Gold in Them Hills: Computing ROI for Support Communities
 

Gold in Them Hills: Computing ROI for Support Communities

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Learn the approaches used successfully by Lithium Technologies' customers to compute a realistic ROI (Return on Investment) for their support community initiatives

Learn the approaches used successfully by Lithium Technologies' customers to compute a realistic ROI (Return on Investment) for their support community initiatives

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Gold in Them Hills: Computing ROI for Support Communities Gold in Them Hills: Computing ROI for Support Communities Document Transcript

  • Gold in Them Hills:Computing ROI for Support Communities
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.68012 of 15Table of ContentsPurpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Financial Benefits of Support Communities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Non-Financial Support Community Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Case Deflection Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Direct Deflection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Indirect Deflection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Decreased Support Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Better Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Customer Satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Increased Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Support Community Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Startup Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Recurring Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Setting ROI Expectations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15About Lithium Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.68013 of 15PurposeThis paper was created in collaboration with FT Works, a leading consulting firm that providesstrategy, operations, and metrics development & tracking services to support organizations. FTWorks’ extensive client list includes Google, Cisco, Autodesk, Chevron, Kodak, Hewlett-Packardand Nokia.This paper describes approaches used successfully by Lithium Technologies’ customers tocompute a realistic ROI (Return On Investment) for their support community initiatives. We defineROI as Cumulative Benefits minus Cumulative Investment. You can use this paper in two ways: toget a general education about community ROI, or to create your own custom ROI analysis.If you only want general information about ROI, simply read through the paper. On the other hand,if you are building your own ROI analysis you will find that you need to pause from time to time togather relevant data. In most cases you will find that you need to either analyze existing data in anew light or gather data that simply does not exist today in order to complete the analysis. We hopeone of the benefits of this paper will be to inspire you to create better metrics for your business.Our goal is to create a meaningful ROI calculation, based on solid and well thought-out dataso you can be sure that the ROI figure you obtain is correct and will continue to hold in thefuture. Therefore, at every juncture of the following analysis we will encourage you to err onthe conservative side as you select data. The good news is that ROI for support communities istypically very favorable, so even with our recommended conservative stance you are likely to find apositive outcome for your community.Financial Benefits of Support CommunitiesSupport communities can provide financial benefits in several areas, depending on how they areused. Here’s an inventory of the main categories.Case deflection. For support communities this is typically the largest, most tangible, andmost easily tracked benefit. Customers who get answers through the community don’t need tocontact the support team for personal assistance. Since assisted support is costly, everyrequest that’s avoided (deflected) means a saving. Note that this applies not only to customerswho pose a question in the community and receive an answer, but also to the (typically muchlarger) group of customers who don’t need to pose a question at all but find the answeralready posted in the community. This is Web 2.0 at its best.Decreased support costs. Most savings occur via case deflection, but depending on how youchoose to deploy your community you may also experience additional savings. For instance,the community may allow you to drop your email support channel entirely (replacing it withthe community), with attendant savings in staff and tool costs. Or you may be able to avoidbuilding a new support center to handle volume growth. Also, you may be able to boost theproductivity of the agents, either by leveraging the customer community as a knowledge baseor by deploying an internal community to more easily exchange information.Our goal here is tocreate a meaningful ROIcalculation, based onsolid and well thought-out data so you can besure that the ROI figureyou obtain is correct andwill continue to hold inthe future.