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Musing about communities and prices

Soon 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.

Posted in Four pillars .


23 Responses

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  1. Brian Driggs says

    What I find particularly interesting is how we’re fast becoming a society where we must be all things to all people, while still delivering the feeling of specialized, niche offerings. We are all lurking consumers. We are all hyper-vocal advocates. We are all everything in between.

    I think the future will see new communities built around more democratic, modular scalability. Instead of having centralized teams coordinate growth and operations, I see things being far more distributed. For example, rather than having 1 moderator for every 10-100 users, we strive for a 2:1 ratio, moderator to user.

    People will expect a greater sense of ownership at all price points. I think it’s possible. You can’t eat your cake if you don’t also have cake to begin with, right?

  2. clive boulton says

    Companies took over creating demand from Adam Smiths invisible hand in the demand supply economy from individuals. Now, are connected communities taking over creating demand from companies advertisers? Would explain why Facebook is so hot, and the consensus Google ad-sense model comes under threat from relationships. So its a real question does a connected community create more demand certainly allowing the supply side to concentrate on pricing. Facebook / Google turn into exchanges like LSE / Nasdaq?

  3. Christopher Locke says

    I think miss A has created a brilliant K-pop (I am currently making a deep study of the phenomenon) restatement of the basic Cluetrain principles re markets vis-a-vis corporations. The fist few lyrics of this video are all you really need! http://youtu.be/8TeeJvcBdLA

  4. JP says

    @brian you want two moderators per customer? don’t understand. I get the distributed growth bit but don’t understand the 2:1 as you’ve explained it. Maybe it’s me.

  5. JP says

    @clive the connectedness affects demand and supply side, surely. the main difference is that the demand side now have some power.

  6. JP says

    Roland guitar synths. And now K-Pop. I had to go listen and watch and find the translated lyrics first…. :-)

  7. Rebecca Caroe says

    Take all you say and then slant it into the business to business B2B world. This is where I find clients have the greatest problems “coping” with community as you describe it.

    Most B2B companies live with fear. The fear of giving away too much information, saying something wrong, giving competitors an advantage.

    B2B companies have another fear. Integrated messaging. A New Zealand client hired us to market into the UK for them; but the product range is limited there.
    “Should we use Facebook or will the customer get ‘confused’ because of the different offerings?”

    Each market, each customer, each group of buyers fits into the hierarchy of customer-types. Aim to be the best ‘trade journal’ magazine you can be for your niche and the customer will figure out which of your offerings (from free to paid) she wants and where/how to acquire for herself.

  8. Christopher Locke says

    the relevant bits need no translation: “YOU DON’T KNOW ME… SO SHUT UP!” not so btw, I am continually heartened that the web has enabled this kind of human ebullience to propagate bottom up – both figuratively, and in this case literally. let the kids rock and roll.

  9. JP says

    @clocke it took me a little while to understand what they were saying, that’s why I went for the lyrics. Probably my Calcutta-ear….

  10. JP says

    @clocke “this human ebullience” …. reminds me of a very old book where page one said things like “we are not seats or eyeballs or end users or consumers. we are human beings. and our reach exceeds your grasp. deal with it” You don’t happen to know who wrote those words, do you? Was she Korean? We must have an answer…..

  11. Christopher Locke says

    Yes, that was written by my girlfriend, Kat Herding. http://www.facebook.com/kat.herding

  12. Chris Ellis says

    Life still is about physical things, in many ways the internet has made physicality mean more to us, where we go online isn’t based on physical or economic constraints as much as how much we care unlike our offline world.

    I wondered if you had given any thought to the notion of money as information? Now that the internet has given us these more naunced pricing models you mentioned it means more of the world’s population have access to the global economy. When we spend our money on a project on Kickstarter (or anywhere else across the net) are we, in a sense, talking? And sure, same as it ever was right? But now the difference is that we can see it that feels important, no?

  13. JP says

    @chrisellis money isn’t information per se; but the spending or withholding of money can be a signal, and therefore informs. As you say, same as it ever was. Now why do I think “talking heads” when I say that…. once in a lifetime, perhaps?

