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How to calculate 'Cost Savings' within a Community

Khoros Oracle

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In my previous article, I spoke about the most common value levers that we can measure within an Online Community in order to evaluate what the Community is doing for the business.  More often than not a stakeholder within an organization wants to know, “is this darned thing making me money or is it saving me money?”  I can never begrudge anybody with such a question that spent money on Khoros software and allocated employees to their Community endeavor.  In fact, I always want to do my best to answer these types of questions.  

It turns out that a majority of our Community customers (around 60%) are primarily looking to save money, and so it is often the case that I do the calculations and subsequently explains that the Community is saving them money.  There are, of course, exceptions.  If the Community is not successful, then that is a bigger problem, and so I do not really talk about what the Community is doing for the business, but rather, what the business is leaving on the table when they do Community incorrectly.  But even the Communities that do not have ‘saving money’ as their primary objective end up with a little bit of Savings anyway.  Why?  Because we are living in an era where people prefer to digitally self-serve.  When somebody solves their own problem by reading a knowledge-base article or peer-to-peer discussion, then that self-service *potentially* deflects a contact to their Customer Support center.

There is nothing new about people resolving their own issues with a brand’s products or services.  Have you ever heard of the team ‘shadetree mechanic’?  Back in the day when cars were a lot more simple, a great number of regular people knew how to fix them, and those folks could do it in a few hours (or minutes!) under the shade of a tree.  Time marches on though, and so much of the world has become more complex.  

For me, the peer-to-peer Community has always represented a light in this complex darkness.  No matter what I was interested in, there was a Community for it.  And within those Communities were subject-matter-experts that could help answer my questions on any arcane subject.  Better yet, I would commonly find that somebody else had already asked my question and that these subject-matter experts had already answered it.  The treasured knowledge, which had been delivered over a year ago unto a poor sap with a problem identical to mine, was now sitting right there for me to learn from.  Eureka!

But let us now make sure we really understand the mechanics of how a conversation saved money.  If a dialogue around somebody asking a question on a peer-to-peer Community is answered by another more knowledgeable peer, that is great.  Potentially, an inquiry to the brand’s Support team was avoided.  But the real action is in how that particular answer lives on in perpetuity within the Online Community.  In the field of self-service, the biggest cost savings are not found in the number of Accepted Solutions on a Community (i.e. - the Direct Contact Deflection of one person answering another), but rather in the subsequent views of those Accepted Solutions over time by large amounts of people that use the Community in an anonymous and passive manner (i.e. – Indirect Contact Deflection).  So it is not ask-and-answer where the magic happens.  It is in the ask-and-answer being viewed hundreds, thousands, or tens of thousands of times.  Some have called this a ‘force multiplier effect’.  Let us now examine it.  

The formula to measure the mechanics of traffic, interactions, and your business, looks like this: 

# of Visits to the Community during a given timeframe

% of Visits seeking support

% of Visits that are 'seeking support' who resolve their issue (aka - 'Resolution Rate')

% of those that were ‘seeking support’ and have successfully ‘resolved their issue’ which would have contacted Support if they had not solved their problem via the Community

Multiplied by the Average Cost-per-contact to the Support Center 

(NOTE - use the 'Fully Burdened' cost per contact)

= Gross Savings

So a savings story might look something like this....

5,000,000 Visits to the Community in 1 year

70% of those Visits were seeking support

40% of those 'seeking support' Resolved their issue

50% of those that were 'seeking support' and have successfully 'resolved their issue' would have contacted Support if they had not solved their problem via the Community

X $12 cost per contact

= $8,400,000 in (gross) savings

For the more visually inclined, here is a picture of the same formula (with the same numbers) in action:

JakeR_0-1619059953153.png

Measuring savings can be done on a weekly (or even daily!) basis, but our recommendation is to run the formula annually or, if it suits your business, quarterly

Though not required, it is recommended that the Khoros ‘Value Analytics’ survey be enabled on the Community.  This survey asks the precise questions in the exact order of the formula.  It is both included in the platform and an extremely non-fatiguing survey experience for the Community Visitor.  Although the questions in our Value Analytics survey cannot be customized, our Value Analytics survey feature has the necessary flexibility to accommodate 3 important contexts;  where it is served on the Community, when it is served on the Community, and to whom it is served on the Community

Though a brand may run their own survey (we have no problem with that!), be mindful of extraneous questions that are not relevant to the Community experience, much less the self-service experience.  When left to their own devices, brands run surveys too quickly in the customer experience and/or they simply do not ask the right questions.  The results are either an extremely low survey completion rate, or worse, a survey full of reactive (i.e. ‘mean spirited’) responses.