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.68014 of 15Better analytics. One of the very enticing benefits of support communities is to facilitatefeedback between customers and vendors, both for existing products and for future products,for instance via a beta community. Customer feedback can be obtained via other means, bymining interactions with assisted support channels or by conducting customer panels forinstance, but communities make the exercise much easier, faster, and less costly.Communities are also ideal for spotting smaller-scope, detailed feedback that may never getvoiced through an assisted support channel or a formal customer panel because customerssee the issue as too trivial to bother.Customer satisfaction. Community users tend to be more satisfied users, tend to recommendyour products or services to others, and experience lower turnover rates. The issue for ROI isnot whether customer satisfaction is increased by the community but rather how a companycan capture customer satisfaction and translate it into financial terms. We’ll come back tothis later in this paper.Increased sales. Although a support community may not be the first tool you think about toincrease sales, it’s an ideal mechanism to make product recommendations. Some ofLithium’s customers capture the traffic from their communities to their online sales site andhave shown that forum recommendations are most effective in triggering not only a visit tothe sales site but actual purchases as well.Non-Financial Support Community BenefitsDo communities provide benefits other than financial? Absolutely! Just to use one example,community users tend to be satisfied not just with the community but also with your products andservices as a whole. So even if you are unable to measure the financial impact of the increasein customer satisfaction, you can rest assured that there are many non-financial benefits ofcommunities. Because our focus here is financial we focus exclusively on those benefits that canbe translated into dollars. It does not mean that there are the only benefits you will enjoy fromyour investment.Case Deflection SavingsCase deflection usually provides the bulk of the hard-ROI benefits for support communities.Indeed, we find that many Lithium customers don’t bother estimating other savings, not becausethey are not there but because they are likely to be dwarfed by the case deflection savings (andthey are harder to measure!). If you have a small user base or you are using an internal-onlyforum naturally you won’t find large savings in case deflection, but that’s the exception rather thanthe rule.Case deflection is best analyzed by separating:Direct deflection, which occurs when a user who would normally place a request for assistedsupport instead posts a question and gets an answer; andIndirect deflection, which occurs when a user obtains an answer from the forum withouthaving to post a question. In other words, the question has been posed and answered alreadyand the customer can use the answer immediately.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.68015 of 15In most cases indirect deflection generates much higher savings than direct deflection. We seeratios of 1:5 to 1:10 and beyond between direct and indirect deflection, scaling up with the size ofthe user base. Communities are very much a many-to-many tool.Direct DeflectionTo calculate direct deflection you need two pieces of data:The volume of threads that result in an answer; andThe cost of processing an assisted support request (cost per case or cost per call)The cost per case is usually pretty easy to obtain, as it’s a standard support metric. If you don’thappen to have it handy you can simply divide the support budget (at least the assisted supportcost) by the number of assisted support cases you handle. If your support organization typicallyhandles highly complex cases and you feel that deflected cases are much less complex thanaverage (a reasonable assumption) you may use a discounted figure for the cost per case. Forinstance, you may use the cost for the average case handled within the level 1 team.Computing the volume of threads that result in answers, and therefore correspond to deflectedcases, requires a little more effort and thinking. Clearly the overall volume of threads is easy tocapture but not all threads get answered. So how can you proceed?If you ask users to label threads as “answered,” use the labels. You will be undercountingsuccessful threads (since a fair number of users may receive an answer but not bother tomark the thread as answered) but that’s what you want: you want to be conservative in yourassumptions.Otherwise, perform a simple manual audit. Read through the threads that were posted lastweek (or just one day last week if your volumes are high) and determine the percentage ofthreads that were answered. You want to use threads that are slightly old so they had areasonable chance to get answered; if you use this morning’s threads you will drasticallyunderestimate the success rate. You want to be conservative in estimating ROI benefits butyou don’t want to be thoughtless. We find that answer rates tend to remain fairly constant soyou don’t need to perform the audit more than once a quarter or maybe once a year.If some threads are answered by customers and some by staff members, should youdistinguish between the two? If you have staff dedicated to the community, or you have a wayto capture the cost of the effort of answering community questions (perhaps via a “cost perthread” figure similar to the cost per case figure), no worries. You will simply capture yourcost on the cost side of the ROI so you don’t have to distinguish here between customer-answered and staff-answered. If you have staff that works seamlessly on both threads orcases and you cannot easily tease out their cost you should segregate out threads answeredby customers (hence answered “for free” and clearly belonging in the deflected category) andthreads answered by your own staff (that are not free and do not represent completedeflection – even if the cost of a community answer is probably less than the cost of a regularsupport case.)In most cases indirectcase deflection gen-erates much highersavings than directcase deflection. We seeratios of 1:5 to 1:10 andbeyond between directand indirect deflection,scaling up with the sizeof the user base.