Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / How Brand Communities Beat Paid Ads for Retention
Transcript
- Lucas: So Luna, I was looking at the latest acquisition cost numbers across consumer brands, and something jumped out. The cost per new customer for paid social has basically doubled in the last three years. But here's the thing — the brands that are spending on community instead are seeing their payback periods shrink. Luna: You mean like building a Facebook group or a loyalty forum? That feels a bit old school, doesn't it? Lucas: Exactly what I thought. But look at Peloton. They've built this massive member community where people share workouts, compete on leaderboards, and even meet up in real life. And that's not just nice to have. It's a churn killer. When someone feels part of that community, they're far less likely to cancel their subscription. Luna: So the community is basically a retention engine. But how do you put a dollar figure on that? Lucas: That's the million-dollar question. And the answer is starting to get clearer. A few months ago, I talked to a CMO at a fitness company who told me that members who engage with the community have a churn rate that's forty percent lower. And they measured it. So if your average subscriber stays for eighteen months instead of twelve, that's six months of revenue you didn't have to spend a cent on acquisition for. Luna: That's real money. But does community actually drive new customer growth, or is it just about keeping the ones you have? Lucas: It does both. Peloton's community is famous for the 'shoutouts' — when you finish a ride, your name pops up on screen. And members love to share that on social media. That's free advertising. Their referral program, which is built into the community, brings in a significant chunk of new members. So community feeds acquisition, too. Luna: So the community is basically a two-for-one: cheaper acquisition and better retention. Why isn't every CMO doing this? Lucas: Because it's hard to measure and it takes time. You can't just spin up a Facebook group and call it a community. It needs a dedicated team, a clear purpose, and a long-term commitment. And CFOs are used to seeing a direct line from ad spend to revenue. Community is more of a slow burn. Luna: But if the payback is so clear, shouldn't the CFO be convinced with that churn data? Lucas: Right, and that's what smart CMOs are doing. They're running experiments. They're tracking engagement metrics like weekly active users in the community, and they're correlating that with retention and referral revenue. And they're presenting that to the CFO as a portfolio: 'Here's the cost per engaged member, here's the lift in lifetime value.' Luna: So what are the actual metrics a CMO should track for community? Lucas: The big ones are engagement rate, which is the percent of members who are active in the community each week, and the retention lift — the difference in churn between engaged and non-engaged customers. Also, track the number of referrals generated through the community, and the conversion rate of those referrals. Luna: And what about the cost side? Because building a community isn't free. You need community managers, platform fees, content creation... Lucas: Exactly. But here's the thing: the cost per engaged member is often much lower than the cost per new customer through paid ads. For example, Sephora's Beauty Insider community is a massive driver of their loyalty program. They've reported that members who are active in the community spend more than twice as much as non-members. So the ROI is there, but you have to build it right. Luna: What about smaller brands? Do you need a huge base to make community work? Lucas: Not at all. In fact, smaller brands can be even more agile. I've seen boutique coffee roasters build a community of a few thousand obsessed customers who basically become their sales force. They share the brand on Instagram, they show up to events, they buy every new release. That's worth so much more than a generic ad impression. Luna: So how does a CMO actually start? What's the first step? Lucas: First, you have to define your purpose. The community can't just be 'a place for fans.' It needs a reason to exist — like Peloton's is fitness motivation, Sephora's is beauty education. Then you choose the platform, whether it's a forum, a Facebook group, or a custom app. And you hire a community manager who is genuinely passionate about your product. Luna: But what if you don't have a product that's naturally social, like software or a fitness bike? What if you sell mattresses? Lucas: That's a great point. Mattresses are a challenge. But even Casper tried building a community around sleep health. The key is to find the adjacent interest — for mattresses, that's sleep tips, wellness, maybe even interior design. You're not just selling a product; you're fostering a lifestyle. Luna: So the community becomes a content engine too. You can repurpose discussions into blog posts or social content, saving your content team time. Lucas: Absolutely. One of the best examples is Duolingo. They have a massive community of language learners who create their own memes and share progress on social. Duolingo taps into that by featuring user content and even letting the community influence product decisions. It's a feedback loop that improves both engagement and the product itself. Luna: That's interesting — they use the community almost like a focus group. But does