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.

Welcome to our new site!

I’d like to welcome you to Impact Interactions’ new web site. Please take a tour around our site and let us know what you think. We’ve consolidated our blog and company information for clients, prospects, and visitors (frenemies too!) trying to learn more about Social Media and/or Online Communities.

We’ve added a new section Social Media Resources to give you quick access to our presentations from conferences and meetings. You’ll find our presentations from Community Unconferences, Business Forums, Internet Strategy Forum Meetings, as well as presentations we’ve delivered to companies wanting to learn more about using Social Media to excel.

We’re also adding a link to our Twitter Account(@ImpactInteract) for those who want to follow our Social Media and Online Community ideas and work issues. For those of you who have been following me at MRowland602 on Twitter, that account will now become my personal account rather than the voice of Impact Interactions. So please consider following @ImpactInteract instead to stay up to date with us.

We’ve also added a link to our facebook account where we’ll add interesting photos from our office and employees as well as additional commentary that runs more to the fun side of running online communities and social networks.

As part of the change, our Blogger account will no longer be updated. All content from our previous blog going all the way back to 2004 has been moved to our blog here. We’ve categorized and tagged the content to make it easier for you to find the information you’re looking for.

Of course, we also have our marketing information as well. If you are looking for an experienced firm with the credentials to make your project (and you) successful, please contact us to continue on your path to success!

Thanks again for visiting, we hope you like the site.

Mike Rowland, President & Founder

Hey! Who’s driving this thing?: Online Community Unconference East 2009

At the Online Community Unconference East, there was a broad range of conversations from ROI and community benchmarks to the psychology behind using online communities. Throughout these sessions I noticed a common theme brought up several times was super user engagement and incentive programs. That in itself is a topic that I was not surprised to hear about. Engaging and encouraging your hyper-affiliated members to contribute regularly drives better content, activity, and engagement throughout the community. Asking these members for feedback, to help out other users when they can, and highlighting them as role models for community behavior is a standard best practice. Where this conversation ventured off path was when I heard the question (I’m paraphrasing here) “My team does not have the time to deal with all of the violations in our community and in this economic climate we just can’t bring more staff on board. Can I get my super users to take on this responsibility?” Simple answer to this one. No.

Giving members of the community the ability to flag content and users that violate the community rules is a valuable tool that allows moderators to identify problems and act more quickly. This is a function that is built in to the majority of community platforms today. But giving members the administrative power to make actionable decisions on the behalf of your organization begins to border on the edges of shirking your own responsibilities and will inevitably leave you asking yourself “Hey, who’s driving this thing?”

No matter how much your members love your product, your brand, your cause; they are not there for your company. They have their own reason for participating in your online community and that reason is often not to uphold all rules and requirements set out by the sponsoring organization. You will find some volunteers that have a great helper mentality and want to do all that they can for the community but can you risk your brand reputation on hoping that one of these members won’t steer the company into oncoming traffic? Remember that these highly active users already have a tremendous sway over the conversation in your community because they are very visible and have built up a reputation to where other members will follow their lead. Handing over administrative tools will only amplify this power.

The level of freedom that you give your members will obviously depend on the type of community and the audience but the ultimate responsibility for running the community needs to lie in the hands of the organization. Volunteer super users cannot take the place of a dedicated and objective moderation team. In our experience of moderating an online community with over 50,000 users and many members that have been deeply involved with the organization online for over 10 years, we find many members that are active in reporting objectionable activities. Despite this, we still see that on average 75% of the terms of service violations are being reported by our moderation team where only 25% of violations are noted by members.

When the internal resources in an organization are stretched too thin to bear the brunt of moderating their communities, contracted moderation services become a viable and cost effective alternative to the expense of hiring additional staff.

If your organization needs help handling the moderation load or are looking for proven moderation best practices, leave us a comment here or Contact Us.

Jen Graziani

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.

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.

Help Wanted: Metric Reporting Analyst

Impact Interactions is a market leader in strategic consulting & moderation services for organizations using online communities and social networks to drive specific, real world, business results. We also help clients to understand and report on their web metrics as an outsourced analytics reporting service. Our clients include AARP, Cisco, Intel, and SAP among others. For all of our client engagements, we provide scheduled reports covering all interactive touch points with site visitors.