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.68016 of 15If you must determine the proportion of customer-answered threads, perform a simple audit.The percentage should remain quite stable over time unless you change your support modelso there’s no need to repeat the analysis more than once a year.If some of your customers are not entitled to contact support you should remove theiranswered threads. Yes, their questions were answered, but no case deflection occurred sincethe customers could not contact support in the first place.How do you distinguish between supported customers and others? It depends on your internaltools. If you can match community users to support contacts the computation is pretty easy. Ifyou cannot, again use a small-scale audit or survey to find out. Note that there can be impor-tant differences in the way that entitled and non-entitled customers use the community:typically non-entitled customers are heavier users of the community since they have no otheralternatives.As a recap of the arithmetic, direct deflection volume is computed as follows:total thread volume * answer rateAnd all you need to do to get to savings is to multiply by the cost per casetotal thread volume * answer rate * cost per caseExampleACME’s community added 5000 threads last month, 80% of which were posted by customers witha support contract. 46% of the threads were resolved by customers, the balance by ACME supportstaff (ACME has a policy to respond to each thread if it’s left unanswered for 24 hours.) ACME’scost per case is $20. How much did ACME save through direct deflection?Of the 5000 threads, 5000 * 80% = 4000 were for customers with a support contract. (Wedon’t count the other 1000 since customers without a contract cannot contact Support.)Of those, 4000 * 46% = 1840 were answered by the community. (The others were answeredby Support staff so were not deflected.)The savings are 1840 * 20 = $36,800 for direct deflection.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.68017 of 15Indirect DeflectionNow for the fun part: indirect deflection (or “savings through search” as some call it) embodiesthe essence of communities: users’ experiences can be shared. The calculation is.browsing visits * success rate * cost per caseSince we already computed direct deflection, that is the savings associated with users who postedquestions and received answers, we now want to focus on browsing visits, visits in which the userdid not choose to create a new thread, so the calculation can be refined to:(visits – threads) * success rate * cost per caseA visit is not a page view. Typically customers will visit multiple pages as part of a single visit andit would be grossly inaccurate to consider page views rather than visits. So what constitutes asuccessful visit? Clearly, one during which the customer finds an answer, but how do we capturethat? There are a number of avenues depending on your specific circumstances.If you ask community users to log in and you are able to match the logins to your assistedsupport entitlement data, you will be able to determine whether community users then moveon to log an assisted support request. Naturally, someone could visit the community to takecare of one need, find the answer, and then place a support request on an unrelated topic.However, matching up visits to support requests placed within a reasonably short window(say, 24 hours) will give you a solid, conservative estimate of success.Since most communities do not require browsing customers to log in, other techniques areneeded to estimate the success rate, typically through a user survey of some kind. There areno silver bullets here. You may use a pop-up survey as users exit the forum (but it’s difficult tocapture forum exits, and in any case many users block pop-ups.) If you are able to reach out toyour users in other ways, for instance via email, you can contact them after the fact andgather their perception of success. You could also use data from a survey about overallself-service usage, not just communities.The good news is that you don’t need to repeat this type of survey very often as success ratestend to remain fairly even.Working with Lithium customers we find that the success rates for finding answers withincommunities range from a few percentage points (using very conservative estimates, to be fair)to 30%-plus. Industry data suggest that a success rate of 40%-plus for self-service would beextraordinarily high.One last note about deflection savings: it takes a while to get to a critical mass of communityusers, so if you’re starting out, expect to see a ramp in deflection from just a small amount at thebeginning (and mostly direct), increasing as the popularity of the community grows and indirectdeflection blossoms.Working with Lithiumcustomers we find thatthe success rates forfinding answers withincommunities rangefrom a few percentagepoints (using veryconservative estimates,to be fair) to 30%-plus.