Social Dollars: The Economic Impact of Consumer Participation in a Firm-sponsored Brand Community

Many firms operate brand-specific social networks or “communities” online. This is motivated by the belief that community members become more engaged with the brand, and as a result, increase their activity with the firm. We label the revenue generated from this activity as “social dollars.” This research 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 an online brand community. We find that 19% of the post-launch revenue from community customers can be attributed to their joining the community. This result is robust across a variety of tests. In addition, social dollars persist over time, arise in both online and offline channels and affect all product categories sold by the firm. Regression analysis reveals that social connections – the number and importance of friend ties – and interactions – personal page displays – are positively linked to social dollars.