Lloyed Lobo | The Community-Based Business Model: Everyone Wins

Mental Models, Performance, Business & Entrepreneurship | newsletter.scottdclary.com

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The Community-Based Business Model: Everyone Wins

The idea of building a community has always been a romantic one in the business world. What if your revolutionary startup concept could bring together a group of like-minded and passionate people? It’s easy to see which companies have successfully drawn a crowd with their innovative ways — think of Apple’s avid devotees, or the many thousands of Peloton junkies.

But the best communities don’t always form after the fact. Some of the most successful businesses today set out to build a community right from the get-go; their entire business model is based not around commodity, but community. HubSpot, for example, wouldn’t be where it is today without its community-first growth model.

I recently sat down with Lloyed Lobo on my podcast. He’s the co-chair of Traction, a community of over 100k+ founders and tech professionals. Our conversation made me realize that building a community can be just as important to success as the product itself — so that’s what we’re talking about today. Let’s dive in!

Commodity vs. Community: What’s the Difference?

The traditional business model is a pretty straightforward one: your business sells a product or service, and then you charge customers for it. This is a commodity-based model on the idea of providing value through an object or experience.

But there’s a new model on the scene, and it’s being used to incredible success by the likes of HubSpot, Harley-Davidson, Salesforce, and more. The community-based business model operates on a different principle: providing value through relationships.

It’s not about selling products or services — it’s about connecting people with shared interests to create meaningful experiences that go beyond what could be achieved individually. This is the basis of any good social network, but in this case, those connections are made for economic and social purposes.

Great Examples of Community-Based Businesses

So how does the community-based business model actually work? I browsed around to see which companies are doing it right, and found some pretty incredible examples.

H.O.G. Local Chapters

One of the most obvious is Harley-Davidson. When the company booted up almost 120 years ago, it was your classic commodity-based business. But as a fanbase began to grow, a culture formed — and the brand became infamous, as we know. Even people with absolutely zero interest in motorcycles know what a Harley is these days.

Harley-Davidson’s community is called ‘H.O.G. Local Chapters’, and the letters stand for Harley Owners Group. The word ‘HOG’ was being thrown around way back in the roaring ’20s when Harley owners dominated racing events. Now, though, the brand has made it an official part of its identity — and being a H.O.G. member has plenty of perks.

For just $49 per year, Harley owners get access to things like exclusive magazines, roadside assistance, event access tickets, Visa points, merch, and a whole list of other benefits. Family members can even join for a slightly lower fee. Most importantly, members join their local Chapter; they can rally and ride alongside other passionate Harley owners.

I’m not a motorcycle fanatic, but even as I was looking through the H.O.G. website, I could feel the energy of the community — and that’s exactly what makes it so powerful for Harley-Davidson as a business. They’re profiting off of the joy and camaraderie shared between fellow riders. And they certainly treat their members well!

LEGO Ideas

Toys are toys — and like it or not, they cycle through phases. No one plays with Polly Pocket anymore. LEGO has found a way to make itself immortal, though, which I have great respect for. The LEGO business strategy has always struck me as one of the very best.

In a nutshell, LEGO has built a community around collection and nostalgia. You can join the LEGO Ideas community and post your designs for everyone else to see — and if your designs are particularly great (meaning you get lots of votes from the community), your design might make it onto LEGO shelves.

Looking through the LEGO Ideas profiles, it was clear that most of the community grew up playing with LEGO and are relishing the opportunity to use their old skills on new tricks. Just look at these bios from some of its community members:

“I love lego and have since I was a child and I got my first lego set. I have been hooked ever since. Now I share the joy of lego with my daughter and my nieces and nephews. I love to spread the joy of lego. I think it’s the most amazing toy or even just the best product in the world. It changes lives for the better.” — Vonbrikenstein

“Since 2014 I have been gripped by Lego fever again. With the Ideas set “Ghostbusters Ecto-1” (21108) I found my way back to the small bricks.” — Hob72

“I’m a lifelong fan of LEGO who has been lucky enough to translate a childhood passion for design into a fulfilling career as an Architect. My LEGO passion was re-ignited when playing with my children and now includes collecting, construction in real life, and digital LEGO design (primarily in Stud.io).” — Jeffy-O

“Rediscovered the joy of being creative with Lego and being completely absorbed into the building process.” — Leg0flow

Heartwarming stuff, right? But I bet you’re wondering how this all gets monetized. To be blunt, most of the LEGO profits come from their toy sales. However, there’s a definite business strategy to all of this. Here’s how it works:

  • Within the LEGO Ideas community, new competitions and challenges are run pretty much every week. The company posts exercises to help its members level up their brick skills.

  • Members can sign up for free and post their designs. They can also support other creators by voting.

  • For the particularly talented builders, their designs go in the running to be made into real-life LEGO sets (like this awesome typewriter you might have seen floating around the internet!)