  14. Christopher Locke says

    into the blue again… after the money’s gone… ?

  15. JP says

    @clocke precisely. Great song. One of the few I recognise after 1976 or so.

  16. Frank Paynter says

    I was pointed this direction from a highly artismic discussion of Korean popular music on, of all places, Facebook. Shaking my head as I read, trying to get the economist neurons firing again, I’m confused by the conflation of “customer” and “investor” I’ve inferred from your post.

    If “Everyone in the community is a customer,” then everyone is contributing some marginal value, you could almost think of it as the profit margin. And of course profits are often reinvested by the firm leading to continuing production of K-pop videos and/or widgets and/or whatever.

    Now, if “Communities expect a range of prices for each product or service,” then communities will suck the big one, because prices are determined by (among lots of other things) elasticity of demand. If, OTOH, a range of investment options exists, then members of the community experience a range of profitable opportunities, whether or not they eat their chocolate covered widgets or simply invest in them.

    But as you can see, i’m hopelessly confused, which according to the name of this blog is your role, JP. I guess I had better return to a high level of lurkage and spare you the pain of my participation.

  17. clive boulton says

    Surely, black swans lurk. As commerce switches more online to Amazon etc, connectedness affects magnify the demand side, creating 100 percent demand certainly. Yet isn’t the supply side completely blind-sided once inventory is depleted and supply chain globalized (securitization, flash crash).The tools for coping are 1970 era MRP [hence my nudging the usefulness of Pardalis IP...]

  18. Brian Driggs says

    @JP – Sorry for the delayed response! Yes, we want 2 moderators per user (or thereabouts), but not because we feel a need to police the population. We believe in giving our most active members a sense of ownership in their community not typically found elsewhere. By trusting them, we enable the risk-taking that drives innovation and progress.

    People who feel important tend to act important! Perhaps 2:1 is a bit extreme, but our aim is to ensure anyone who believes in what we’re trying to accomplish can take an active role in managing our community. We (semi) auto-promote all the way to a steering committee of quasi-site owners with the authority to lead the evolution of the community into the future.

    We’re always in beta. :)

  19. Ric says

    One of the reasons the entire community is important is that while the ratio of contributors/lurkers/etc remains relatively consistent, the individuals who make up those categories will differ in different circumstances (different opensource projects, different products, whatever). So the Linux lurkers might be the Apache rockstars. Also, since the ratios seem to be relatively consistent, if you don’t have 90 lurkers you won’t get 10 contributors …

  20. Ric says

    BTW – I tend to use a different sequence: conversation –> relationship –> transaction (with the last one optional), but that’s more in the context of “strangers” (i.e. use of social media for marketing, and the wrong-headed assumption of many marketers that they can sell “with” social media) than community. A community is such because of the existing relationships …

Continuing the Discussion

  1. Creating value from the overlap between networks and communities | @stuartgh linked to this post on April 2, 2012

    [...] So business strategists therefore have to approach them differently. What makes it confusing is that your market may contain both a community and a network, for example at Lego there is a community of enthusiasts which create a lot of content but contribute little relative to the business bottom line. And then there is a large consumer mass market for the Lego product which can be found online through social networks like Facebook. Of course this is an artificial distinction too, as in a real sense which takes time to value for both businesses and participants: “Everyone in the community is a customer.” [...]

  2. How to write a B2B brand online strategy | Creative Agency Secrets linked to this post on April 3, 2012

    [...] Commenting on Confused of Calcutta’s blog post – Musings about communities and prices [...]

  3. TWICs XXVII linked to this post on April 9, 2012

    [...] Confused of Calcutta: Musing About Communities & Pricing (04.01.12) I think the future will see new communities built around more democratic, modular scalability. Instead of having centralized teams coordinate growth and operations, I see things being far more distributed. For example, rather than having 1 moderator for every 10-100 users, we strive for a 2:1 ratio, moderator to user. [...]



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