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.68018 of 15ExampleLet’s reprise the ACME example above and focus on indirect deflection. The ACME communityenjoyed 50,000 visits last month and is estimating a 20% success rate, based on its survey ofself-service (20% is a fairly high number but ACME seems to pay close attention to self-service,including posting answers to all community threads, and that’s paying off.) How much did ACMEsave through indirect deflection?The number of browsing visits is 50,000 – 5000 = 45,000 (removing the visits where athread was created.)The number of successful visits is 45,000 * 20% = 9000.The savings totals 9000 * 20 = $180,000 for indirect deflection. Note how the number is alot higher than the direct deflection number and how it could be even higher if the user base ofthe community were larger.Decreased Support CostsClearly communities decrease support costs because they decrease the number of supportrequests, as we just described at length. But they may also have other positive impacts, usually ofsmaller scale, that we will explore here.Increased productivity. You may find that using communities allows your support agents to bemore productive, namely to resolve issues faster and to be able to handle more issues withoutescalating to the (always costly) next level. The productivity increase may occur with level 1agents if you find that they can leverage the customer community as a knowledge basesubstitute or add-on. The productivity increases may occur with agents of all levels if theyhave access to internal forums that facilitate quick dissemination of information amongst thestaff.The math to compute increased productivity savings is not too difficult, although you will needdetailed data on resolution time and cost by level of agent. You will also have to ensure youare not double-counting savings if, as is common, there are multiple savings at multiplelevels. The savings will be expressed by the following formulas, one for savings achievedwithin a particular level of the organization: time saved * cost per minuteand one for savings related to lower escalation percentages: escalation avoidance * cost at next levelBe careful not to be too optimistic with productivity increases. If you start a customercommunity a common consequence is that the technical complexity of support requestsincreases as the easier issues get resolved within the community so your agents may spendmore time on each case on average, reflecting the increased complexity. You would stillexperience savings since the overall case volume is lower so the aggregate amount of effortrequired to solve all cases decrease, but the “savings” for this particular category wouldbe negative.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.68019 of 15Decreased support agent costs. To be sure, decreased support agent costs are more elusivethan increased productivity, but they may exist in your context. They would include:•• Lower compensation if you can use less-skilled agents who leverage communityknowledge (internal or external forum). Your savings equation is compensation savings per head * headcount•• Lower facility costs if community sharing allows you to use home-based agents. Thesavings are facility savings per head * headcount•• Faster ramp up. Using the community as a knowledge creating and sharing mecha-nism may translate into tangible gains in how long it takes to train new agents. Thesavings add up: time saved * compensation * headcount•• Lower turnover. Agents who feel they have good tools tend to stay longer. As weknow, turnover means much higher recruiting and training costs so if you can linkcommunity use to lower turnover you will see tangible savings. turnover decrease * cost of turnoverStrategic savings. In some instances communities may serve as a substitute for other, costlyinvestments. For instance, they may allow you to skip investing in the following areas (in eachinstance, the savings are simply the avoided cost of the investment):•• Support for multilingual customers. Supporting multilingual customers is oftenexpensive, requiring hiring new, multilingual employees, and often opening a newlocation where such people can be found. It may require translating extensiveamounts of documentation and training materials for agents. Instead, you maybe able to direct customers to a community and avoid or delay the investment inpeople and facilities.•• Support for long-tail products. It can be very expensive to maintain a trained work-force to support low-volume, perhaps older products or releases – the statistical“long-tail” of support demand for any mature company. Tapping the knowledge ofyour customers is the best way to meet this demand. The savings would equal theinvestment you would have to make otherwise.•• Business continuity solutions. While we would always recommend having a robustbusiness continuity (backup) plan in place for your support centers, it’s veryexpensive to build complete redundancy, especially for major, uncontrollableevents such as natural disasters. If your customers can use alternate supportavenues such as a community during the disaster recovery time frame they willbe much more tolerant and understanding of the failures, especially if you can becandid about the source of the problem.It can be very expensiveto maintain a trainedworkforce to supportlow-volume, perhapsolder products orreleases. Tapping theknowledge of your cus-tomers is the best wayto meet this demand.