The ROI Of Blogging

Helping Business Thrive On Technology Change
January 24, 2007
The ROI Of Blogging
by Charlene Li and Chloe Stromberg
BEST
PRACTICES

© 2007, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, WholeView 2, Technographics, and Total Economic Impact are
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BEST PRACTICES
Client Choice topic
EXECUTIVE SUMMARY
Many large companies stand on the brink of blogging, yet they are unwilling to take the plunge. Others,
having dove in early, now face the challenge of managing existing blogs without the ability to show that
they effectively support business goals. While blogging’s value can’t be measured precisely, marketers
will find that calculating the ROI is easier than it looks. Following a three-step process, marketers can
create a concrete picture of the key benefits, costs, and risks that blogging presents and understand how
they are likely to impact business goals. This, in turn, enables marketers to answer the key questions,
such as whether to blog or not to blog, or to make smart choices about an existing blog.
TABLE OF CONTENTS
Why Calculate The ROI Of Blogging?
Calculating The ROI Of Blogging Has
Limitations
Three Factors Determine The ROI Of Blogging
Quantify And Value The Key Benefits Of
Blogging
Estimate The Costs Of Blogging
Incorporate Risk Calculations Into The ROI
Model
RECOMMENDATIONS
Three Tips To Building A Better ROI Model
Supplemental Material
NOTES & RESOURCES
Forrester interviewed nine Fortune 1000
companies with external blogs, including BMC
Software, Dell, Hewlett-Packard, Microsoft,
Southwest Airlines, Starwood Hotels & Resorts,
Sun Microsystems, Verizon, and Wells Fargo.
Related Research Documents
“Calculating The ROI Of Blogging: A Case Study,”
January 24, 2007, Case Study
“The Forrester Wave™: Brand Monitoring,
Q3 2006“
September 13, 2006, Tech Choices
“The Forrester Wave™: Blogging Platforms,
Q2 2006“
June 27, 2006, Tech Choices
“Blogging: Bubble Or Big Deal?”
November 5, 2004, Best Practices
January 24, 2007
The ROI Of Blogging
The“Why”And“How”Of External Blogging Accountability
by Charlene Li and Chloe Stromberg
with Jeffrey North and Tenley McHarg
2
3
10
11

Best Practices |The ROI Of Blogging
© 2007, Forrester Research, Inc. Reproduction Prohibited
January 24, 2007
2
TARGET AUDIENCE
Interactive marketing professional
RESEARCH CATALYST
Clients selected this topic for Client Choice research.
WHY CALCULATE THE ROI OF BLOGGING?
Blogging is entering a new phase of maturity. Software firms like Sun and Microsoft were testing the
waters in 2004 and 2005; today, mainstream consumer companies like Wal-Mart and McDonald’s
are also jumping in.1
As blogging becomes more visible — and expensive in terms of both time
and money — supporting blogging with informal budgets and borrowed resources just won’t
cut it. Instead, marketers need to understand how and why blogging will affect their particular
businesses, and calculating the ROI of blogging is the process by which marketers can obtain this
understanding. Calculating ROI will enable marketers to:
· Answer the question: To blog or not to blog? Marketers have likely found themselves on both
sides of the table: passionately advocating for corporate blogging to little or no effect or fending
off buzz-driven executives’ inquiries about blogging. If marketers can show concretely how their
companies will benefit or suffer from launching a blog, they can either move to the next phase
of execution or put the issue to rest for the time being.
· Manage existing blogs. Many of the brave souls who jumped into blogging early are at a transition
point. The initial discovery phase is over, and they are now faced with new decisions, such as
how to involve customer service in blogosphere outreach or deciding how much the company
should invest in blog monitoring services. And, they are facing all of these questions without
having a clear understanding of how these choices will impact the bottom line and by how much.
Calculating ROI will enable marketers to see the relationship between key benefits and costs,
understand what impact changes are likely to have, and, in so doing, make better decisions.
Calculating The ROI Of Blogging Has Limitations
Marketers should approach blogging ROI as a process, the point of which is to get just enough
information to make some fundamental decisions and to communicate with stakeholders about how
they’ll be affected. Marketers should refrain from treating these results as science or too rigorously
optimizing their blogs to maximize ROI, by keeping the following limitations of the process in mind:
· The exact benefits of blogging are impossible to measure. Many of the benefits of blogging
are indirect, and this causes a whole host of measurement problems. For example, how do you
measure the contribution of a fantastic blog post by an engineer to a software company’s overall
sales efficiency? How do you assign a dollar value to the ideas sparked by a Web dialogue between

