Communispace CEO Diane Hessan
Diane Hessan

Dana Stanley: Hi Diane, how are you?

Diane Hessan: I’m great, thanks.

DS: Thanks for taking some time today, I appreciate it.

DH: My pleasure.

DS: I wanted to ask you about your company, Communispace, it’s a company that has gotten a lot of press, it operates in an area that’s very hot, market research online communities. I wanted to ask you a little bit about how you got into this and let people know, who may have heard of Communispace, but might not know much about what you do. Give an overview of what you are doing and how it is different.

DH: Sure. So, first of all, what we do. Communispace, as I always say to people, Communispace does one thing, and we’re basically trying to do it better and better all the time. That one thing is that we generate consumer insights via online communities and we do that right now for about 100 major brands. What people don’t always know about us, is that we have been doing it for 10 years. So, we jumped into this space when no one had heard of social networking or social media. We didn’t know that is what it was, we were just interested in how the web, there was a great application of the web, which was to get people to have conversations with each other. But we have been doing this for a long time, so we have built over 350 communities over the past ten years. And in the process, learned a ton and also made a lot of mistakes. The way we got into it, was that we were actually doing something completely different. We started a company in 2000 with the intention to be a collaborative software application. So we wanted to use the internet to help employees within companies share those practices with each other, give each other advice and insight and things like that and that’s how we started the company. We raised venture capital based on that, and had some early clients like Sarah Lee and Chase Manhattan Bank, which was still Chase and not J.P. Morgan Chase at the time, and they were using our software for employee collaboration. I will tell you that it was a very difficult business for us. People were buying from us, they thought it sounded like a great idea, but in general, we had a terrible time getting people to use the software. It just, at the time, was not a natural process for employees to go on to our communities to look to their colleagues for advice and insight. And we, basically, it was a very competitive space, we were having a hard time helping clients get value from it, and as I say, we had a lucky day. We were at Hallmark in Kansas City, and our client was about to launch an internal community for floor managers and basically had an idea that we might be able to do something even better if we created a space for their consumers. And so, we basically built the company based on an idea from a client. We went ahead and our first community in November of 2000, was the Hallmark Idea Exchange for Parents, which ended up being spectacularly successful and a real breakthrough for our client and that changed everything. That was a community of moms who were there to help Hallmark innovate into the future and we tried that and it was on fire, and we’ve been working getting better at that ever since.

DS: You referred to communities, how do communities in your mind differ from custom panels?

DH: Basically, the primary difference to us between a community and a panel is that the holy grail of community is that the people in it have relationships not just with the brand but also with each other. So, in a panel, the typical model is that you have a large group of target customers and essentially you are – you are sending a survey out to them and they fill it out and of course, if you are doing it online, you can do that fairly quickly, but there is not a lot of interaction with each other. There are some panel applications now where you can have a bulletin board or things like that but it’s pretty much the client asking a question of consumers and getting the information back and usually those are surveys and pretty statistically significant quant-type stuff. In a community, the people – there are profiles, everyone knows each other and usually, you’re not only in conversation with those customers, but they are coming back to you with ideas, and they are also having conversations with each other, which of course, if you are a market research junkie and you love listening to customers, the really fun stuff is to learn what customers are saying to each other that potentially you forgot to ask. So that’s really the trick with the community is how do you build an environment in which people can build relationships and know each other and therefore, trust you and open up their lives and potentially share things with you that they might not share if it were a traditional survey or something like that. Now, because the holy grail of community is this kind of intimacy and relationship building and interaction, usually communities have a lot more research functionality to them. So, in our communities, you are not just able to do a survey or a bulletin board, but we’ve got lots of other really interesting tools, a brainstorming area, an area in which people can do chats or things like that. An area where they can kind of document trends that they see going on. Places for them to upload and create videos, photo galleries, things like that. So everything is about getting the people to talk to each other, rather than to just to go one way to the client.

