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Proving Social Media's Value (Forum ROI model) - SMX Advanced

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This is presentation I gave at SMX Advanced in Seattle on June 2, 2009. Using Net Promoters concept of "promoters" and "detractors," this presentation shows you how to measure the revenue lift from engaging in third-party forums or building your own support forum to help users publicly.

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Proving Social Media's Value (Forum ROI model) - SMX Advanced

  1. 1. June 2, 2009 Edmund Wong @edmundw SVP, Strategy iCrossing Proving the Value of Forum Engagement (a.k.a. How to convince your boss to fund your forum project)
  2. 2. User forums represent a large source of online conversations <ul><li>Tech companies (e.g., consumer electronics, software) have an opportunity to participate in forums , which can account for 30-50% of total UGC, in a meaningful way </li></ul><ul><li>Whether you are looking to build your own user support forum or participate in 3 rd party forum conversations, you can apply an ROI calculation to this form of engagement </li></ul>
  3. 3. Benefits of engaging in user support forums <ul><li>Do something about the significant discussions about your brand </li></ul><ul><li>Visibly provide support that others (“Lurkers”) can benefit from </li></ul><ul><li>Drive traffic , especially natural search, to e-commerce store and main site </li></ul><ul><li>Improve customer service and potentially call center cost </li></ul><ul><li>Test new product ideas and gather feedback </li></ul><ul><li>Foster an online community that increases customer retention </li></ul><ul><li>Show you care </li></ul>
  4. 4. But senior management will still ask: What’s the ROI?
  5. 5. Many companies have a “value” for a customer Average customer Customer Value (LTV)
  6. 6. But not all customers are created equal Neutral Promoter Detractor Customer Value (LTV)
  7. 7. And don’t forget “referral economics” Important to decrease detractors and increase promoters Source: Net Promoter Economics: The Impact of Word of Mouth, Satmetrix, 2008 Customer Value (LTV) Neutral Promoter Detractor
  8. 8. Calculating referral economics Source: Net Promoter Economics: The Impact of Word of Mouth, Satmetrix, 2008 78% 3.87 17% 0.5 29% 4.24 68% 0.8
  9. 9. Support forum economics Active Users Direct Value Active Users Referral Value Active Users Lurkers Lurkers Direct Value Lurkers Referral Value Direct Value Referral Value
  10. 10. Incremental value from engaging directly with active users in forums Before After Lift from Promoters Gained Lift from Detractors Saved Active Users Direct Value Active Users Referral Value Promoters Neutral Detractors + # Promoters gained X Referral Impact (per Promoter) X LTV = # Promoters gained X ∆ LTV = # Detractors saved X ∆ LTV + # Detractors saved X Referral Impact (per Detractor) X LTV # of customers
  11. 11. Rinse and repeat for “lurkers” in the engaged forum threads Lift from Promoters Gained Lift from Detractors Saved Lurkers Direct Value Lurkers Referral Value <ul><li>Perform similar calculations with Lurkers, those who may be reading but not posting to the forum and may be influenced by the threads you conversed directly with other users on </li></ul><ul><li>Some additional assumptions: </li></ul><ul><ul><li>Lurkers start off less negative toward the brand </li></ul></ul><ul><ul><li>Actual impact is probably a little lower </li></ul></ul>Before After Promoters Neutral Detractors # of customers
  12. 12. If you pull it all together, you get this Note: Excludes cost savings from decreasing call center burden + – Total Program Value (i.e., incremental revenue) Lurker Lift from Detractors Saved Lurker Lift from Promoters Gained Active User Lift from Detractors Saved Active User Lift from Promoters Gained Profit Program cost (e.g., technology investment, community manager) ROI
  13. 13. Thanks! Edmund Wong SVP, Strategy iCrossing [email_address] @edmundw

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