Welcome to our Special Guest Blogger Matthew Lees

I grew up watching television shows where each week there was a “Special Guest Star” on an episode each week. These guests provided a little extra to the show and usually were cool celebrities. Think of all the villains on Batman for example or the Brat Pack on “Vegas” or the vacationers on Fantasy Island…or for those of you a little younger, the guests on the Simpsons.

Following that idea, I’d like to introduce our Special Guest Blogger, independent analyst Matthew Lees.

Matthew is a well respected analyst in the Social Media and Online Community World (see his bio here). He is the author of reports through the Patricia Seybold Group such as:

1. Selecting An Online Community Platform
2. Best Practices In Crowdsourcing
3. Analyst Report: Lithium’s Social CRM Suite

After reading his research and reviews of his findings, I thought Matthew truly understood how to make social media technology work in an enterprise organization. So, like all good social media practitioners I followed him on Twitter (@mlees) and his blog. Matthew and I first met in person at one of Forum One’s Online Community Unconferences. We’d been reading each other’s blogs and reports and discovered that we come to the industry with the same high level focus… using these tools to improve business results. While Matthew focuses on the technology and its impact, we focus on the process and the users. Together, we cover the issues that all enterprises need to succeed in their social media projects.

We decided in late December over a crab cake lunch here in Maryland, that we should find a way to collaborate together. Our idea is to inform, educate, and drive the best practices we’ve developed to a broader audience with this blog and our twitter accounts. Matthew will be posting here over the next few months both independently and collaboratively with our team members.

If you have a suggested issue of topic for us to cover, please contact us by adding a comment on this entry or by using our contact form.

So, with that said welcome Matthew!

Mike Rowland, President

Social Media – The Global Story

The world is adopting social media at higher and higher levels according to a recent Neilsen Report.  According to the research by Neilsen, global time spent on social media sites increased by 82% in December 2009 when compared with December 2008. Pretty large increase especially if you look into the footnotes and understand that this research is based upon only U.S., U.K., Australia, Brazil, Japan, Switzerland, Germany, France, Spain and Italy. No China, no India, no Russia, nor are there any Nordic countries listed.

But this growth coincides with what we’re seeing here at Impact Interactions. We’ve helped develop and launch multiple communities in countries such as China, Russia, Italy, France, Germany, Brazil, Argentina, Mexico, Poland, and elsewhere over the past several years. And while clients are still interested in their communities in the U.S. their focus is shifting. We are seeing more interest in companies asking us to help them launch communities and social media plans in countries ranging from Japan to Russia to Brazil to Mexico.

The growth in third party applications such as Twitter and Facebook have helped companies to understand the potential reach of the medium, but it is the local language social networks like StudiVZ (German) which have helped in-country marketing teams decide that they must be engaged with their customers using social tools. So even as Facebook moves past these local social media/networks, the smart marketer understands that it’s not the tool so much as it’s the growth that matters in deciding whether social media is a good tactic in a particular market.

In our experience leading a social media workshop in Innsbruck, Austria at the prestigious Management Center of Innsbruck it was clear that our non-US audience were more engaged on local language social media tools including blogs and social networks than on the U.S. offerings. (In fact, it was there that I learned more about StudiVZ and other offerings.)

That doesn’t mean that non-U.S. members are not on Facebook, Twitter, or LinkedIn. But it does mean that for the savvy global marketer the research and identification of which sites or applications to use is a bit more difficult. While the strategy remains the same, each Internet culture requires a clear focus on localized tactics. That means a cookie cutter approach using the same tools like Twitter, Facebook, or other application across multiple markets will not deliver the results you desire.

Watch the growth, it’s here to stay. But also look for the smaller sites that can deliever more value to your organization when using social media globally. As the old adage goes “All marketing is local.” The same applies to social media.

-Mike Rowland, President

Online Community – Moving Beyond Metrics to ROI

We gave a presentation on building ROI models for online communities at the Online Community Unconference in Mountain View, CA on June 10th. It was added because so many of the participants stated that ROI and calculating the value of their community was the most important issue they faced.  So, we didn’t have time to build a true presentation, but rather lead a workshop for participants to learn more. It was lead by our president, Mike Rowland.

Here are the summary notes taken during the session:

