Web3 — A 3rd dimension to (brand) network effects?
Community dynamics add a Z-axis to network effects through a self-sustaining value creation and value capture flywheel
By taking a community-first approach to brand activation, companies are weaving a new fabric of customer engagement, creating a sense of belonging and shared purpose, with direct connection, community empowerment, collective ownership and value co-creation as core ingredients. Whether community is the product or (more likely) augments the experience, a brand’s core business model of value creation and value capture will be impacted by the intrinsic dynamics of building a vibrant community.
First and foremost, community drives engagement and retention, beyond the pure transactional customer journey. Through common rituals, peer connection and grassroots empowerment, brand communities create a sense of belonging, resulting in stronger brand affinity and loyalty. And by augmenting the brand experience with member-only benefits and privileges, communities end up creating value-driven lock-in. As a result, community ends up strengthening a brand’s growth loop to acquire, activate, retain and monetise a loyal customer base.
More importantly however, by building community a brand can generate its own network effects, adding a formidable force multiplier to its activation flywheel. When customers become brand community members, their tribal loyalty tends to turn them into strong and loud brand advocates. As a web3 community grows it acts as a viral marketing machine, accelerating the growth of the community and the associated brand. A brand will become its own social network, benefiting from the compound network effects of member ‘consumption and creation’ flywheels. As more members join the brand tribe, they increase the value of belonging, of forging meaningful connections and of sharing in collective experiences.
But it’s through tokenisation that web3 brand communities will ultimately add another dimension to these social network effects. Community members do not just want to feel valued, they are looking to add value as well. Being part of the inner circle goes beyond accessing exclusive perks to being trusted with specific brand building and brand experience responsibilities. There is a quid-pro-quo in community, from member-help-member and knowledge sharing, to active participation in community activities, up to member-led value co-creation and innovation. By aligning incentives between brand owners and community members, the value that gets co-created can be fairly redistributed based on actual contribution. With the right tokenised reputation and reward model, community members will be incentivised to create additional brand value, as they partake in the value being captured. As such, brand communities become networks of ‘agency’: the power to not only own, but shape a brand, to share ideas and make them have an impact in something bigger than oneself. Agency has the power to boost the flywheel of community network effects through the combination of value creation and value capture dynamics enabled by tokenised incentives.
Web3 (brand) communities will compete on the amount of value they allow users to capture incentivising all users to become creators and as a result web3 networks will increase the average value produced per user significantly
A Framework for Network Effects in Web3 | by Epistemic Meditations | Medium
To maximise compound network effects, brands will need to come up with their own distinct community flywheel design, from defining and validating their community-market fit, to crafting a well-staged go-to-community strategy, while optimising the various access, utility and incentive levers that will drive a self-sustaining value creation and growth machine. Rather than capturing a maximum of value from brand customers, a community-first business growth strategy seeks to create value with and for them.
Go-to-community is the process of operationalizing and optimizing your community-building efforts to align them with business outcomes
How to Drive Business Growth By Fostering Your Community | Future (a16z.com)
In crafting a brand’s go-to-community strategy, there are 4 distinct areas to consider in order to convert shared passion into agency and kinetic energy:
- community design: purpose, values, norms, roles, rituals …
- community management: member access & roles, token incentives, governance & moderation …
- community engagement: onboarding, nurturing, connection, activation …
- community co-creation: projects, guilds, challenges, polls/votes …
A vibrant community is not only defined by its sheer size, but equally so by its energy. Member activation and participation will be the leading indicators of community health. Any community needs a critical mass of producers and contributors, and token reward mechanisms play a significant role in selecting the types of users who join web3 brand communities. Bootstrapping community membership by focusing on early adopters and value creators, is the best way to cross the chasm to mainstream success. Often, that means starting small with a focus on a niche of super brand fans, build initial community and overdeliver, while using the early member base to inform the community roadmap and spread adoption.
Networks with effective token reward mechanisms aim to optimize their token holder hierarchy.
A Framework for Network Effects in Web3 | by Epistemic Meditations | Medium
Ultimately, tokenised brand communities, when well designed and managed, have the potential to fundamentally alter and optimise a brand’s underlying business model. Gone are the days where value creation and capture were the sole monopoly of the brand, but instead where brand ownership is more evenly distributed across all stakeholders. Where community becomes the new business model, propelled by the kinetic force of a self-sustaining flywheel …
What tokens have unlocked is the ability for clans to instantiate the network effects of passion, engagement and affinity and redistribute that value in fractional form back to participants
Warm Crypto — by Richard Kim — Meandering Musings (substack.com)