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.680110 of 15•• Spike handling. In the same vein, it’s awfully hard to be completely ready to handlesudden spikes in volume. By using the community as an overflow mechanism youcould save significant dollars.•• Substitute support channels. Some Lithium customers have been able to simplydo away with providing email support by offering community support instead(yes, their communities are monitored by internal staff, but the savings are stillsignificant due to the many-to-many nature of communities).•• Delay in strategic investments. Is there a new support center in your future tohandle increasing volume? Deploying a community solution may help you avoid thesteep costs associated with a new venue.Decreased online maintenance costs. If you are converting an existing community to aLithium-powered community you may well find that Lithium’s features allow you to save onadministration costs. Customers tell us that they can save in three ways: forum maintenance,forum administration, and the ability to repurpose information gleaned from the forum intothe knowledge base (an active community is a wonderful knowledge-mining site).Better AnalyticsWhile issues may take days to percolate through the support centers (typically much longer thanit takes to resolve the cases to which they gave rise, since root cause analysis rarely starts untilcases are closed) community input can be used much faster. Let’s consider both reactive benefits,through better root cause analysis, and proactive benefits, thought better customer input.Product issue identification. If you are able to identify product issues by mining forum dataand resolve them, your savings will amount to # issues * cost saved by discovering issueWhile this technique can apply to all kinds of product problems, communities areparticularly suited for spotting low-grade issues, issues that may not be identified throughassisted support for a long time because the agents fail to identify their full scope: after all,all the customer had to do was to reboot. But as we know a large volume of small annoyancesadds up to a sizable cost, not to mention lots of frustrated customers.Product Feedback. The other, more advanced idea is to use communities as product feedbackmechanisms. Seeking customer input for new or future products is not easy or cheap, andcommunities can be a great avenue for gathering data quickly andinexpensively. The savings will be the cost saved in focus groups and surveys. (# focus groups * cost) + (# surveys * cost)If you can go one step further and track the adoption rate of the product, you can capture increase in adoption rate * product price
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.680111 of 15but it’s probably difficult to track all the way through. See the Increased Sales section at theend of the paper for more suggestions around sales benefits.Customer SatisfactionThe customer satisfaction benefits of support communities are undeniable: customers lovecommunities and their enthusiasm seems to carry over to the very products supported in thecommunities. The challenge is not so much measuring customer satisfaction, but rathertranslating increased satisfaction into a financial benefit. Most organizations have no establishedmethod to do that, and if that’s your situation that’s fine: simply concentrate on measuring theother benefits.In the organizations we’ve worked with who have quantified the financial impact of customersatisfaction it’s typically the Marketing group that has led the effort, showing that an increase ofX points on customer satisfaction can be matched to an increase of Y dollars in revenue. Othercompanies assign a token (and completely arbitrary) value to customer satisfaction, such as $1 foreach increase of one point. If you have such data, you can apply it to thefollowing areas:Customer satisfaction with communities themselves.Customer satisfaction with specific topics that are well-served by the communities, betterserved than through assisted support. For instance, communities are typically anexcellent medium for sharing best practices.Customer satisfaction with support in general. Customers typically appreciate communitiesas part of the total support experienceCustomer satisfaction with the product or brand. Community users often report higheroverall satisfactionYou may also be able to measure the impact of the community on reputation: how communityparticipation may inspire your customers to be active advocates for your products and yourcompany. While we believe that community participation does indeed encourage customers tobecome active cheerleaders it’s a challenge to capture exact numbers. If you choose to ventureinto this area you may want to look at two aspects:Independent recommendations. Community users tend to recommend products associatedwith the community to others. Benefits would be computed through the volume of influencedpurchases (You can tell how difficult that would be to track: see the next section for anotherway of looking at sales influenced by community usage).Better brand value. Community users are more likely to positively influence the brand. Againthis is a difficult metric to tease out.Seeking customerinput for new or futureproducts is not easy orcheap, andcommunities can be agreat avenue forgathering data quicklyand inexpensively.