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www.socious.com
@SociousSoftware
Housekeeping
 Tech Check
 Ask Questions in the Q&A Panel or
 Twitter at @SociousSoftware
 We ARE Recording!
Online Communities
Return on Investment


              Richard Millington
              www.feverbee.com
          richard@feverbee.com
                @RichMillington
1) Identify the problems with assessing the ROI

• Collect data is an appropriate manner (without
  biases)

• Identify the ROI of the community

• Understand the principles of increasing the ROI
“What’s the
ROI of your
mother???”
“What’s the ROI of
putting your pants
       on?”
Background
• Most organizations don’t (or don’t know how to)
  measure their ROI
• Those that do measure the ROI, do it badly
• Unless we know the ROI, we don’t know if the
  community is worthwhile
• The data we have paints a mixed picture
• Anti-measurement bias
Research shows communities can...
  1) Increase avg. amount spent spending per customer

  2) Attract new customers

  3) Reduce costs

  4) Increase productivity (internal communities)

  5) Fulfil an organisation's mission (non-profits only)
The problem is...

...we are terrible at proving it
Common ROI Mistakes
1) Measuring antecedents of return (or irrelevant stats)

2) Trying to use a single formula

3) Trying to be precise (instead of accurate)

4) Using biased/dumb metrics (fan -vs- non-fan)

5) Not measuring attributable return
Improving the Return on Investment of Online Customer Communities
Improving the Return on Investment of Online Customer Communities
Improving the Return on Investment of Online Customer Communities
Improving the Return on Investment of Online Customer Communities
Increased spending per customer
1) Increase in retention rates (customers stay longer)
Increase in retention rates since joining community = (avg. retention rates of
members/lurkers - avg. retention rates of newcomers)
    Less the avg. increase in retention rates of non-members (control group)
       Multiplied by the value of customer per year

2) Increase purchases of existing products/services (customers buying more of
what you sell)

Increase in sales of members since joining community = (avg. value per active
member/lurker - avg. value of newcomers to the community
    Less the avg. increase rates of non-members (control group)
        Multiplied by the # active members + # lurkers in the community
Improving the Return on Investment of Online Customer Communities
Spending per non-member, newcomer, lurker,
  active member per quarter (self-reported)
Increase/decrease in member spending
Increase/decrease in member spending
attributable to community (control group removed)
Improving the Return on Investment of Online Customer Communities
3) Sales of new products/services to existing customers
Included in the repeat purchase rate (tracks all purchases via survey)

4) Advertising revenue

Total of advertising revenue connected to community

If community elements added to existing platform, then the increase between the two
(should correlate to the growth in community)
New Business
1) Leads generated through misc community activity
Measure # ‘how you heard about us’ and multiply by profit generated by
the deal

2) Misc income

Profits from community events & activities.
Sponsorship
Focus groups
Direct membership income (incl. in repeat business)
   - Account for quarterly revenues (divided by 4)
Improving the Return on Investment of Online Customer Communities
Reduction in Costs

1) Advertising/marketing/PR
Direct cost savings from advertising/marketing/PR budgets

2) Customer service

Direct cost reductions from customer service team

3) Recruiting costs

Direct savings from headhunter/recruitment

Note: Must be attributed to community activity
Improving the Return on Investment of Online Customer Communities
Increased productivity of staff

1) Productivity ratios

e.g. profit per employee
avg. sales of employees in community -vs- those out
the community etc..
Fulfilment of organization’s mission

1) Satisfaction/happiness.
      - Happiness/self-reported usefulness to
members/non-members
           - results from community members
deducted from non-members
           - increase attributable to the community
           - value per happiness (from non-
members)
           - * by active members
Improving the Return on Investment of Online Customer Communities
Improving the Return on Investment of Online Customer Communities
Improving the Return on Investment of Online Customer Communities
AND THE ROI IS...
AND THE ROI IS...
      - 4%
AND THE ROI IS...
      - 4%
       :-(
Improving the Return on Investment of Online Customer Communities
Not included in the ROI
1) Benefits of new product ideas/innovation/research

2) Improved performance of staff recruited through
social media

3) Future value of community

4) Off-line referrals
How to increase the ROI
1) Keep developing community (links to activity & SOC)

2) Tremendous Value Exchange
Tremendous Value Exchange
1) Gain great feedback by making it an exclusive
opportunity (or use information in community

2) Increase purchases (first opportunity, branded
products, special bonus etc)

3) Recruitment (only let top members apply, or post as
a challenge/activity)

4) Word-of-mouth (sneak previews/exclusive
information)
FeverBee Community Management Course
                        http://course.feverbee.com

• Live weekly lessons

• 100,000+ words of written material covering every step of the community development process.

• Coaching sessions from the world’s greatest community specialists

• A complete new book of case studies.

• FeverBee's personal coaching to support your community.

• Template scripts/strategies and other documents we use for our own clients.