So, how does it all make money? Well, with thousands of members and avid builders… they’re going to need a lot of LEGO. The community keeps people buying more bricks to fuel their creative passions. It’s perfect, really.

Traction

Since Lloyed Lobo is the inspiration for today’s newsletter, it’s only right that I mention Traction, of which he’s the co-chair.

If you haven’t heard of Boast.ai before, it’s an innovative software that helps companies get the most out of R&D tax credits minus the usual rigmarole. Traction is its community of over 110,000 members — tech heads, business owners, investors, and innovators.

The whole community is based around this idea of innovation in entrepreneurship. With industry icons like Jeff Lawson of Twilio, Kip Bodnar of HubSpot, and Julia Hartz of Eventbrite, it’s bursting with the most inventive and hardworking minds.

Conferences, podcasts, and webinars deliver high-caliber education to thousands upon thousands of members each year. One of their most recent webinars was run by Vinay Hiremath, co-founder of Loom — so they’ve got some impressive names contributing to the community.

It’s a simple monetization process; I imagine there’s a fee to attend conferences and webinars, which provides funds for the company and value to the community members. The members themselves seem to absolutely love the experience:

“Traction is THE community to supercharge your business by learning from thought-leaders of the fastest-growing companies in the world!” — Daniel Saks, AppDirect

Salesforce and HubSpot have a very similar setup in which they bring together like-minded people to share their ideas and expertise. If you look around at some of the most successful companies today, you often don’t need to dig too far to find an adjoining community.

How To Monetize Your Community

It’s pretty standard for the community model to use monetization strategies like paid events, subscriptions, and product add-ons. But really, it’s up to the individual business to find out what works best for them. Here are some of the most convincing strategies I found while researching:

  • Restricted access. It’s rarely a good idea to charge a membership fee; usually customers just won’t bother, since they have no proof it’ll be worth their cash. Make the membership free, but lock certain pieces of valuable content (webinars, templates, etc.) behind a paywall.

  • Discounts, coupons, and other deals. Slashing prices for your members is often the best way to get more sales through the community. Plus, it makes people feel special — which is invaluable when it comes to customer loyalty.

  • Ads and product placement. Offer opportunities for relevant businesses to advertise or showcase their products in forums and other areas of the community.

  • Make your perks obvious. This is one strategy that can help if you’re charging membership fees. On the H.O.G. website, there’s a huge list of all the extra benefits you get with a Harley-Davidson membership. It’s certainly impressive, even to an outsider looking in. Make sure your members know what they’re getting for their money.

  • Create a trading space. Have you got a product that members can, and would like to, trade among themselves? You can monetize that by adding a small fee for each transaction.

  • Leverage exclusivity. This works particularly well if you’ve got a figurehead within your community who people look up to. Sell tickets to exclusive webinars or even one-on-one consulting sessions with that person.

You can get pretty creative with this. Just keep in mind that the money won’t always flow straight away; community building doesn’t happen overnight.

But Is It Worth The Hassle?

This is a great question because, let’s face it — community building isn’t easy. Businesses that naturally gather a crowd of engaged users are fortunate, since they can set up a monetized structure around the pre-existing group. But even then, it’s hard to give your community something of value they’ll actually pay for.

That being said, the benefits of a community-based business model are enormous. You’re not just relying on a product to garner and maintain popularity; you’re benefiting from the collective energy of people who actively use and advocate for your product or services. It’s a self-sustaining system that can bring an extra layer of profits to your business.

Think about LEGO Ideas, for example. They’ve got billions of dollars coming in from toy sales, LegoLand tickets, online stores, and so on. But on top of that, they’ve managed to dredge up an entirely new stream of revenue just by setting up a community for nostalgic builders. Never underestimate the power of nostalgia!

And, of course, there’s the added bonus of increased customer loyalty. People who are part of a thriving and engaged community will naturally be more loyal to your brand than those who just buy a product off the shelf. We’ve all seen the statistics — customers value human connection much more than they used to. The community-based model provides that connection in spades.

What Will The Future Hold?

I truly believe — as does Lloyed Lobo — that future businesses are going to be increasingly more community-based. It’s impossible to look away from the success of initiatives like Traction and LEGO Ideas, and it’s only a matter of time before other companies start to adopt the model.

That being said, there are some caveats. It’s important to remember that communities don’t just appear out of thin air; they have to be nurtured with care and attention. You’ve got to give your customers something special — whether that’s exclusive deals or insider knowledge — that’s worth their time.

Lloyed also mentioned to me that he only recommends this model to people if they have a desire to bring people together. That’s the only way it works — if you’re passionate about your product and care enough to provide value to a community of users, then this model should work for you.

Are you a business-driven innovator? Could community be your new currency? I’d love to hear your thoughts on the community-based business model in the comments!

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