© 2007, Forrester Research, Inc. Reproduction Prohibited January 24, 2007
3
an executive and a company’s customers? Should you count the value of a del.icio.us (a social
bookmarking Web site) tag on a blog post that led to a mainstream press placement, as well as
counting the press placement itself? As marketers find workarounds to some of these measurement
problems and choose to ignore others altogether, they will see that these metrics are not a precise
measurement of value but, rather, a proxy that provides a general sense of the scale of benefits.
· Blogging shouldn’t be overmanaged. Blogging purists will argue that demanding accountability
for blogging misses the whole point: The value of blogging comes from the spontaneous expression
of ideas and unstructured interactions.2
One of the interviewees for this report said: “If you start
thinking in terms of ROI and similar concepts, then the immediate danger is that the blog will
become a real PR marketing tool and consequently could — and probably will — become ‘censored.’
By not considering the ROI, I feel I’m a lot more free in what I write.” Marketers will have to learn
to balance their blogging optimization with the need to allow things to evolve organically and
spontaneously.
THREE FACTORS DETERMINE THE ROI OF BLOGGING
While it may not be possible to calculate a precise ROI figure, knowing whether the impact on
business will be generally positive or negative, by a little or a lot, will go a long way to helping
legitimize blogging for most firms. So, what’s the best way to proceed? Using a simplified version of
Forrester’s Total Economic Impact™ (TEI) model, companies can gather the information that they
need to give a ballpark measurement of the impact of blogging on their business (see Figure 1).3
This
approach is a road map for systematically considering:
1. Benefits. What are the primary ways that your company will benefit from having a blog?
2. Costs. How will your company pay, both in hard costs and resources, for the blog?
3. Risks. How do uncertainties change the total impact of blogging on your business?
Figure 1 Look At Three Factors To Calculate The ROI Of Blogging
Source: Forrester Research, Inc.
41064
• Identify benefits
• Use existing metrics
• Assign value to metrics
Benefits
ROI of
blogging
Costs
• Startup costs
• Recurring costs
• Identify
uncertainty
• Calculate
probability
Total impact on
business
Risk

January 24, 2007
4
Quantify And Assign Value To The Key Benefits Of Blogging
While hype — and skepticism — about the promise of blogging abounds, marketers must shift their
thinking from the big picture to the concrete while maintaining an open mind and a willingness to
get down to specific details, such as:
· Using the blog’s goals to define key benefits. A good place to start is to write down why you
think you should have a blog. For many companies, there is simply a feeling that blogging is
consistent with their brand values. In Forrester’s interviews, the most frequently mentioned
benefits of blogging were: greater brand visibility in mainstream media, on the Web, and word
of mouth; improved brand perception; instantaneous consumer feedback; increased sales
efficiency; and fewer customer service-driven PR blowups.
For example, Southwest Airlines representatives said that they felt that their customers expected
them to blog. Going another why deeper will help marketers arrive at helpful definitions of
benefits for their model. In this case, one reason why Southwest might want to meet customers’
expectations that it blog is to fuel more word-of-mouth activity per enthusiast by giving
customers easy-to-share narratives and pictures.
· Quantifying benefits with standard metrics. The next step is to ask: If we were really successful,
how would we know it? The trick? Use metrics that everyone is familiar with, rather than try to
come up with a new metric for intangibles like engagement. The key is then to associate each
metric with a dollar value that quantifies the benefit (see Figure 2).
For example, Microsoft created the Channel 9 Web site to engage the developer and user
community by providing a window into the development process, which, in turn, helped change
the perception of the company.4
Channel 9’s success can be seen in two key metrics: unique
users and the sentiment of blog posts about Microsoft in the larger blogosphere. Today, four
million unique users per month see a previously invisible side of Microsoft, and the number
of harsh blog comments about the company has decreased.5
But, to understand the benefit, it’s
important to quantify what four million unique users mean to Microsoft. Each company will
value traffic differently, depending on how traffic helps it reach specific business goals.
· Assigning monetary value to metrics. The toughest part of this exercise is to assign a dollar
value to these metrics. There are two general approaches that marketers can take. The first is to
correlate metrics with a general measure of relationship health that the company has already
tied to financial performance. For example, Microsoft might measure the change in the Net
Promoter Score (NPS) for unique users to Channel 9 and extrapolate from that a monetary
value based on historical data about how closely changes in NPS relate to revenue growth.6