• End of term assignments covering the course material focused specifically on your organization’s
  community efforts.

• Access to key academic journals.

• Problem-orientated live discussions with fellow participants..
Questions?

Socious Online            Richard Millington
Community Software        www.feverbee.com
www.socious.com       richard@feverbee.com
@SociousSoftware            @RichMillington

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Improving the Return on Investment of Online Customer Communities

  • 2. Housekeeping  Tech Check  Ask Questions in the Q&A Panel or Twitter at @SociousSoftware  We ARE Recording!
  • 3. Online Communities Return on Investment Richard Millington www.feverbee.com richard@feverbee.com @RichMillington
  • 4. 1) Identify the problems with assessing the ROI • Collect data is an appropriate manner (without biases) • Identify the ROI of the community • Understand the principles of increasing the ROI
  • 5. “What’s the ROI of your mother???”
  • 6. “What’s the ROI of putting your pants on?”
  • 7. Background • Most organizations don’t (or don’t know how to) measure their ROI • Those that do measure the ROI, do it badly • Unless we know the ROI, we don’t know if the community is worthwhile • The data we have paints a mixed picture • Anti-measurement bias
  • 8. Research shows communities can... 1) Increase avg. amount spent spending per customer 2) Attract new customers 3) Reduce costs 4) Increase productivity (internal communities) 5) Fulfil an organisation's mission (non-profits only)
  • 9. The problem is... ...we are terrible at proving it
  • 10. Common ROI Mistakes 1) Measuring antecedents of return (or irrelevant stats) 2) Trying to use a single formula 3) Trying to be precise (instead of accurate) 4) Using biased/dumb metrics (fan -vs- non-fan) 5) Not measuring attributable return
  • 15. Increased spending per customer 1) Increase in retention rates (customers stay longer) Increase in retention rates since joining community = (avg. retention rates of members/lurkers - avg. retention rates of newcomers) Less the avg. increase in retention rates of non-members (control group) Multiplied by the value of customer per year 2) Increase purchases of existing products/services (customers buying more of what you sell) Increase in sales of members since joining community = (avg. value per active member/lurker - avg. value of newcomers to the community Less the avg. increase rates of non-members (control group) Multiplied by the # active members + # lurkers in the community
  • 17. Spending per non-member, newcomer, lurker, active member per quarter (self-reported)
  • 19. Increase/decrease in member spending attributable to community (control group removed)
  • 21. 3) Sales of new products/services to existing customers Included in the repeat purchase rate (tracks all purchases via survey) 4) Advertising revenue Total of advertising revenue connected to community If community elements added to existing platform, then the increase between the two (should correlate to the growth in community)
  • 22. New Business 1) Leads generated through misc community activity Measure # ‘how you heard about us’ and multiply by profit generated by the deal 2) Misc income Profits from community events & activities. Sponsorship Focus groups Direct membership income (incl. in repeat business) - Account for quarterly revenues (divided by 4)
  • 24. Reduction in Costs 1) Advertising/marketing/PR Direct cost savings from advertising/marketing/PR budgets 2) Customer service Direct cost reductions from customer service team 3) Recruiting costs Direct savings from headhunter/recruitment Note: Must be attributed to community activity
  • 26. Increased productivity of staff 1) Productivity ratios e.g. profit per employee avg. sales of employees in community -vs- those out the community etc..
  • 27. Fulfilment of organization’s mission 1) Satisfaction/happiness. - Happiness/self-reported usefulness to members/non-members - results from community members deducted from non-members - increase attributable to the community - value per happiness (from non- members) - * by active members
  • 31. AND THE ROI IS...
  • 32. AND THE ROI IS... - 4%
  • 33. AND THE ROI IS... - 4% :-(
  • 35. Not included in the ROI 1) Benefits of new product ideas/innovation/research 2) Improved performance of staff recruited through social media 3) Future value of community 4) Off-line referrals
  • 36. How to increase the ROI 1) Keep developing community (links to activity & SOC) 2) Tremendous Value Exchange
  • 37. Tremendous Value Exchange 1) Gain great feedback by making it an exclusive opportunity (or use information in community 2) Increase purchases (first opportunity, branded products, special bonus etc) 3) Recruitment (only let top members apply, or post as a challenge/activity) 4) Word-of-mouth (sneak previews/exclusive information)
  • 38. FeverBee Community Management Course http://course.feverbee.com • Live weekly lessons • 100,000+ words of written material covering every step of the community development process. • Coaching sessions from the world’s greatest community specialists • A complete new book of case studies. • FeverBee's personal coaching to support your community. • Template scripts/strategies and other documents we use for our own clients. • End of term assignments covering the course material focused specifically on your organization’s community efforts. • Access to key academic journals. • Problem-orientated live discussions with fellow participants..
  • 39. Questions? Socious Online Richard Millington Community Software www.feverbee.com www.socious.com richard@feverbee.com @SociousSoftware @RichMillington