• Have to first identify what is the economic value of the community to the organization offering it: (Don’t confuse traffic or behavior metrics with value)
  • Cost Avoidance
  • Increased subscription rates or lower churn rate
  • More frequent purchase rates
  • Higher purchase level/amts
  • Faster close for large item sales
  • Reduce lead generation cost
• Once you’ve identified your value metrics, break down your metrics into 3 buckets to look at communities:
  • Traffic – PV, visits, visitors, etc.
  • Behavior – What they do when the get there, who they are, download/visit, contribution/member, responses by employees vs. customers
  • Value – can attach an economic value to it. Need $ to get to a true ROI model. See above list.
• You have to build relationships w/ the folks in your company. Need access to other systems. You cannot build ROI from community analytics provided by software vendors or from traffic and behavior metrics alone. 
• ROI Frameworks:
  • Cost Avoidance
    • The person who proposes the question needs to verify the answer. This is a feature needed in the platform.
    • # of community support resolutions X $ complimentary support resolution (1-800 number) = total cost avoidance -> economic value
    • Track over set period of time (e.g. quarterly or yearly)
    • ROI = (total economic value – total costs to set up and run forum) / total costs –> over one period and as a percentage
  • Increased subscription or reduced churn
    • Customer database compared to community database
    • cust. database = Average churn rate (e.g. the number of months the avg user subscribes) X price/subscription = customer value
    • Community database – look at active members and see if the churn rate is better or worse.
    • Price will be the same, so you’ll have to see if the churn rate was more or less. If subscriptions are longer, than you have a higher customer value for community members.
    • Shows you slowed the churn rate down.
  • More frequent purchase or Higher Purchase level/amts
    • Use your eCommerce DB or CRM system
    • What is the avg amt customers spend/purchase?
    • go back to comm DB and parce out active members and compare to ecommerce DB (which ones spend more/purchase?)
    • Do comm members have a higher spend/purchase? active comm users X avg $ they spend = economic value
    • Need to trend this and see how it fluctuates.
    • what is the average number of items in completed shopping activity? (e.g. 1.6 items) Do comm members buy more?
    • Avg cost/item X avg # items = economic value
  • CRM decrease cost
    • Want to find what avg value of customer is
  • Faster close of sale (Good for large purchases like software or hardware systems)
    • How fast are organizations moving through your CRM system to sale?
    • Identify active organizations in community DB to compare them to avg organizations.
    • How long does it take the avg. organization to go through sale stages? What’s the cost/sale? Do active organizations in your community go through more quickly and spend more?
  • Lead generation cost
    • Similar to above, but use cost to generate a lead for average customer versus those which originate in community/social media campaigns
• How can you tell if a user came to your comm and then bought your product through a 3rd party reseller? You can’t unless your resellers provide access to their databases which is next to impossible to get.
• Users of support communities become brand neutral after their issue becomes resolved.
• Hidden costs of community for ROI Analysis, make sure you count these:
  • Servers
  • development costs
  • customizations
  • widgets
  • maintenance
• Make sure that you are amortizing your costs across the same time period as your economic value or you will skew your results.

One point to remember is that the value of communities really is derived from active members, not all members. So define your active members with criteria that meet your behavioral key performance indicators (KPIs). For example, an active member can be someone who posted in a forum, downloaded a featured whitepaper, uploaded content, or viewed a webcast in the past month. For B2B especially, it doesn’t have to be an activity within the past week as most B2B community members average 2-3 visits per month unless they are deep into the sales cycle.

The number one issue to watch out for when building your ROI framework is the use of proxies. If you cannot get the data, don’t guess at a proxy for the value because the more proxies you utilize the bigger the house of cards that you build.

Lastly, value can be a set of different items. For a subscription based community value can be both churn rate differential and purchase levels. ROI is not a single value formula, it is a multiple value formula in most cases as there is marketing value in support communities and vice versa. So make sure that you are at least attempting to capture as much of the value drivers as possible in your analysis.

Want to learn more about online community or social media ROI? Contact us today or leave a comment.

B2B Communities – What Works

We gave a presentation at last week’s Online Community Unconference (site is open to the public as of June 19th per Forum One) in Mountain View, CA on B2B Communities. We weren’t surprised by the number of attendees looking to learn more about the best practices for running a B2B Community, but were surprised a little bit by some of the misperceptions on managing them.

Top Best Practices for B2B Communities:

1. B2B Community Members have higher expectations than B2C members. You must engage with them as they want to engage with your company just as much as they want to engage with their peers.
2. B2B Communities require internal SMEs to engage early and remain committed to meeting member needs until external SMEs can compliment the internal SME efforts.
3. Third party applications like Twitter and Facebook should not be used as external competitive communities, but rather should be utilized as beacons to drive traffic to your community and key information.
4. You can measure the ROI for B2B communities, but you cannot get there by using only community software metrics and/or web analytics packages like Omniture or Google Analytics. None of these provide true value metrics that have an economic value associated with them. To get to ROI, you must build relationships within your organization so you can obtain real data on customers, leads, ecommerce transactions, etc.
5. When budgeting for B2B communities, be realistic. For example, no single vendor of software or web design or implementation services will ever come in exactly where they quote when you want additional features or customization. So build a small cushion into your budget to be safe.
6. To attract business decision makers, you must focus on how they will use the site… not how you want to market to them.
7. The higher the level within an organization your potential members have attained, the lower the amount of time they will have to spend on your site. So don’t waste their time!

In short, B2B communities can deliver impressive results when managed properly with a focus on those segments who deliver the value to your organization. Don’t be all things to all people, that strategy is doomed to fail. To learn more about the best practices for B2B communities, please download our presentation , ask questions in the comments area below, or contact us.