5
The second approach is to estimate how much the company would have to pay to achieve a
similar outcome. So, for example, Microsoft would estimate the cost of putting advertising
with similar messaging in front of three million developers and Microsoft users each month.7
While the second approach does not produce numbers that companies can plug into financials,
marketers who are evaluating the go/don’t go decision will find that taking the second route will
give them a sense of the scope of a blog’s impact and that the numbers will be easier to come by.
Figure 2 Quantify And Assign Value To The Key Benefits Of Blogging
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Benefit Metric Value
Increased
brand
visibility
Blog traffic
Press mentions
Word of mouth
Savings on
customer insight
Reduced impact from
negative user-generated
content (UGC)
Increased sales
efficiency
Number of blog-driven stories
by offline press, Web media, or
high-profile bloggers
• Number of blog posts in a
Technorati search
• Number of people commenting
on blog
Number of times a year that blog
comments provide useful business
insight
• Number of press stories that
mention UGC
• Change in Net Promoter Score or
other attitude metric post-UGC
Historical change in sales
associated with change in Net
Promoter-type metric
Number of clients/prospects
who read the blog, number of
salespeople who read blog
Cost of advertising in similar
content channel
Cost of advertising in same
publication
Search engine
positioning
Percentage of search results
landing in the first three search
pages driven by blog
• Cost of search engine optimi-
zation to improve ranking
• Cost of paid search for
blog-driven keywords
Cost of hiring a buzz agent
Cost of a focus group or other
market research tactic
Decrease in the cost of sales
Number of unique visitors, page
views

January 24, 2007
6
Estimate The Costs Of Blogging
Compared to wrangling benefits into manageable metrics, estimating costs is a piece of cake.
Marketers should list the essential things that would have to happen in order to: a) Get the blog
they’ve described up and running, and b) maintain the blog in the course of a typical month and
year (see Figure 3).8
Doing so will effectively create a catalog of costs that fall in to two groups:
· Startup costs. For most firms, startup costs for a blog should be minimal; in most cases, the
costs should be less than $100,000. For many firms, the costs should be between $25,000 and
$45,000 if they don’t integrate the blog with existing brand sites or content management systems.
The process typically takes three steps: 1) getting buy-in; 2) planning and building; and 3)
training bloggers. After gaining buy-in, in most cases, a team of four to five people was sufficient
to strategize, plan, and launch a blog. Most companies said that this second step took from three
weeks to five months. Demands on legal and design were modest, and many marketers initially
circumvented their IT departments when launching their blogs. Finally, preparing bloggers —
bringing them up to speed on guidelines and familiarizing them with the blogging platform —
typically took 30 minutes to 1 hour per blogger.
· Recurring costs. To get a realistic sense of recurring costs, marketers should keep in mind that
there’s more to blogging than writing posts. Each company interviewed for this report said that
its blogging initiative consisted of four activities: 1) monitoring what’s being said about its brand
in the blogosphere, 2) producing blog content, 3) responding to visitors’ comments, and 4)
reading and staying interactive with other blogs. In general, however, the costs of a blog amount
to the number of employee hours spent on developing content and on interactivity, leadership
time devoted to reviewing blog reports and refining strategy, and annual fees for a monitoring
service and blogging platform.9
Interviewees told Forrester that bloggers typically spent 1 to 2
hours per post.

7
Figure 3 Estimate The Costs Of Blogging
Incorporate Risk Calculations Into The ROI Model
Incorporating risk into the ROI model will be the most valuable part of this exercise for many
marketers. Blogging is a fundamentally different way of doing business, and it can affect
relationships across a business, with customers, prospects, business partners, investors, franchisees,
and even employees. For big companies, small changes in these relationships add up to millions of
dollars. Dell, for example, came under pressure from bloggers to improve the quality of its customer
service. But, with its customer service center handling half a million calls per week, even a small
increase in its cost per call adds millions to the bottom line, a significant number when Dell’s
expenses represent just 9% of sales.10
Bringing these risks to light and putting a dollar figure on them will enable marketers to address
their own fears about blogging and have considered conversations with key stakeholders. To do this,
marketers can follow three steps which make the process more manageable:
41064
Cost Sample values
Education
Strategy and
planning
• Less than 1 hour per blogger for training
• Fewer than four meetings with decision-makers
• Hours with trainees plus 10 to 20 hours prep
• Total process: three weeks to five months
• Two full-time or four to five part-time marketing staff
• Less than 4 hours for legal to review blogging policy,
update privacy policy
• Less than 30 hours to design
• IT depends on degree of integration
Content
production
• 1 to 2 hours per post, per blogger
• Two to three full-time or four to five part-time marketing staff
Moderating
Monitoring
platform
Blogging
platform
• $75,000 to $300,000 annually
• Less than $30,000 annually
Startup
Recurring
• 30 minutes to 3 hours per day, per blog depending on
number of comments, comment spam filters
A spreadsheet with additional data is available online.