DH: Our numbers – well, the average for us is the average person will spend about 20 minutes per week. That’s based on who the person is. I’ll give you an example. If you have a community and the average age is a baby boomer type age, which is mine. We all, we go into the community, we’ll say gee, Tuesday is my day to go into the community, there are multiple activities for me there. In our communities, basically, our clients are doing three projects every week. So, about 150 different projects per year. If it is an older population, they’ll go in once a week and do everything at once. If it is a younger population, they are in the community, every day, sometimes only for a few minutes, they might do one thing, but the trick is with keeping younger people engaged, there has to be something new sitting there every day. It’s about 20 minutes a week.

DS: What do you say to those who might worry that interacting to this degree with a brand would influence people’s feelings about the brand and make it more positive over time.

DH: Right —- positive bias. Well, we’ve got, we’ve done about 18 different studies on positive bias. So, let me first of all say, that what we’re trying to do in these communities is make the customer come to life, and things like that. You would not use Communispace to do some really scientific, let’s make a multi-zillion dollar decision sort of thing, you wouldn’t use Communispace to forecast a market size. You wouldn’t use it to do a segmentation study or something like that, so I am not trying to imply that everything you do is scientific. We have done 18 parallel studies with various clients. Taking a look at what our community members might say in a particular situation versus what a larger quant panel might do. And in 17 of the 18 studies, the answer has been the same. What we generally found when our Ph.D.’s look at it, that actually we don’t have positive bias, that over time, the members of our communities become slightly more critical. Which is kind of interesting but, think about it Dana – if you and I don’t know each other that well, I might say to you ‘hey, how are you doing, you look great, blah, blah’, but if we are really close friends, I actually might say, ‘hey, you know, funny-looking hairdo’, or whatever else. So as you build relationships, and what I am talking about here, is the relationship between consumers and the brand or the sponsoring company, because they do know what the company is. They actually work a little harder and we find that people tend to be really critical when they need to be.

DS: Ok, what is different about the way that you approach online communities relative to some of the other companies out there?

DH: Well you know, I think there are a lot of companies that are now getting into this space. For the first four or five years at Communispace we literally kind had everything to ourselves. People would say, who else does this? And we would say, well nobody else does it, you could obviously – there are other uses for your dollars or you could try something like a panel, different set of objectives. Now, all of sudden, this space is exploding and lots of people are in there. There is a recent Forester Wave that was done in the space where Forrester analyzes all the companies and I think right now people feel that what differentiates us the most is our model which is pretty much full service. So the people who work with us tend to be large companies where they just don’t have the bandwidth to even think about building and operating the community on their own. So, we have the ability to sell our software to a client and let them do everything but most of our clients don’t fall into that space. So if you think about how to build a community, you’ve not only have to set up a site, but you have to do the planning and strategy for it, saying ‘what are we going to do, what is the long term plan?’, things like that – the community is great if it’s going on forever. So you have to figure out the plan, you’ve got to figure out which target consumers you want in there, you have to figure out how to recruit them, screen them, bring them on board, make them happy, make them feel heard. You’ve to know how to create and to facilitate all sorts of activities, you have to be able to analyze what they’re saying and report it out to the organization. You have to figure out whether to give them appreciate gifts and how much. There is a lot of, quote, best practice to this. So if a client wants us to come in and just to the part where we build the community and they do everything else, we can certainly do that, but we’ve never had a client that has wanted us to do that. So, we have a full service model. The client has us do everything that I just mentioned, and then the role of the client is to drive the activities, to figure out which questions are really important and which research projects they want to do in the community, and then they’re also responsible, obviously, for kind of managing that within their organization, reporting the results out, making sure that everyone is listening, things like that. But we do all of the heavy lifting, and each client usually has a team of three people that are doing that on an ongoing basis, and that team over time gets to learn about them and their issues and things like that. I think that’s the main thing, is that we are just very – we’re very experienced at the service piece of this and we are great at engagement, we know how to get normal target consumers to come in and stay in and continue to participate and be engaged and to be willing to kind of open up their lives to clients. So that’s a long way of saying, you know our experience over the past nine years is that although we put millions of dollars every year into our software, but this is not just about having good software.

