The return on involvement (ROI) of customer participation and co-creation

A headshot of David Garnder.

by David Gardner

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It goes without saying that sentiments about community-building won’t move most executives unless you can show them good ROI.

Participation marketing reaps significant return on investment, although a better way to put it is “return on involvement.” In reality, it’s not just about the money spent, but the quality of the time spent, which is to say that it’s not enough to engage in one-off interactions. The involvement needs to be all-encompassing, methodical, and prioritized.

The Iris Participation Brand Index has compiled data from 14,000 global, publicly-traded consumers in multiple sectors. Its purpose is to understand the relationship between a brand’s participatory efforts and its business performance. As Iris explains on their website, these brands “are outperforming the competition without outspending them” and “getting their market to do their marketing.” 

Iris found the following Return on Involvement (ROI):

  • Investing in the top 20 brands in the Participation Brand Index over 3 years would have seen 4 times ROI than they would have had they invested in the bottom 20 brands
  • Investing in the top 10 brands in the Participation Brand Index over 3 years would reap a return double that of the S&P 500

The fascinating part is that this index isn’t a reflection of the kind of participation marketing in digital co-creation ecosystems that we’ve discussed in previous articles. (Notably, brands with significant superfan communities such as LEGO, Ikea, and Muji are privately-held firms and therefore not included on the Index.)

The Index includes brands who’ve incorporated consumer engagement activities in other forms, many of which can be highly-effective but very costly. For example, to fuel their innovation insights they may hold in-person design thinking programs run by consultants, conduct observational research by ethnographers in people’s homes and workplaces, run private product alpha-testing programs, subscribe to elite trend hunting and trend watching services, and so forth.

To collect user-generated marketing content, they may create branded micro-sites, hold user events, sift through streams of social media, run advertising campaigns to solicit contributions, hold retail launch events, and more.

Some of these companies, including Ford and Airbnb, have begun to engage communities through new digital co-creation efforts. One can only imagine the results as more of these brands build persistent co-creation communities.

More than just sales

Co-creation’s return on involvement doesn’t just manifest itself as increased sales. It also shows up during the production stage by reducing risks and cutting costs.

Participation brands have a clear picture of what their customers want, which empowers them to hold off on putting a product into production until they have enough interest to recoup their expenses and make a profit.

Consider the scramble to master social media marketing. Once companies saw the rewards others were reaping via their social media feeds, they quickly mobilized to get a piece of the promotional pie. But in their haste, they jumped in with both feet without clear goals or an overall strategy. The challenges of earning a decent return on social media investment is further compounded by the oversaturation of newsfeeds. It isn’t as easy as it was even five years ago to engage with customers via social media. That said, companies continue to waste a lot of time and money on ineffective social media campaigns.

That’s not the worst of it. These wasted efforts aren’t limited to the marketing stage. They seep into the production stage as well.

A 2014 Nielsen report found that 76 percent of fast-moving consumer goods (FMCGs) fail within the first year. That’s over three quarters. Researchers identified four important principles present in brands considered “breakthrough innovation successes”:

  1. Choice: Selecting the right innovation
  2. Process: Getting the innovation right by having an organization in place that is properly structured to make an innovative idea market-ready
  3. Marketing: Telling the story of the innovation in a way that resonates with consumers
  4. Togetherness: Getting the entire organization behind the success of the project in a cohesive and functional way

All four of these things can be achieved with effective co-creation. Participation marketing allows you to:

  • Determine exactly where your customers seek innovation
  • Incorporate your employees fully into the process of co-creation
  • Bring your superfans behind the scenes to collectively determine which promotional projects work best
  • Turn participation into an organizational strategy as opposed to just a marketing strategy

Companies are already doing this. Former P&G CEO A.G. Lafley shared a startling statistic. Only 15 to 20 percent of P&G’s new products would reap a return on investment. After embracing a strategy that included open innovation that number shot up to 50 to 60 percent.

Evidently, co-creation equals smart business.

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