Common Craft Blog
Overcoming Online Communtiy ROI
By leelefever on May 09, 2007 - 11:25am
I have a hunch that the world of online community ROI is shifting. More data is available to support decisions and most importantly, it appears that businesses are placing less emphasis on ROI as a requirement for community projects.
Last week I had to miss what appears to have been a great event called the Online Community Business Forum. I've attended Forum One's Online Community Summits for years and always considered it time well spent.
A couple of friends, Joe Cothrel and Bill Johnston presented some data about our strange and wily friend - Online Community Return on Investment.
From the Online Community Report Summary of the Event ...
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Publicly available stats (compiled by Joe)
- Community users remain customers 50% longer than non-community users. (AT&T, 2002)
- 43% of support forums visits are in lieu of opening up a support case. (Cisco, 2004).
- Community users spend 54% more than non-community users (EBay, 2006)
- In customer support, live interaction costs 87% more per transaction on average than forums and other web self-service options. (ASP, 2002)
- Cost per interaction in customers 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)
From the April 2007 ROI Survey:
- Only 22% of respondents had clear ROI Model
- 42% had staff of 1-5 people
- 49% Report Monthly to Mgmt
- Establishing ROI Model was a priority for most respondents in the near term
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Mukund Mohan also did a recent survey of developer communities with 112 respondants. One of the highlights regarding ROI was:
¾ (75%) don’t provide ROI information for their developer communities and don’t see the need from management to do so. One participant put it “Its so obvious what the ROI is that we don’t see the need to justify itâ€.
Link to the summary file with charts and results.
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Dave Hersch of community platform company Jive Software shared his views recently in a blog posted titled "ROI ShmoROI"
I've been getting a number of reporters asking about the ROI behind an application like Clearspace lately. My general response is that it's a fool's exercise. Trying to determine if the savings and revenue increase are worth the expense is like trying to measure whether the view from atop Everest was worth the climb -- it's exceedingly hard to measure and it should be painfully obvious.
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Here's my perspective...
For me, ROI is important, but I think the equation should be flipped. One of my core beliefs is that, in the future, businesses will rely on their communities of customers to remain competitive.
In this context - what is the cost of not pursuing a community strategy? What will happen, over time, if community doesn't become a part of the organization?
The threat I see is the inability to remain competitive. If your organization doesn't treat their customers like a community and build those interactions into value, your competitors will. Your lack of a community strategy *now* may become a competitive liability in the future. You may be faced with competitors who save support cost, innovate more quickly and produce higher quality products because of their engagement and relationships with their customer communities.
In this way, the question becomes: what is the future cost of not pursuing a community strategy now?
ROI comment
It was indeed a good event. The thought that came to mind for me was the following: Shouldn't those of us who do Community be held to the same ROI standard as our Marketing departments? It seems we are looking for the hard science in part because of where communities are first emerging in our companies - hard science orgs. How does marketing justify their spend and can they "pave the last mile" in the equation - no! NOTE: I did NOT just advocate for marketing departments to drive communities at companies - my worst nightmare - just raising the comparison. sean www.communitygrouptherapy.com
Marketing ROI
I see what you mean about marketing ROI. At Webvisions, Jeremiah Owyang was asked about ROI of social media and the "flippant" version of his answer was "whats the ROI of a billboard?, whats the ROI of a conversation?" It's a bit like branding (I almost wrote this today). I don't think people are questioning the value of a brand - it's assumed and accepted that brand is an important part of business - but one that is very hard to measure. I see community the same way - difficulty in measuring it doesn't preclude it from being of value. I just think we have a way to go before business people are ready to make the same assumption on the same scale.
Articulating Community Value
Hi Lee, Great post! I think you raise an interesting point about cost of not engaging in community activities as being justification... the problem is, at the end of the day you need to put a value on the community activity to either value return or asses what the cost of not engaging is. I actually had "cost of not engaging" in the slide about attributing value from the OCBF presentation but then took it out because it is so vague and context-specific. The bottom line for me is, it seems like most organizations need to quantify some points of value in the short term and that a mix of internal metrics and externally validated points of value, like call avoidance, could be mashed-up into a a model that most folks could use to report on value / ROI. It also seems that if we could get signoff from several organizations on a model, we would get closer to having "generally accepted community value principals". To points made about marketing, and specifically the value of billboards :), actually most marketing departments do have metrics and return on those activities. OR, at least metrics meaningful enough to get the folks at the C table to keep writing those big checks. We need similar measures of value for community activities... especially since they are starting to displace a lot of push-marketing activities and will likely prove much more valuable in the long term.
ROI
Lee The ROI feedback surprised me also. No clue why (which we want to ask the next time over) people did not see the need to provide ROI for developer communities. I still think (and agree with Sean) that ROI for communities has to be associated with the same way Marketing spends on branding, advertising etc. But I suspect as Communities gain major adoption, ROI will become more of a requirement.
Worth noting too ...
Actually, the ROI from billboards is an easy one - just compare it to other ways of getting impressions (e.g., newpaper ads), and if you get more from spending less, you've got a return on this relative to alternatives. And if you're really good, you know what the conversion rate per thousand impressions, and you can show revenue in addition to cost savings. Dave is not wrong about calculating the ROI of applications like Clearspace. The reason is that applications used primarily by employees are harder to ROI than applications used by customers. This is mainly because we measure customers better than we measure employees. So many of the difficulties of community ROI have nothing to do with community; they have to do with the way we measure our businesses. Is there less focus on ROI today than in the past? I don't think it's changed much among the types of companies I work with. It's still a minority of companies who are serious about measuring community ROI, but not a smaller minority than, say, seven or eight years ago. Just my experience ... Joe