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.680112 of 15Increased SalesDo community users buy more than others? It seems from Lithium customers’ experiences thatthe answer is yes, and that the only obstacle to capturing that data is a good tracking mechanismto track the behavior of community users, typically by analyzing the origin of online purchasesto determine whether they come directly from the community. Look for additional sales in thefollowing areas.Product sales. This is commonly seen when forum posts recommend specific items. Theincreased sales will be: # of additional purchases * product priceSupport sales. Community users may purchase or renew support contracts more readily. Theincreased sales will be: # of additional support contracts * contract priceLower churn. Community users tend to remain as customers longer than others. If yourindustry experiences high churn that would be a very high value. While difficult the measure,the conservative increased sales will be (calculated assuming the average retained customerstays one additional year): # retained customers * avg. annual sales per customerSupport Community CostsSupport community costs fall into two categories: startup costs and recurring costs. If you arepreparing an ROI analysis for an upcoming purchase you will likely concentrate on the startupcosts such as project management for the implementation, but you must also consider recurringcosts such as the compensation of the community manager.If your community is way past implementation stage, it’s not too late to create an ROI analysis. Youwill likely focus on the recurring costs since startup costs have long since been expensed.Startup CostsHere’s an annotated checklist for startup costs:Launch fee. This is the fee you pay to Lithium.Cost of other software. This refers to optional, complementary software for communitiessuch as analytics software.Do community usersbuy more than others?It seems from Lithiumcustomers’ experiencesthat the answer is yes,and that the onlyobstacle tocapturing that data is agood trackingmechanism to track thebehavior ofcommunity users.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.680113 of 15Project management costs. This is typically an internal cost although you may choose to hirea third party to handle the rollout. It can be difficult to estimate internal costs but do give it atry. Especially for larger-scope initiatives internal costs can be significant. Estimate theheadcount (or portion thereof) required and multiply by a weighed labor cost. headcount or % * fully-loaded costIntegration costs. If, for example, you are integrating the community with your CRM system orenabling single sign-on, Lithium will assess an integration fee in addition to the launch fee.Design work. Integrating the new community with your existing support web site will requiresome amount of work, either internally or through an outside agency.Process design work. Adding a community means adding new roles (such as moderators) andoften new tasks (such as forum data mining.) The process creation and revision work isusually done internally.Internal IT resources. Although Lithium is a SaaS solution, some amount of IT resources maybe required if you are implementing a single sign-on solution or other integration.Data migration. Migrating user IDs to Lithium may be handled by internal resources or a thirdparty as part of the initial rollout.Reporting setup. Perhaps inspired by this paper, you will want to set up a reporting environ-ment for your communities such as web metrics.Administrator training. Lithium provides complimentary training but you should take intoaccount the time required for the administrators to attend the training.Training for forum moderators. Here again it’s a matter of the time investment rather thanout-of-pocket training fees.Marketing rollout to customers. You will probably want to tell your customers about the newcommunity. For instance, you may need to invest in an email campaign.Recurring CostsSo much for the startup costs. What about recurring costs?Usage fee. This is the monthly fee you pay for Lithium’s software. Your ROI calculation shouldproject increases related to higher usage (which will be matched by increasedcase deflection.)Software maintenance. If you purchased add-on software as part of the rollout you will bepaying maintenance for it.Reporting recurring fees. Your IT organization or third-party provider may charge youregular fees for creating the reports – and it’s likely you will want to update the reports everyonce in a while.Ongoing IT support for integrations. Again this is for CRM or other integration.