DS: Do you license your software to marketing research consultants?

DH: We have worked with some marketing research consultants who want to do that. Again, when we work with market research companies, sometimes, very often what they’ll say to us is we want to do all the work and then eventually, it’s a huge amount of time and effort for them and it doesn’t mean that people don’t have the skill to do this, it is just, this is all we do, so we have gotten to be very good and very efficient about how you make all of this stuff happen. But yes, we do work with market research companies, and we also work with a bunch of advertising agencies, so the planners and ad agencies.

DS: How do you see market research online communities changing over time?

DH: I think there are a couple of areas. First of all, technology is changing dramatically. And so, over time for instance, whereas most of our members are now participating in these communities, sitting at their desktop, we are now experimenting with all kinds of ways for people to basically be on site giving us feedback. So if we’ve an IT executive in a community, that person can be shopping at Best Buy and taking a picture of something and basically sending it back into the community and having the software authenticated, so people will be more mobile and therefore the opportunity to participate in the communities will be more mobile and there are all different kinds of technologies that we are experimenting now so we now have capability for community members to be able to do whiteboarding or collaging or all different sorts of storytelling that involves technology that we just didn’t have a couple of years ago; so that’s one. A second one is that we are seeing communities become more global over time, so we do have clients from all over the world, but even in the US, lots of our communities have members from five, ten, fifteen, twenty different countries and I think that clients will start to use the communities to really help drive their global strategy so that is just kind of a content objective. I think those are the two main things. Communities will probably also be more integrated with other things that clients are doing. So for instance, right now we’re working with a lot of market research firms who have big, huge quantitative panels and we’re kind of going back and forth with those firms as partners, so perhaps the panel supplier comes back, and there are all these interesting statistics but they don’t really understand the why behind the results, and maybe the slip into our community and we really explore the why or perhaps out of our community, we do a lot of stuff in the fuzzy front end of the innovation process, maybe there is a really interesting idea that comes out that then we might want to validate through some other method, so I think we will begin to integrate with many of the larger companies that have other sorts of tools that would do something we don’t do.

DS: OK, one of the things I hear sometimes is market research providers that have some sort of panel technology or community technology say that they have said to clients, we can do what Communispace can do but we just charge a lot less.

DH: LAUGHS. I will tell you, if they do what we do and they charge a lot less, they’re probably losing a ton of money on it. So, here is what I would say. Number one, if they are charging a lot less, they are probably just kind of giving you the tool and not doing as much on the service end, so that would be one reason that a community would be less expensive. I mean, when we are doing these, we are doing everything. I think the second thing is the amount of work that gets done. So sometimes, people will build a community and then they might do one or two projects a month. What we are doing, it depends on the service level of the client, but for most of our clients, we’re doing somewhere between ten and fifteen projects per month, so the intensity of this is huge and that’s just doing everything and reporting out and things like that. So, we usually kind of tell people to kind of take a look at apples to apples but what’s the service level and what’s is the level of activity, those would be the two things to compare. So, I do think in our communities we are charging some significant money. I’d say the average Communispace community is probably between $15,000 and $20,000 per month, but if you start dividing that up with how many projects you’re doing, we might be doing 12 projects, that could be the equivalent of 2-3 focus groups so people actually get a really fast payback on our communities and I think that’s why, even in tough times, we have got about a 90% client retention rate, it’s pretty easy actually, to prove the value. So, if somebody says they are doing the same thing as we are, my bet is that they haven’t done it very much, or it’s not an apples to apples comparison, or they’re just losing their shirts. LAUGH.

DS: Ok, your community sizes, my understanding, tend to be 300-500 people?

DH: Yes.

DS: And what’s your philosophy around optimal community size?

