It was not long ago that all of us in the Online Community space struggled with how to calculate Community’s Return on Investment (ROI). If a big enterprise brand had an Online Community, everybody and their dog knew it had value, but actually quantifying the dollar figures with any level of credibility was a daunting task. In fact, none of our in-the-trenches employees that should have been talking about ROI with our very own Khoros customers during the years 2008-2012 initiated the subject; instead preferring to be reactive and let our customers come to us with ROI questions that we could barely muddle our way through answering.
Our company had a whitepaper or two (one that we commissioned a 3rd party to construct, and another we built from scratch) that were both long on theory, but short on actual measurement instructions. Looking back, I am a bit embarrassed by this, but I am also embarrassed about what I did (or did not do) in high school, so we ought not to dwell on such things.
Outside of our company, Forrester Research had about 3 whitepapers (one was so-so, the second was decent, and the third was great) on the subject. The Technology Services Industry Association (TSIA) had one or two serviceable whitepapers as well. All in all, Community ROI was a fairly bleak thought-leadership landscape until about the year 2012. However, there was no magical switch that was flipped that year, nor was there any one single person that changed the game. Indeed, what happened during the years 2012-2015 was that we here at Khoros started to run standardized plays on how to quantify business value within an Online Community. These are the 4 fundamental Value Levers that we arrived at (below, on the right):
Business Value tends to come down to whether something makes the company money or saves the company money. Additionally, the concept of ‘soft value’ (i.e. - valuable assets that are hard to quantify into money) should be acknowledged as well. However, I always start talking about Community business value with the fundamentals that can have money associated with it, and then shift into ‘soft value’ traits. The best way to think about Community value levers is to associate them with a concept I call the “4 S’s”: Savings, Sales, Satisfaction, and SEO. They are all easy to measure if you have both the Community data and can reconcile it with internal business data.
Of course, I should not get too far ahead of myself and also make 3 disclaimers about measuring these fundamental value levers of an Online Community. Here they are:
- Community Business Value is always predicated upon Community Health. If your Community is unsuccessful from a ‘health’ perspective, then the Business Value will be slim to none...and really, attention should instead be paid to fixing the Community rather than measuring it’s Business Value
- Having Single Sign On (SSO) for your Community is good. However, having a Customer Relationship Management (CRM) integration is even better. If you do not have SSO, it is still possible to measure ‘Savings’, ‘Satisfaction’, and ‘SEO’, but you cannot measure Sales. With SSO or a CRM integration, you can measure ‘Sales’
- Once you arrive at any sort of measurement of any Community value levers, you do not have ROI. You have a gross yield. To measure the ROI of a Community, you need to take the gross yield of the value levers, and then subtract the cost of the platform and the cost of the people that operationally manage it
In subsequent articles I will explain how to measure the “4 S’s”. Though not complex, there are two primal considerations before even attempting to measure these 4 value levers.
The first of which is to make sure to pick the “S” that is most relevant to your Community’s business objectives, and tackle that value lever first. This means that if you work in Marketing, and your Community initiative is sponsored by Marketing, then you probably do not want to spend a whole lot of time extolling the virtues of how much money the Community saved the company by deflecting contacts to the Support organization.
The second factor to consider is whether or not the business has a firm grasp on the data points that are necessary to reconcile with Community data, which will help you arrive at the gross yield. For example, to measure the Savings value lever, you need to know how much a deflected contact to Support is worth to your business. Some of this data is easy to track down internally, and some of it may be challenging to uncover. It depends on your organization, the maturity of your business, and again, what really matters to those that are sponsoring the Community initiative.
These things take time, but don't worry. We’ll get there.
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