Due to our recent growth, we are looking to add the right person to our team here in Maryland. Specifically, we are looking for an individual who wants to learn our business while helping our clients to understand the way that visitors use their site. The selected candidate will have the following responsibilities:

1. Prepare daily, weekly, and monthly reports for our clients in Wordand Powerpoint
2. Stay current on metric trends and techniques by attending seminars,webinars, and reading white papers published by the major analytics vendors
3. Interact with client teams to resolve reporting issues and topresent reports (requires some overnight travel)
4. Learn about online communities, user generated content, and socialnetworks (including moderation) in order to understand their impact on business goals
5. Update client ROI analysis on a quarterly basis

To be considered for this position, you should have the following qualifications:

• A degree in a mathematical or business related discipline(Statistics and Marketing preferred)
• Strong proficiency in all Microsoft Office Products
• Familiarity with Omniture, WebTrends, Site Intelligence, HitBox, or other analytic tools
• Basic understanding of PPC, SEM, Conversion techniques, and Engagement measures
• Strong writing skills
• A sense of humor!

Impact Interactions is located on beautiful Kent Island on the Chesapeake Bay across from Annapolis. Our benefits include subsidized health insurance, gym membership, a casual work environment, PTO, and a quarterly bonus plan. You can learn more about us by visiting our website. We are an equal opportunity employer.

If you’ve read all the way to here and are still interested, please send your resume and a cover letter to JOBS at Impactinteractions.com for consideration. No phone calls please. We will contact all qualified candidates to schedule an initial telephone interview.

Online Community Expert Dan Bruhn Joins Impact Interactions

Dramatic growth in High Tech clients focusing upon user generated content on web sites has increased the need for experienced executives who can bring strong real world business processes to manage the submitted content. To help our clients in this sector, Dan Bruhn has joined the Impact Interactions team as our Senior Consultant for High Technology engagements. A graduate of Bradley University, Dan brings over seven years experience in online communities, marketing, technical support, and analytics to our client engagements.

Prior to joining Impact Interactions, Dan worked with Cisco Systems’ award winning Networking Professionals Community (NetPro). In his role with Impact Interactions, Dan will continue to lead all engagements within Cisco, including the ongoing moderation engagement for NetPro. Additionally, Dan will provide best practices for Impact Interactions’ business-to-business clients pursuing online community-based interactive strategies.

“Dan provides our clients with an additional level of online community expertise. He and I worked together in the early days of NetPro at Cisco and his experience in using online communities to drive measurable results is significant,” states Impact Interactions president Mike Rowland. “With the addition of Dan, Impact Interactions continues to build the strongest database of best practices in the online community world for our clients. His deep knowledge of technical support, marketing, and partner communities brings tremendous expertise to Impact Interactions which in turn will help our clients succeed.”

For additional information regarding online moderation or user generated content strategies, please contact us at ImpactInteractions.com.

Wanted: Online Community Team Associates

Impact Interactions is expanding again…

We are actively seeking people interested in online community to join us as associates, both in our online moderation group and in our online consulting group. These entry-level positions are based in our offices in Maryland. These are not virtual positions, you must be able to work in our offices.

For associates in our online moderation group, we have both full time and part time positions available for all days and shifts. The basics of the job are:

• Familiarity with online communities, MMOGs, Virtual Worlds, and other interactive web based destinations
• A college degree with an emphasis on writing skills (English, Creative Writing, Education, Marketing, or Journalism preferred)
• The ability to work as part of a larger team, while independently meeting your client’s needs for reporting, moderation, and facilitation
• Proficiency with Microsoft Word, Excel, and PowerPoint
• Basic understanding of web traffic metrics
• Ability to travel to client sites around the globe as dictated by our clients

For the associates in our online consulting group, you should possess all of the above and additionally:

• A strong understanding of web metrics including experience in using at least one of the major analytics packages (WebTrends, Omniture, Hitbox, Google-Urchin, etc.)
• A basic understanding of SEM, SEO, PPC, and PPA and how to measure results
• The ability to create blog entries for our blog to provide our view of the online community world
• At least one year in a web-oriented position
• Fluency in a foriegn language (German, Chinese, Spanish, Korean, Japanese, Russian, or Polish) is a plus

We are an equal opportunity employer. Disabled and older workers are encouraged to apply. Proof of eligibility to work in the United States is required.

To learn more about these positions or to apply, please send a current copy of your resume in Word, a cover letter, and your salary requirements to Jobs at Impactinteractions.com. Due to the anticipated volume of responses, we will only reply to those candidates who meet our needs.

Thank you for considering Impact Interactions!