Inside Rensselaer, June 6, 2008: Enhancing Virtual Customer Environments

Companies increasingly are turning to online forums — or virtual customer environments (VCEs) — to connect with customers and involve them in product development and innovation. What many companies fail to realize, however, is that interactions within VCEs can have a profound, lasting impact on how customers perceive the company or product. Therefore, it’s in the company’s best interest to implement and maintain strategies that enhance the VCE experience.

Those are among the findings presented in “How to Profit from a Better ‘Virtual Customer Environment,’ ” published in the Spring 2008 issue of MIT Sloan Management Review and co-written by Rensselaer’s Satish Nambisan, associate professor in the Lally School of Management & Technology.

The article discusses Nambisan’s research and that of his wife and co-author, Priya Nambisan, ’05 Ph.D., an assistant professor at the School of Public Health, University at Albany. Along with the research findings, the article provides a framework that companies can use to evaluate customers’ VCE experiences. It also details four strategies to improve those experiences and, as a result, strengthen customer relationships.

“Online technology has made it easier and more cost-effective for companies to tap into customers as sources of innovation,” Nambisan said. “But companies have to realize that providing the technology is not enough.

“Customer experience is paramount,” he added. “Companies must continue to monitor the virtual environment and develop strategies to enhance the virtual customer experience.”

The research indicates that customers attribute their VCE experiences — both positive and negative — directly to the company. Those who have positive experiences are twice as likely to remain engaged in activities in the VCE. Furthermore, the studies demonstrate that the effect of the VCE experience extends beyond the virtual world. In fact, VCE experiences have even more impact on customers’ perception of the company and its products than on customers’ decisions regarding future participation in the online forums.

Enhancing the customer experience
Based on co-author Priya Nambisan’s dissertation work, four components of the VCE experience are identified:

Pragmatic experience — the ability to acquire product- and technology-related information.
Sociability experience — the extent to which the VCE engages customers as members of an online
community.
Usability experience — the ease with which customers can perform tasks and interact with others in the VCE.
Hedonic experience — the satisfaction, enjoyment, or intellectual stimulation that customers derive from their participation in the VCE.
It’s up to the company to determine which components are most important to its customers and their VCE activities. For example, in VCEs where customers serve as product designers and testers, usability tends to rank high. Sociability becomes more important in VCEs that are geared toward product support and marketing.

The authors also present four strategies and practices that companies can use to enhance the VCE experience. Here, again, companies must determine which strategies are most relevant to their customers and VCE activities.

Design to encourage customer innovation — Special features, such as content rating systems, customer recognition programs, and exclusive customer forums, provide richer innovation environments.
Link the external to the internal — Companies can adapt organizational roles, communications mechanisms, and product development processes to connect VCE participants with internal product teams.
Manage customer expectations — Companies can reduce the potential for misunderstanding and negative outcomes by managing customer expectations about their roles in the innovation process and how their input will be used.
Embed the VCE in customer relationship management activities — By involving VCE participants in existing, offline marketing and customer relations activities, companies can demonstrate their appreciation and cement customer relationships.

The cost to implement these practices can vary considerably so, as always, companies should target those strategies most in line with corporate objectives.

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Inside Rensselaer, Strategic Communications and External Relations
1000 Troy Building, 110 Eighth Street, Troy, N.Y. 12180 or to leibat@rpi.edu.

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