hear, feel. So the community-as-customer is a heterogeneous beast.

Communities have always exhibited some sort of Pareto distribution in their behaviour: some hyperactive participants, some active, some more languorous in their participation, some lurking on the sidelines. Sometimes there’s a visible leadership structure, sometimes it’s more emergent. The open source movement provided considerable opportunity for studying such digital communities, and numerous have been published over the years. For example, here’s an analysis of the developer community using SourceForge  published by Jin Xu and Gregory Madey a few years ago.

The observers, the lurkers, the kibitzers, the languorous, the active, the hyperactive: they’re all part of the community. 1000 lb gorillas and benevolent despots? Part of the community. Moderators and facilitators? Part of the community. “Core” participants? Part of the community. And yes, freeloaders? Part of the community.

Which brings me to my first point.

Everyone in the community is a customer. Some customers will pay, some won’t. Some will engage, some won’t. But they’re all customers. All with the capacity to recommend or pan. All with the capacity to help improve the product, or to kill it. All with the capacity to build deeper relationships between the community and the corporations, or to destroy them.

Which in turn leads to my second point.

Communities expect a range of prices for each product or service. This is not just about “freemium” pricing or related models, it goes much deeper than that. The Kickstarter funding model is a good example. Each product or service will come in a vast array of participation levels, differentially priced. For the sake of argument, let’s call the levels Free, T-Shirt/Mug, Film Clip, Signed Numbered Manuscript, Closing Credits, Opening Credits, Starring Role. Some levels will be abundantly available, some scarcer. So some levels can be infinite in their subscription, while others will be constrained and capped. In addition, where the levels are constrained, communities will expect to be able to trade the participation, sell it on, without fear or favour. [I'll write about 21st secondary markets in a later post, if there is demand for it].

I guess some of you think this is me in my retired-hippie-tree-hugger-Sixties-Utopian mood, imagining things that will never happen. Which leads nicely on to my third point:

This is nothing new, it’s been happening for a long time. We’ve lived in an advertising-dominated age for many years, where the income from advertising was used to defray the costs of providing products and services to a community. Sometimes the costs were subsidised. Sometimes the subsidy was total. But the principle was the same. A small number of people paid large sums of money, the net effect of which was to make something available to a larger community at a price below what it would otherwise have been. Third party pays. Sometimes the subsidy is from the seller, as with printers and blades. Sometimes it’s from other participants, as in mobile phone operators. Centuries ago we called them patrons. But the principle has always been there. Not everyone pays. Of those that pay, not everyone pays directly.

And this brings me to my final point. 

A connected community converges to act as a single, composite customer, organic, heterogeneous, messy. You can’t just connect to the paying customers, or to the subsidisers. Every part of the community expects and demands engagement. And they’re connected, they influence each other. The community becomes as important a vehicle for engagement as the individual customer. Together. Integral. Able to act severally as well as jointly.

In summary: when the customer is a community, things happen differently:

  • Everyone in the community becomes a customer
  • They expect a range of prices for each product or service
  • This is nothing new, it’s been happening for a long time
  • A connected community converges to act as a single, composite customer

Just musing. Views? Comments? Fire away.

 

Cross-posted at ConfusedOfCalcutta