In this latest article about quantifying Community Value, I want to examine the methodology for measuring ‘Spend’ as a business value lever within Online Communities.  ‘Spend’ is the value lever that always gets the most attention from a brand’s leadership when the story is conveyed effectively to them.  Yes, it is true that ‘Savings’ (another one of the 4 S’s) is the value lever that everybody seems to talk about, but ‘Savings’ seems to be afforded the majority of attention not only because it is a common objective, but because it is easy to calculate as well.  But believe me when I tell you;  if a brand has an Online Community, the very top of their leadership organization cares about this: What I have also found to be true is that although the formulas for discovering the different variations around Online Community member spending are extremely simple, the actual technical and/or technological tracking to prove the ‘spend story’ can be difficult to achieve. Let us first start with the primal formulas that are used to examine Community Member spend.  You basically need two averages to compare in order to conclude that a Community member is spending more than a non-Community member: The average of a regular (non-community member) customer spending with the brand.  Hopefully, the business is mature enough to have this data on hand at all times, but sometimes (depending on where one sits in the organization) it can be a bit difficult to track down this data The average spend of all community members (preferably those who logged in during the last year) with the brand It is likely that community-member spend will be higher than the average non-member ...though not always. It is, indeed, very rare when that is not the case.  Let us look a bit more closely at how we slice and dice the data in order to discover the truth of whether Community Members spend more or not.   First, reconciling these averages can sometimes be arduous if you do not have the right technology experience and tools to handle large data sets (SQL, Tableau, etc).  Second, it is also very dependent on the brand having Single Sign-On (SSO) in their community in order to even have the data..  If SSO is not set up, then this measurement exercise is nearly impossible.   But do not give up hope.  It is possible for a brand's Marketing team to check where people are 'coming from' when a customer placed items in their shopping cart and/or successfully completed an order.  If the origins of the shopping experience (from what the brand can tell in their tracking data) come from the Community, then the Community team should know about it!  Ideally, Web Marketing (or Web Sales) should also know how many online conversions had Community in the purchase journey.  Here are three ways to track conversion events coming out of Community: The most common way is if the Community is directly integrated into the CRM system of the brand.  If that connection is all wired up, you can usually tell which Community users made purchases using the brand’s online shopping cart after they spend some time on the Community.  However, a CRM integration may not tell you definitively what content was read in the community by the purchaser, and precisely when the person read the purchase-inspiring content.   A CRM integration with Community will advise you (by virtue of the member lists) that Community members spend more (or less) than average non-Community members.  It does not necessarily indicate what content was digested in order to influence a purchase decision Another less common way to track DIRECT conversions is to have an integrated shopping feature (with products!) within the Community.  With that sort of feature/integration enabled, you can definitely track conversions very tightly from the Community The easiest and most standard way of looking at Conversion events as a result of Community is just tracking cookies/sessions as a Visitor moves from the Community onto a product page, and subsequently converts.  Many product pages of e-commerce sites are able to read where a Visitor (and ultimately, somebody that 'converts') came from.  If where they came from is the Community, then great, let the Community get some credit! Lastly, and I will not include the following in the numbered list above because the following tactic does not involve any direct interaction with one’s own technology or specific data points, is to make some assumptions using formulas.  I am loathe to do this when calculating Spend if the Community is already live and successful (because I would rather endeavor to get the real data instead!), but sometimes there are exceptions.  Here are some studies that have assisted me when using assumptions: Forrester: 2016 is the year of the branded community Aberdeen: Hi-Tech with online community achieve 54% greater annual revenue Constellation Research: Online communities drive additional revenue University of Michigan : Online communities boost sales The Community Roundtable: Value from answers (support and marketing/sales) And an additional reference point that I use not only when assumptions are necessary, but also as a ‘gut-check’ when I have made calculations using the actual brand’s data is our own Millward Brown Digital 2014 study on the impact of Marketing & Sales. All in all, calculating the monetary yield of Sales from Community can be tricky, but it is only tricky due to a lack of a fully wired-up tech ecosystem.  But once the story is told, people really do take notice.  The Community will begin to gain a new level of credibility and respectability within an organization.  Make it happen if you can!    ⬅️ Previous How to calculate 'Cost Savings' within a Community  ... View more

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: 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? ⬅️ Previous Discovering Business Value within a Community Next  ➡️ How to calculate 'Member Spend' within a Community ... View more

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.  T hese things take time, but don't worry.  We’ll get there.  Next  ➡️ How to calculate 'Cost Savings' within a Community ... View more