Why Does Everyone Believe Community ROI Is So Hard To Measure?
Just finished reading Jeremiah Owyang’s blog on ROI for online communities and social media. The entry is here. Jeremiah’s suggestions are accurate and some of the comments from our colleagues are really helpful. Here is our commentary which we’ve also posted on Jeremiah’s blog:
What I find interesting about this topic is the general disagreement of the relevance of ROI in the discussions of community and social media experts. We’ve attended events, webinars, and industry meetings, where people were unclear or downplayed the importance of this measure for social media and communities. Others in the Social Media space blog frequently that ROI is either tough to do or not relevant.
At Impact Interactions, we believe that ROI is a crucial element of the community building and management process. You must start building your framework before the community even launches, then refine it over time. But you cannot use just the metrics from your community, you must align them with additional data from within the organization (CRM records for B2B for example).
For B2B support clients, we measure technical questions answered by members as a cost avoidance measure to demonstrate the scalability of the community versus call center costs. We supplement it with survey data on customer satisfaction, purchase influence, and information utility. It all adds up to a large ROI.
For a marketing focused B2B community, we built a framework that demonstrated the influence that the community had in influencing sales of multi-million dollar contracts. We mined the transactional data and compared it with the CRM records to develop a pattern of influence on sales velocity, lead generation, and sales.
For a B2C automotive parts company, we compared sales transactions from the companies e-commerce database with community transactions to find the ROI for the community. It also reinforced the powerful notion that community members were buying more frequently than non-community members and that each purchase transaction was larger than those of non-community members.
For a B2C subscription based service, at Participate.com we demonstrated that community members churned at a rate 50% lower than non-community members, resulting in millions of dollars of revenue and profits.
Each of these clients had an ROI on their community of over 100% once their communities scaled.
It is not hard to develop the ROI framework, but it does take time and relationships within the organization to get the appropriate data. If you are a community manager, you need to build a network outside of the community area in your organization in order to align the community’s analytics with your organization’s focus and goals. Only then will you be able to tap into CRM or e-commerce databases to validate your framework.
We have some basics on B2B ROI in presentations available for free in our Social Media Resource Center on our website. Please feel free to visit and download the presentations. In our introductory deck on Impact Interactions, we have quotes from Cisco, Mercury Interactive, and ATT on their ROI from their online community efforts. Here is the link: http://www.impactinteractions.com/social-media-resource-center.html
What Jeremiah has posted is absolutely spot on. But is up to you as a community manager to act. In this environment, you cannot afford to have your community (and job) viewed as a soft application that doesn’t produce tangible, measurable results. If you’d like to learn more, please contact us.
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This entry was posted on Thursday, January 29th, 2009 at 12:35 pm and is filed under Best Practices, Measurement & Reporting. Both comments and pings are currently closed.
2 Responses to “Why Does Everyone Believe Community ROI Is So Hard To Measure?”
Impact Interactions says: Thanks Lawrence. Your comments and the blog entry are on target IMHO.
Since I posted this here and on Jeremiah’s blog, I’ve gotten several good emails from folks who are as passionate about measuring real results for Social Media and Online Communities as we are here at Impact Interactions. One stands out though:
Kate Niederhoffer wrote:
I think people are making a leap based on the wrong metrics right now – not understanding that there are intermediate outcomes. Many (even community platform vendors) will supply “statistics” such as # photos uploaded and viewed; # users per day as “ROI.” That can’t go on. People are conflating value and return (others have argued this too).
As I discussed with Kate, in Impact Interactions’ six years of existence and for four years before that with Participate.com, we’ve tried to bring clarity to the ROI measurement issue. Yet here we are ten years later without industry accepted methodologies. More disappointing to us is the lack of interest by many social media/online community consultants and practitioners in building a consensus around this idea.
If you are looking to build or reinvigorate your social media project or online community, you owe it to your organization to find someone who can help you measure and explain how your efforts are contributing to your organization’s goals. To do otherwise in this economic environment (or any other for that matter) is rather foolish.
People who don’t believe in ROI are in denial because they don’t (yet) have the analytics/reporting tool(s) or proper metrics to measure ROI.
I blogged about this topic a few months back: http://communityzenmaster.com/blogs/lliu/archive/2008/10/29/do-social-media-and-online-community-metrics-really-matter.aspx – and hey, you left a comment.