DH: Well, our communities are either really small or really large, depending on what your perspective is. So, the main metric we use for our communities is not how many people are in the community. The metric that we use is that how many people are actually participating, number one, and number two, if they are participating, how much work are they willing to do? So you might say instead of 300-500 people, maybe you have a 5,000 person community but the question would be, of those 5,000, how many are actually participating and sometimes, they’re pretty small numbers. And then secondly, if they are participating what are they doing? Are they just willing to kind of do a quick survey for you or are they really willing to work hard? So, in our communities, we’re getting participation rates, in many of our communities, of 70-80% of the members actually in there doing stuff, which is really high. I mean, if you think about the world of communities, sometimes you only get 1% participation rates, we’re getting 70-80% participation and we are getting people who are willing to do incredible things for our clients and spend lots and lots of time – go mystery shopping, do field trips, make collages, do videos of their home, take pictures of their pantries and on and on, so that’s what we are really looking at, is the intimacy inherent in the communities that we have is you know what we call the holy grail of community, and that is our sweet spot. Sometimes people call it netnography, but if you think about how much money companies would spend on an ethnography or a one-on-one interview or a focus group, or the like, we are able to take what they are doing there and really scale that experience and yet, very often have enough people responding where you can get some interesting quantitative data. So, that’s the number that has really worked for us. We have done smaller communities, and we’ve done much larger communities but the sweet spot tends to really work is 300-500. Now remember, what we are looking for here Dana, is not necessarily statistical significance, what we’re looking for, is what we are trying to do for clients, is to try and get them real insight. To generate things from the community that they have actually never heard before, or that might transform their perspective or that might help lead to a breakthrough in their business. So if the goal is insight, then that is the number that works for us in our experience.

DS: How do you get people to engage at such high levels?

DH: Well there’s a lot of secret sauce and best practice. Some of it is pretty obvious. Think about it, if you’re a member of a community what would engage you? Number one, people love feeling heard, and it is unbelievable what consumers or customers, we’ve done – we’ve got young guys, we’ve got baby boomers, we’ve got gastroenterologists, IT executives, financial planners, you name it, we’ve kind of got the whole gamut but all of those have one thing in common, it is just unbelievable what people will do for you if they really feel that you are listening. If they really feel that they have a voice in what you’re doing moving forward. And so, a lot of what we do is to work really hard on making sure that people know that what they’re saying matters. There are other things that get people engaged; one is they start to build relationships with each other and so they come into the community and it feels like a place where they have relationships, where they have things in common, what we call social glue. The third one is that we‘ve been able to directly track engagement to variety of activities. And, by the way, people go to our website, we have a four person research team and all they do is study this stuff and the white papers are available on our website. But, for instance, if you do a wide variety of activities and make in interesting, rather than just a bunch of surveys, we can get participation to go up. So sometimes, we’ll have a client that just wants to do a lot of surveys in the community and we’ll demonstrate to them that by making things more interesting they’ll get participation to go up. And then another thing that we do is refresh the membership. If people aren’t participating, we will ultimately ask them to leave and bring some new people in. So there are a lot of things but those are just a few examples.

DS: I also wanted to ask you how you utilize social media. You, as an individual, are an active user of social media, and my understanding is that Communispace uses social media as well. Tell me about your philosophy around those tools.

DH: Well, first of all, we think that what we do is social media. It’s not social media as in ‘let’s get a whole bunch of people into a community’ and if you pretend to listen to them they will go out and buzz about you. It is not that sort of thing, but for us, the fact that people are engaged in ongoing conversation and connection to each other and to a brand is basically that we are kind of market research meets social media, or what Forrester would say is that you look at social media and you divide it up by what the objective is and were the use of social media either for listening or the use of social media for what they call embracing, which means co-creation, involving your customers or consumers in innovation product development, things like that. We also use a lot of social media tools. So, depending on the objective, we might have our community members using Twitter and sending their tweets into the community. Or, we used Facebook and lots of other kind of funky social media tools. So, we’ve an innovation group called the Futures Team and the’re always looking at really interesting social media tools and processes that we can connect right into our communities. And, it’s been a lot of fun to experiment with all of those.

DS: OK, thanks for taking some time this afternoon, I appreciate it; it’s been very interesting and educational.

DH: Well, my pleasure, thanks Dana.

DS: OK, talk to you soon.