"Where for art thou" Community ROI

June 3, 2007 at 12:12 pm 11 comments

It seems I might be the only web 2.0 blogger who hasn’t blogged about the trouble with community ROI.  Well, time to remedy that.  I don’t know if there is any secret sauce here, but hopefully you will see some things that are either useful or you can add to the list!

Community ROI is a high anxiety topic at every community event I’ve attended…I expect it will be again at this weeks online community unconference. (By the way, I’ll be there and I’m planning to facilitate a session on influencer programs – stop in and say hello.)  Whenever the topic comes up, I’m reminded of why I named this blog Community Group Therapy…as the discussion invariable turns into “group therapy” on the difficulty of community ROI. 

Community ROI Group Therapy Session notes:

Albert:  “You know, we had our whole community planned out…forums, RSS, reputation system, it was gonna be GREAT…then that damned finance guy threw me under the bus!!  What’s the ROI he said”

Therapist:  “How does that make you feel Albert?”

Albert: “I’d like to shove his ROI right up his….”

Therapist: “Hold on!  Albert, try to stay with us here.  Who else has something to say that might help Albert on his ROI troubles.”

Jerry: “I HATE OUR FRIGGIN’ FINANCE GUY TOO!!!”

Sheila:  “My boss didn’t get it either, he couldn’t even spell ‘rss’.”

Therapist:  “Ok, ok everyone.  We are approaching the end of our session.  Let’s have a hug and we’ll continue this next week.”

Sheila to Jerry outside the meeting:  “Are you coming next week?  I like these sessions, but I’m just not sure what I’m getting out of it.”

Enough of that…let’s get back to the task at hand…the ROI model for community.  To start, what is ROI?  Well, feel free to review  Wikipedia for a more formal definition, but simplified for a business, ROI is what measurable benefit does the business get from a particular expense (often, but not solely, viewed as increased revenue or lowered costs).  I’ve see quite a few published metrics on the value of community.  For example:

–  Cost per interaction in customer support averages $12 via the contact center versus $0.25 via self-service options. (Forrester, 2006)
– Community users visit nine times more often than non-community users (McKInsey, 2000).
– Community users have four times as many page views as non-community users (McKInsey, 2000).
– 56% percent of online community members log in once a day or more (Annenberg, 2007)
– Customers report good experiences in forums more than twice as often as they do via calls or mail. (Jupiter, 2006)

These kinds of metrics provide a good framework to think about community metrics and may be very useful if you are starting a new community, but where I work, these are interesting, not fascinating.  I live in a world where industry metrics are good theory, but rarely can they stand alone and get you the needed resources to run your community.  So, hopefully we can add to the list a range of methods for ROI pursuit.

In an earlier post, I claimed that web 2.0 has the potential to impact all 3 primary functions of a business (what it builds, how it sells/markets and how it supports), so I guess it only makes sense I use these general categories for structuring the ROI discussion.  I won’t claim to use all of these, in fact, later I will encourage you NOT to use all of these.  I also won’t claim these are easy to get and measure, it takes effort and time to get there. 

Support

  • Content cost – Do you have a knowledgebase?  What does it cost you to author content (In house? Offshore? Vendor?)  Cost per piece of content per page view is a useful baseline metric.  Made even better if you index that against satisfaction on the content (did it help the user solve their problem).  Now, compare this model to a user generated model – do you let your enthusiasts author formal help/how to content?  Do you harvest Q&A pairs from your forums as content?  I don’t think I’ve talked to a single company that has really tied their content/documentation cost to their investments in community/user generated content.
  • Content availability/coverage – What is the state of your Long Tail on content.  This is an even bigger issue than content cost – it is the opportunity cost of dissatisfied customers who don’t find answers (of course you can correlate dissatisfaction with re-purchase).  What will drive more more online success by your users…the next 10K articles you write or the next 100,000 forum, blog, wiki, podcast or other community contributions by your users?  Does online success = satisfaction?  That is certainly measurable.  The message here is that your communities are content – whatever ROI model you use today on content should apply – but don’t look at them in isolation.
  • Localization – Let’s look at this separately.  Everything that is true of the limitations of your content in English is even more true in non-english.  Here’s a link to our MSDN Wiki in Brazilian Portuguese as an example.  Again, the same calculations are possible here.  Localization cost.  Content gap costs (Satisfaction correlated to repurchase). 
  • Overall Support cost – And don’t forget, those that don’t find their answer online are much more likely to call your call center.  The irony here is no one wants this.  In general today, few users want to call for phone based help and support.  It’s the last resort – so, they don’t want to call you and those calls are the most expensive part of your support business – this business case has potential.  Measuring call avoidance turns out to be pretty hard – how to measure what doesn’t happen??  This is a long term metric – not your bread and butter.
  • Summary – virtuous cycle – it just so happens that what your users want (great online self help) costs you less and done well delivers more content/answers for users questions resulting in higher satisfaction – ok, yes, you have to go instrument this in your world, but I can’t help with that:)  If I had to pick one thing here to figure out, it would be the following:  What is your cost, per point of user satisfaction across your support contact portfolio (Phone, web, community). 