that ever backfire? I mean, what if the community turns toxic? Lucas: That's a real risk. Community management is not just about cheering people on. You need clear guidelines, moderation, and a team that can handle conflicts. But when it's done right, the community becomes a self-policing space. And the benefit of getting honest feedback is huge — you might catch a product issue before it becomes a PR disaster. Luna: So, we've talked about the strategic side, but what about the budget? How should a CMO think about allocating dollars to community vs. paid ads? Lucas: That's the million-dollar question. And the answer is starting to get clearer. A few months ago, I talked to a CMO at a fitness company who told me that members who engage with the community have a churn rate that's forty percent lower. And they measured it. So if your average subscriber stays for eighteen months instead of twelve, that's six months of revenue you didn't have to spend a cent on acquisition for. Luna: That's real money. But does community actually drive new customer growth, or is it just about keeping the ones you have? Lucas: It does both. Peloton's community is famous for the 'shoutouts' — when you finish a ride, your name pops up on screen. And members love to share that on social media. That's free advertising. Their referral program, which is built into the community, brings in a significant chunk of new members. So community feeds acquisition, too. Luna: So the community is basically a two-for-one: cheaper acquisition and better retention. Why isn't every CMO doing this? Lucas: Because it's hard to measure and it takes time. You can't just spin up a Facebook group and call it a community. It needs a dedicated team, a clear purpose, and a long-term commitment. And CFOs are used to seeing a direct line from ad spend to revenue. Community is more of a slow burn. Luna: But if the payback is so clear, shouldn't the CFO be convinced with that churn data? Lucas: Right, and that's what smart CMOs are doing. They're running experiments. They're tracking engagement metrics like weekly active users in the community, and they're correlating that with retention and referral revenue. And they're presenting that to the CFO as a portfolio: 'Here's the cost per engaged member, here's the lift in lifetime value.' Luna: So what are the actual metrics a CMO should track for community? Lucas: The big ones are engagement rate, which is the percent of members who are active in the community each week, and the retention lift — the difference in churn between engaged and non-engaged customers. Also, track the number of referrals generated through the community, and the conversion rate of those referrals. Luna: And what about the cost side? Because building a community isn't free. You need community managers, platform fees, content creation... Lucas: Exactly. But here's the thing: the cost per engaged member is often much lower than the cost per new customer through paid ads. For example, Sephora's Beauty Insider community is a massive driver of their loyalty program. They've reported that members who are active in the community spend more than twice as much as non-members. So the ROI is there, but you have to build it right. Luna: What about smaller brands? Do you need a huge base to make community work? Lucas: Not at all. In fact, smaller brands can be even more agile. I've seen boutique coffee roasters build a community of a few thousand obsessed customers who basically become their sales force. They share the brand on Instagram, they show up to events, they buy every new release. That's worth so much more than a generic ad impression. Luna: So how does a CMO actually start? What's the first step? Lucas: First, you have to define your purpose. The community can't just be 'a place for fans.' It needs a reason to exist — like Peloton's is fitness motivation, Sephora's is beauty education. Then you choose the platform, whether it's a forum, a Facebook group, or a custom app. And you hire a community manager who is genuinely passionate about your product. Luna: But what if you don't have a product that's naturally social, like software or a fitness bike? What if you sell mattresses? Lucas: That's a great point. Mattresses are a challenge. But even Casper tried building a community around sleep health. The key is to find the adjacent interest — for mattresses, that's sleep tips, wellness, maybe even interior design. You're not just selling a product; you're fostering a lifestyle. Luna: So the community becomes a content engine too. You can repurpose discussions into blog posts or social content, saving your content team time. Lucas: Absolutely. One of the best examples is Duolingo. They have a massive community of language learners who create their own memes and share progress on social. Duolingo taps into that by featuring user content and even letting the community influence product decisions. It's a feedback loop that improves both engagement and the product itself. Luna: That's interesting — they use the community almost like a focus group. But does that ever backfire? I mean, what if the community turns toxic? Lucas: That's a real risk. Community management is not just about cheering people on. You need clear guidelines, moderation, and a team that can handle conflicts. But when it's done right, the community becomes a self-policing space. And the benefit of getting honest feedback is huge — you might catch a product issue before it becomes a PR disaster.