Sunk Costs and Social Media Engagement: When To Let Go?

By Dennis D. McDonald

Thanks to a tweet by @tacanderson I stumbled across the blog post Sunk Costs by venture capitalist Fred Wilson.

Wilson’s article is basically a repeat of the old advice, “don’t throw good money after bad” when there’s no hope of recovering what you’ve already sunk into a failing project or product.

What if part of the cost has been investment in developing a social network based “community” of potential vendors or customers for the failing product or service? Should you just cut ties with them and walk away from them under the assumption that they are also part of the “sunk cost”?

That will depend on the “halo” surrounding each connection. Is it solely tied to the failed product or service? Or is part of that “halo” also tied to your company, organization, and/or reputation?

If the latter is true, trying to just sever all social media connections could get messy. Some people who are invested in the relationship might not be willing to let you make a clean break; after all, admitting failure in public could reflect on their reputation as well as yours.

On the other hand, trying to redirect or channel the old community’s enthusiasm could take time and money away from the new things that need to be done. No one wants to be the last rat off a sinking ship, no matter how attractive you make the ship.

What to do?

One approach is honesty. When the old project fails, be honest and say so. If there’s no immediate way to transfer the investment you and the community have already made is online social engagement to another product or service, also say so and set a date beyond which online resources, features, and services will no longer be available.

Needless to say, the nature of the relationship you’ve had with the community up till now will impact you going forward as you work through shutting down and/or transferring services.

If it’s any consolation, one of the things you learn about any corporate system is that shutting them down or retiring them is rarely “free.” You don’t just walk in and click the “off” switch on a server running and old and moldy legacy application. There’s data to be preserved, privacy issues  to be addressed (if personal file are included), and last but not least, there are the training and transfer costs associated with shifting users of the old system to a new or replacement system.

The same is true of the communities we build around products and services under development; it’s hard to just walk away.

Copyright (c) 2010 by Dennis D. McDonald

Comments

[Doug Brockway]

Theory suggests one build a community of interest around "buyer personas," not around a project or a product. The project or product or service that you are building, and the social network you are investing in, should be based on the personas.

Given that you've taken that step then you may put less effort into a given network after your once-active project fails, the network has a life of its own until and unless the persona no longer exists.

I would recommend adjusting how you participate, perhaps less frequency, but can't see the advantage in abandonment unless strategically you've decided to never deal with that persona again.

In such a case you've likely got bigger issues than social media.

[Dennis D. McDonald]

Hopefully, too, the product or service you are building the community around is based on the needs (or "personas") of the community. If you have underestimated or misinterpreted the needs, this should definitely be reflected in how you manage -- or "retire" -- the community.