Sales & Marketing

  • Sales:  If you are driving online transactions from your web portal this should be pretty measureable.  This is not what we do, but I couldn’t leave this out of the post.
  • Affinity / Loyalty / Satisfaction:  Most companies of some size run some sort of annual broad customer satisfaction survey/research methodology.   Most surveys are trying to get at driver analysis and correlation data.  This might tell you obvious things like product quality is the #1 driver of Satisfaction, but how much does support contribute?  What about content?  other indicators.  Most of us do this stuff.  The relevant issue here is whether you embedded community participation questions into your satisfaction measurement process.  Can you correlate any of the following to your users who participate in community verses those that do not?  (If you don’t have the “verses” part, you have nothing!!).  So do your users who participate in community have…
    • Higher overall satisfaction with your company? or particular product/service.
    • Higher likelihood to recommend?
    • Higher likelihood to repurchase? or purchase companion/related products/services.
    • Higher satisfaction with support?
    • Higher perception of Image or Brand?
    • hint:  I didn’t just invent this list as random examples đź™‚
  • Image/Brand:  If you are big brand company, you likely spend big bucks researching, building and protecting that brand.  (another hint here…anything you currently spend big bucks on is good territory for ROI…if you spend nothing on it today, your resource ask is incremental!!  It may still be good, but accept the fact that it is incremental cost!!).  There are a wealth of companies out there now offering services for online community sentiment analysis (BuzzMetrics, Clarabridge & Visible Technologies to name a few).  I’m a big fan of this as a method for improving brand/product/service research.

Product / Program Development

This is an area I have blogged about already, so for sake of shortening up this too long blog post, let me link and summarize.  This is about the following key measurement areas: Product, policy and program feedback.  Beta / pre-release feedback.  Market / Competitive research.  Supportability.

Here’s the link to previous post on Insights you can use.  The one I didn’t cover as much was Supportability, so let me expand on this.  Supportability comes in a couple of different forms:

  • How do the drivers of call volume differ from the drivers of posting volume in your support forums?  Trust me – they are different!  And this is valuable/measurable. 
  • What are the top issues reported by your influencers/community mavens – you need to pay particular attention to this.

The one pitfall I would point out is not to get “drunk” with the wealth of ROI model options for community.  The failure of this I think is trying to explain/pitch too many ROI benefits and the listener gets lost in your story – remember, you have the curse of knowledge.  Also remember, you are probably NOT in the community business…community is more likely a means not the end (obvious exceptions out there).  So, stop pitching community and start pitching the ROI benefits!! Online success rate!!  Satisfaction!!  Cost model improvements!  Product improvement!  This your listener will understand way better than RSS, Wiki, Forum, etc, etc, etc.

I thought I should link here to others worth reading, but a short inspection told me there were too many to list…so, feel free to scroll my blog roll and check others opinions if you’d like.  Or, I tagged some in delicious here.

Sean

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Visualization of Tag Drafting… Another Podcast goes live…how I got started on community…

11 Comments Add your own

  • 1. Lee LeFever  |  June 3, 2007 at 9:13 pm

    Great post Sean. I think one of the points you hit on here and at Refresh Seattle is key: don’t try to sell “community”, but the benefits of community. You being in the “answer” business vs. the community business is an apt example.

    Reply
  • 2. Suzanna  |  June 4, 2007 at 6:16 pm

    Agree with Lee, one of your best posts.
    One area I find interesting is the concept of “staying power” versus the “flash in the pan” and how that relates to ROI…
    I think both of these types of communities have thier place online but what makes one type of community “stick” and other’s fade? While in some cases a community may come together for a short period of time due to an event, for example, but how do you last?

    Reply
  • 3. Andy Sernovitz's Damn, I Wish I'd Thought of That!  |  June 5, 2007 at 8:35 pm

    The ROI of Word of Mouth

    Sean O’Driscoll is Microsoft’s very smart communities guru. Read his blog: “Community Group Therapy” Needless to say, in that role he’s dealt with user communities on a scale that most of haven’t seen. And yet, he still needs to deal

    Reply
  • 4. Digital Influence Mapping Project  |  June 6, 2007 at 5:43 am

    Measurement: Community ROI

    The formulas for word of mouth ROI are getting complicated. it is the natural cycle. As our investment in WOM-based communications goes up, our need for metrics to justify that investment goes up. Will there be a neat GRP-like definition

    Reply
  • […] ROI was another very spirited session…and I guess a hot topic based on traffic here to my recent blog post on […]

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  • […] Practical measurement and ROI attributes and concepts from Sean […]

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  • […] Community Group Therapy: “Where for art thou” Community ROI “…remember, you are probably NOT in the community business…community is more likely a means not the end (obvious exceptions out there). So, stop pitching community and start pitching the ROI benefits!! Online success rate!! Satisfaction!! Cost model improvements! Product improvement! This your listener will understand way better than RSS, Wiki, Forum, etc, etc, etc.” […]

    Reply
  • […] starting point as part of the work we’ve done).  Hot topics at conferences are around ROI and organization alignment (where should the community team sit) – both indicators that the […]

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  • […] the value proposition of marketing and/or buzz generation.  As I introduced in my post about community ROI, companies should invest in community and influentials not just for marketing benefit, but because […]

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  • […] I blogged about ROI and Web 2.0 as Business transformation.  I’m more convinced than ever that these are the […]

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  • 11. shashib  |  November 8, 2007 at 4:00 pm

    Sean,

    I am happy i followed several links to land on your Blog today. Are you invovled in communities now in your day job too?

    Shashi

    Reply

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