What does this look like in practice? This is my interpretation of how you could use it when self-publishing an ebook:
1. Start a website that relates to the book. If it's a non-fiction book it's easy to decide on the topic. If it's a novel, what aspect do you think people would find most interesting and likely to make them buy the book?
This is not always obvious. For instance, a mystery set in a ski resort will not necessarily appeal more to skiers than others. In fact, sometimes people who know a lot about a topic don't read fiction about it because they know so many authors get things wrong. And people who will eagerly read non-fiction may not read fiction at all.
Here's a tip: find a successful book similar to yours in a significant way. Look at the author's website, the comments and reviews people have left on Amazon and YouTube, and use Google to track down articles about them, fan sites, etc. You'll get lots of clues about where this author's fans hang out. Go there. Be unobtrusive at first, and then start posting but not about your book. Without spamming or forcing it, let people know you have a blog or site they might find of interest (and make sure it is interesting, of course).
The sooner you do this, the better. This model works only if you start early.
2. Involve your followers in the writing of the book. For instance, invite their questions. If a lot of people have the same question, that's a great indicator that you should be answering it in your book or featuring the topic in some way.
3. Let your followers read chapters as you go along. Be clear that these are early drafts and you welcome input. Pay attention to what makes sense, ignore what doesn't. But start with an open mind. If you find that the book you want to write isn't the same one people want to read, adjust accordingly.
In works of fiction, pay attention to feedback like "I got mixed up between Brian and Bruce," or "It' wasn't clear to me whether Samantha knew about John's previous marriage or not." If the reader is supposed to know that, maybe you need to state it more clearly.
4. Let followers vote. Ask them to help you pick the best title, the best cover image, the best copy for the back cover. You can get a lot of useful information. Again, it helps if you are able to put aside your ego. If 80 of a hundred people voting clearly prefer one cover over the other you'd be silly not to listen, even if you like the other one better.
5.Tell about the steps of the publishing process, including a bit of gossip here and there (naturally, nothing that will upset your publisher). Your followers will feel like insiders and at the same time will know when the expect the book.
6. In the book, acknowledge by name any followers whose comments have been helpful. It's a nice thing to do, plus people buy more copies of a book when their name is in it.
7. Have an online launch party. Invite your followers and ask them to invite their friends as well. Do something special, maybe a live video feed from an actual party, or set up a webinar in which people can ask you questions. Give away prizes including copies of your book.
8. Keep your followers involved after the book is published. Blog about your experiences--did you have a signing and 100 people turned up? Great, tell us about it. Did you have a signing and nobody turned up? Not so great for you, but possibliy a more entertaining story. Put reviews on the site and invite your followers to do their own reviews on YouTube and post links to those (or embed them) on your site. Give a prize for the best review every month (not the most fawning but the most entetaining).
9. Get their input on what you should write next--hook them early so they'll stay with you.
10. If your book has timely content, update it as often as necessary. With e-books this is simple and costs nothing or very little. Let your followers know that you're keeping up to date and ask them for input on what changes you should make.
Have I done all these? Nope. But writing this has given me some good ideas...
(You can also get loads of good ideas for inexpensive and innovative ways to market yourself or your work, in my book, "Do Something Different," published by Virgin Books.)