January 24, 2007
8
1. Identify the top three to five worst things that could happen. Instead of suspending disbelief
about risk, marketers should let their imaginations run wild, envisioning the most dismal
possible outcomes. Thoroughness will pay off. Marketers should catalog uncertainties about
both costs (e.g., higher cost of customer service) and benefits (e.g., nobody comes to the site
at all). They should also consider catastrophic but unlikely risks (e.g., a lawsuit) as well as less
catastrophic but more likely ones (e.g., consumers are disillusioned when bloggers don’t respond
to comments fast enough). Marketers will know that they’re done when all of the butterflies in
their stomachs are gone.
2. Model the scenario(s) where the top three to five things happen. Next, marketers must model
the scenarios in which different outcomes take place by adjusting the existing costs and benefits
in their model or by adding in new costs. For example, Southwest Airlines might envision a
scenario where 500 consumers respond to each post on the Nuts About Southwest blog, in which
case, the company would have to hire additional staff to manage the communications. The
model would then reflect this additional headcount, but it might also include greater benefits
associated with the increased consumer interactivity.11
This process will produce several versions
of the model. Marketers may want to create a separate scenario for each risk or come up with a
best, worst, and most likely case of what could happen.
3. Estimate the probability of the scenario(s). The final step is simply to make a gut-level decision
about the probability of each scenario taking place. These probabilities should add up to 100%.
Multiplying the ROI for each scenario times the probability of the scenario taking place and
adding together the resulting numbers will produce a risk-adjusted ROI. Marketers shouldn’t
worry about the accuracy of these probabilities, but instead use them as a starting point for
discussing the blog with stakeholders, giving them the opportunity to adjust the probabilities of
the different scenarios to what they think are accurate.
It’s easier than it looks. One risk of blogging that gets many big companies’ hearts pumping
is the possibility of a lawsuit. Here’s an example of how to figure in that risk (see Figure 4).
In this case, the company thinks that the most likely outcome of blogging would be costs of
approximately $400,000 and benefits of $500,000, yielding an ROI of 25%.12
In the best-case
scenario, the company’s costs would be $400,000 with benefits of $700,000, yielding an ROI of
75%.13
In the worst-case scenario, the company sees benefits of $500,000 and costs of $400,000.
Additionally, there’s a lawsuit, and the company pays a $25 million settlement, yielding an ROI
of negative 6,225%.14
Yikes!
But, the company figures that the probability of the worst-case scenarios is actually very low,
estimating that there is a 0.5% chance that something like that could happen. The company
incorporates probability into each case by multiplying the probability of each of the scenarios —
the company estimates that the likelihood of the best-case scenario is 25%, and the most likely
scenario is 74.5% — by the ROI of each scenario. This yields a risk-adjusted ROI of 6%.15

9
The associated Best Practices Case Study document provides a detailed case study of General
Motor’s FastLane blog and shows how this process can be used to calculate the ROI of the blog.
But, even more importantly, the case study shows how ROI analysis can help marketers make key
decisions that can maximize the value of the blog for General Motors.
Figure 4 Blogging ROI Should Also Be Risk-Adjusted For Diﬀerent Scenarios
41064
Costs
Beneﬁts
Risk impact
ROI
74.5%
Most likely
scenario
Probability
Risk-adjusted ROI (25% x 74.5%) + (75% x 25%) + (-6,225% x 0.5%) = 6%
$(400,000)
$500,000
25%
25%
Best-case
scenario
$(400,000)
$700,000
75%
0.5%
Worst-case
scenario
$(400,000)
$500,000
$(25,000,000)
-6,225%
Calculate
Estimate
Recalculate

