Social dollars: the economic impact of customer participation in firm-sponsored online community

Many firms operate customer communities online. This is motivated by the belief that customers who join the community become more engaged with the firm and/or its products, and as a result, increase their economic activity with the firm. We describe the customer expenditures generated from increased engagement as a result of joining the community as “social dollars. ” This paper tests for the existence and magnitude of social dollars via a difference-in-differences estimator using data from a multi-channel entertainment products retailer that launched a customer community online. We find that a significant increase (of at least 18%) in post-launch expenditure from community customers can be attributed to their joining the community. This result is robust across a variety of tests for self-selection and alternative explanations. These social dollars persist over the time period we observe and arise in both online and offline channels. Examination of mechanisms conceptually linked to community benefits reveals that social dollars are moderated by the extent of a customer’s social engagement (posting versus lurking) and by the unique informational benefit of product information sourced from a community of shared interests, which we observe as a shif