Online Community – B2B Return on Investment (ROI) During Recessions

As we move through a downward business cycle, smart companies are moving counter intuitively to engage more with their customers rather than decreasing their online community efforts. The slide below from a presentation during the height of the Dot Com implosion in 2003 shows that even in a recession, online communities still deliver impressive returns on their investments:

What is interesting about these quotes is that the communities referenced were launched in the 1998 to 2000 time frame when online community was a new offering on the web. To gain these results, our clients had to change the behavior of their potential members to include online communities in their work routines. While it seems old fashioned today when everyone knows what an online community is, these results demonstrate one of our best practices:

Too often organizations buy into the idea that the offering itself will be enough. The “build it and they will come” idea has been proven to fail almost every time. And yet, we see organizations thinking about cutting their community investment or launching a community and letting the community run itself. That is a recipe for failure as well. It also reflects the thinking that online communities and social networks are a ’soft’ application (meaning that they cannot prove their value quantitatively). It is for this reason that many managers move to cut online community budgets dramatically during downturns. This is exactly the wrong time to cut, this is the time to build.

In times of economic uncertainty, your customers and prospects will perform more due diligence than ever prior to buying your product or service. Online communities and social networks are valuable tools in that process. Will a community without a strong company presence be able to influence the purchase decision? Probably not. This reinforces a second best practice:

So how does this tie into the ROI argument? Simple… if your organization is not prepared to engage with the community members by answering their questions, providing documentation, linking them with content, and asking their opinions your community will wither away during the downturn. If your organization is ready to engage with your community, you will build additional brand loyalty among members. Your community will be vibrant in comparison with your competitors who are pulling back. You will be demonstrating the value of working with your organization over the competition. By providing correct information rather than partially correct information (community managers facilitating conversations do this part), you help your prospects learn more about your products/services/company and build confidence in them that you’ll be there to help.

Remember that in most B2B communities, the ratio for those visitors who read versus those who add content is roughly 25 to 1. This means that every successful interaction potentially influences another 25 visitors on average. Depending upon the product or service, it can be much higher. Influence is correlated with purchase intent. When your community is functioning properly and is well managed, the influence it wields is tremendous.

By mining your registration database against your customer database, you’ll be able to prove the value of your online community. By using a proxy of 2-5% of sales made to community members were influenced by the community, you’ll be able to calculate a basic ROI. To refine the proxy, survey your members about the influence the community has had on their purchase decisions. You’ll be surprised how large a percentage of community members have been influenced by something they read or received from the community. But if you are not investing in your community, you will not get the growth needed to generate a positive ROI.

And that’s just the sales/marketing ROI. For those B2B communities engaged in self-service customer support, the cost avoidance equation is easier to figure out and measure.

Want to learn more? Visit our website (Impact Interactions) to download our free presentations on online community best practices.

Online Community Metrics & Reporting- Another Viewpoint

Matthew Lees of the Patricia Seybold Group and Robert Dell’Immagine of VMWare presented the topic of Metrics and Reporting to the Santa Fe meeting last Monday morning. Several of Matthew’s comments were interesting from the perspective that it appears many organizations continue to have trouble measuring the true value from their communities. A couple of his comments from his research:

But the most important message from Matthew’s presentation was: What are you going to do once you’ve measured the impact of your site? Too often, organizational managers say “Great, our numbers are up or our metrics are okay.” instead of trying to understand why the metrics look the way they do and what they can do to improve them.

Measuring activity is easy. Measuring business value is hard.Out of the box platforms’ reporting tools will not give you value/impact metrics.

 

What are your customers using to measure their success vs. what does success mean to your organization?

(An example of using metrics for advancing a web site was demonstrated by our client SAP. In reviewing landing page metrics for multiple countries, we noticed that one country was not converting its visitors to registered members at anywhere near the same rate as our other country pages. Because of this data, SAP reviewed its page in the context of navigation and contextual language and discovered that the text was unclear as to the real benefits of registration for the targeted country’s population. The pages were then re-written with a different call to action and tested. Over time, as the metrics came in, further adjustments to the call to action text were made and the overall conversion improved.)
The process that Matthew recommends for measurement and action is as follows:

Hypothesis –>Baseline–>Action–>Evaluation–>Moving the Needle

Robert’s presentation was a good reminder for everyone that metrics evolve over time and that one set of metrics agreed upon at the outset of the community may not meet the needs of all stakeholders. For example, Robert’s community team reports to multiple stakeholders including the community team, support, product management, marketing, and executives. Each has their own requirement for information and metrics to back up their own ideas. As Robert stated, “our metrics viewed have evolved over time.” I couldn’t have put it better.

Are you interested in learning more about reporting and metrics? Impact Interactions is the leading online community strategy firm helping clients to measure the impact of their site offerings. From your pay-per-click campaigns through your ROI, we can help you understand how visitors/members are using your site and how it ties to your organizational/business goal. To learn more, please contact us.