This is how you measure ‘Contact Deflection’ Savings in an Online Community.  Easy, right?

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Discovering Business Value within a Community

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How to calculate 'Member Spend' within a Community

7 Comments
Advisor

We have struggled to effectively use metrics from the Khoros 'Value Analytics' survey responses to get a meaningful output using the contact avoidance formula described in this article: the raw data suggests a fantastically and unbelievably high number of contact avoidances in our case. They suggest we're deflecting far more contacts than we ever received before we had a community, and the community certainly hasn't dropped our contacts to 0.

Have other people had success in identifying concrete data that gives numbers to plug into this formula to get believable results?

Honored Contributor

This is great formula as it is but there is one problem - if you look how many visits per giving time there is it includes all the visits. I mean human visits and bot visits, visits what last only second or so.

So the ROI is way bigger than it actually is.

Or, is the bot visits excluded from the Community analytics and Visits metrics / Unique visitors?

Trusted Contributor

Hi @TeroRe,

From what I remember, bots are excluded from Community Analytics. From the Khoros blog post:

Page Views approximates user behavior and therefore excludes non-human requests (Web crawlers, robots, RSS feeds, REST API calls, ActiveCast calls, and LevelUp requests).
A visit is one or more page views over time by a uniquely identified client (visitor). 

Regards,

Karolina

Honored Contributor

@karolinalinda yeah Page views metrics has bots excluded but how about with the visitors / unique visitors? I can't find any mention about those.

Occasional Commentator

@cgrinton I agree that the calc won't necessarily reflect actual because customers often don't really call for support for questions they're asking. They have these other behaviors:

  • Save up their questions and ask all on one support case
  • Live with it
  • Ask someone else in the office

[Skip any and all of this if you've already done it.]

A better place to start IMHO would be:

  • Can I move the needle, i.e. make it better or learn what makes it worse?
  • How does my community compare to other Khoros customers in the same space?

 

Can you share what the % results you're getting for each? 

 

Based on the sample data, only 14% are deflected to achieve the ROI. At $12 p/ call, you do need to deflect a lot, and if you had 5M customers that would still be a huge return, but most of us aren't serving 5M customers.

  • Are there really 70% of my visitors seeking support, but only 50% would have called? That's 35% of all customers if I solve 100%.
  • For a mature community, this gets smaller, because the topics are different. I'm looking to get beyond what support can do for me.

 

One last thing. 

Be sure to subtract out your operating costs from the ROI calc, unless it is included in the fully burden cost already -- often it isn't.

  • What do you pay Khoros
  • Moderator and related head count
  • Is there other IT work from your org?

Do if I had 50K customers * 70% seeking * 40% resolved * 50% would actually call * $25 burden = $175K

$175K - (2 mods) - (Khoros cost) = I'm losing money

 

Looking forward to hearing from others. And if you're not using this, how are you measuring your return?

Honored Contributor

We have spoken about this lately and choose not to use visits when calculating ROI. Because it includes all the visits, no matter how long visit lasted. 1-5 seconds visits, it is impossible to get info you were looking for, read and understand.

We choose to use Google´s new metric, Engaged Sessions. If visitor stays least 10 seconds in one page it is calculated as a session. 

Calculating ROI using this metric it is much closer actual ROI. But just like @JCTatRedSail mentioned, you have to take note platform investment, peoples salary on so on.

Occasional Commentator

I like it! -- I wonder how the ROI calculator would play out for people once they use Engagement Sessions instead of visits.

I'm going to have to go back and look what that does to my #s. @TeroRe - Can you share the % difference from visits to Engaged that you saw?

The example I posted previously might just change a bit if you dropped 20% of the visits.

Do if I had 40K customers * 70% seeking * 40% resolved * 50% would actually call * $25 burden = $140K

$140K - (2 mods) - (Khoros cost) = I'm losing money