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.680114 of 15Administrator or community manager. Every community has a manager. This is often apart-time commitment from someone who has other responsibilities in marketing, support,or product management.Moderators. If you are using Lithium’s moderation services or have a full-time internalmoderator, this recurring cost is easy to calculate. If you are using part-time internalmoderators (such as asking support agents to contribute a portion of their time to monitoringthe community) use your best estimate of the time spent on this task. The “time online” metricin the Lithium solution can help you quantify how much time individuals are spending in thecommunity.As mentioned in the discussion around deflection, if support agents are seamlessly workingon cases and community threads you may be better off separating out their answers fromcustomers’ rather than performing complicated calculations at this point.Support costs for community escalations. In our experience we have found that only a tinypercentage of community users ever need escalation-handling. If you feel that it’s importantto include, estimate a recurring cost for community issue management.Super-user program administration. In most communities, a small number of users answera large percentage of all questions. Successful communities usually have programs in placeto recognize and support these “super-users” with various rewards, including giftcertificates, free admission to conferences, and free products. The costs are usually small,but make sure you are capturing whatever you spend, plus the cost of management timerelated to super-users.Setting ROI ExpectationsThe two most popular questions we get are: How soon will we reach positive ROI on ourinvestment? And, how will overall benefits compare to overall costs over the long-term? Theanswer to both is a resounding “It depends.”You will reach positive ROI very soonWorking with real customers, we have been surprised (and so have they!) to find companiesreaching positive ROI on their initial community investment in as soon as a few months, when thecommunities still felt very new. This is because the startup costs for communities are relativelysmall (and indeed larger communities that require more upfront work may take a little more timeto reach positive ROI).Your mileage will varyWorking with customers who have established communities that are considered successfulby them and their customers, we see the ratio of financial benefits to costs varying greatly,from 2:1 (that’s a 200% overall return) to 10:1 and up. There are many reasons why a particularcommunity’s return will be much larger than another, including how well you can capture accuratemetrics, so rather than shooting for a particular number or ratio let’s reaffirm a few criticalWorking withcustomers who haveestablishedcommunities that areconsideredsuccessful by them andtheir customers, wesee the ratio of financialbenefits to costsvarying greatly, from 2:1(that’s a 200% overallreturn) to 10:1 and up.
  • Gold in Them HillsComputing ROI for Support Communities© 2009 Lithium Technologies, Inc. All Rights Reserved.Lithium Technologies, Inc.lithium.com | 6121 Hollis Street, Suite 4, Emeryville, CA 94608 | tel 510.653.6800 | fax 510.653.680115 of 15success factors.Size mattersThe communities with the larger user bases have the largest returns. This is because the indirectdeflection savings are enormous for large communities, even if the success rate of using theforum is relatively low. So if you have a small user base either work to increase it or be contentwith a more modest return.Follow community best practicesThe most successful communities, without exception, follow a small set of best practices (forsome of those practices, see our whitepaper entitled Online Support Communities: Best Practicesand Deployment Tips for Reducing Costs and Increasing Overall Customer Satisfaction). For instance,successful communities carefully cultivate and reward community participation.Get better metricsWe find that the largest obstacle to creating successful ROI analyses is not that there’s no ROI(there almost always is!) but rather that support organizations have a hard time coming up withaccurate, reliable data. For instance, many organizations simply do not track success rate forforum usage. We hope that we have inspired you to capture a few key pieces of data on a regularbasis, starting with success rate.ConclusionThis paper was created based on the complementary expertise of Lithium and FTWorks, combinedwith the real-world experience of Lithium’s customers. Whether you are building the businesscase for a proposed support community, or assessing the ROI of an established community, thispaper provides you with a robust framework for conducting your analysis.About Lithium TechnologiesLithium is the leading provider of Social CRM solutions to power enterprise customer networks.Lithium solutions combine the power of online customer communities with the broader socialweb and traditional CRM business processes to inspire customers to innovate, promote, andsupport on the company’s behalf - measurably improving marketing and sales, acceleratinginnovation, and increasing customer satisfaction. Lithium’s platform is proven in high-volume,growth environments and provides the security, analytics, APIs, and multi-language support thatenterprises demand.About FT WorksLithium is the leading provider of Social CRM solutions to power enterprise customer networks.Lithium solutions combine the power of online customer communities with the broader socialweb and traditional CRM business processes to inspire customers to innovate, promote, andsupport on the company’s behalf - measurably improving marketing and sales, acceleratinginnovation, and increasing customer satisfaction. Lithium’s platform is proven in high-volume,growth environments and provides the security, analytics, APIs, and multi-language support thatenterprises demand.