January 24, 2007
10
R E C O M M E N D A T I O N S
THREE TIPS TO BUILDING A BETTER ROI MODEL
One way or the other, going through the process of calculating ROI will make marketers much
savvier about blogging. To get the most from the process — and build the most credible model —
marketers should follow three tips:
1. Get hands-on with free monitoring tools. Whether or not he or she has the stomach
for details, any marketer evaluating blogging for his or her company should try out free
monitoring tools like Icerocket.com’s Blogs Trend Tool, Technorati, or Google Blog Search
early in the process.16
Setting these tools up to track conversation around brands, products,
and industry topics will pay off handsomely. How? First, they will give marketers a sense
of which consumers want to engage in dialogue with the company, what they most want
to talk about, and with whom they want to speak. Second, these free monitoring tools will
help marketers understand what they do and don’t need from a professional monitoring
service. Finally, they will allow marketers to establish baseline Web visibility numbers for
their companies before any blogs are launched.
2. Build an ROI model for your competitor’s blog. If possible, marketers should build
two ROI models: one for their own blog and one for a competitor’s blog. If none exists,
marketers should choose a corporate blog with a similar structure to the one that they’re
planning. Doing this accomplishes two things. First, this will enable marketers to set relative
goals, as well as absolute goals, for their blog. For example, driving two major press stories
per month with blog content is admirable, but when a competitor is regularly generating
four, marketers may want to revisit their strategy. Second, whether or not an ROI model
paints a rosy picture, marketers may still have trouble getting executives to commit to the
project when 25% ROI on $400,000 adds up to just $100,000 in benefit. Estimating the ROI
of a competitors’blog may help to light the needed fire under decision-makers’seats to
move the project forward.
3. Don’t underestimate the role of excellent people in mitigating blog risk. Blogging gets
lumped into the new-high-tech-stuff-we-don’t-understand category in many marketing
organizations. But the truth is that the technology underlying blogging is not complicated.
People, not the blogging platform, make or break most blogs. When marketers intuitively
get the inherent possibilities of blogging and can creatively interpret them in the context
of a company’s business model, the strategy will generate more interest.17
Likewise, when
employees are intelligent, professional, and responsible in the context of their own blogs
and in the blogosphere, their activity poses fewer risks to the company.18
Finally, when
bloggers genuinely embody company values, are fired by real passion, and have the ability
to create entertaining content, they can be a tremendous asset to the brand.19

11
SUPPLEMENTAL MATERIAL
People Interviewed For This Document
In addition to the companies interviewed for this document, Forrester also interviewed Avinash
Kaushik, Occam’s Razor; Constantin Basturea, Converseon; Steve Rubel and Michael Wiley,
Edelman; and Marc Schiller, Electric Artists.
The following individuals contributed valuable ideas and reference material for this report
via Charlene Li’s blog: David Phillips; Stephen Turcotte, Backbone Media; Kurt Buyse, LTE
International Airways; Dennis Howlett; Kevin Reid, Issue Dynamics; Rick Whittington; Jim Turner,
One By One Media; and Jonathan Mendez, OTTO Digital.
Companies Interviewed For This Document
BMC Software
Dell
Hewlett-Packard
Microsoft
Southwest Airlines
Starwood Hotels & Resorts
Sun Microsystems
Verizon
Wells Fargo
ENDNOTES
1
Wal-Mart made the news recently when bloggers discovered that the writers of a blog called Wal-Marting
Across America were, in fact, compensated by the company, although this was not clearly disclosed on the
site Source: Pallavi Gogoi, “Wal-Mart vs. the Blogosphere,” BusinessWeek Online, October 17, 2006 (http://
www.businessweek.com/bwdaily/dnﬂash/content/oct2006/db20061018_445917.htm). For Wal-Marting
Across America’s account, see http://walmartingacrossamerica.com/.
McDonald’s corporate responsibility blog, Open For Discussion, can be seen at http://csr.blogs.mcdonalds.
com/, and Sun’s blogs are available at http://blogs.sun.com.
2
Hugh MacLeod captures the suits-don’t-belong-in-the-blogosphere sentiment with his Gaping Void cartoon,
“What’s Blogging’s R.O.I.?” Source: Hugh MacLeod, Gaping Void (http://www.gapingvoid.com/Moveable_
Type/archives/002066.html).
3
Forrester’s Total Economic Impact™ (TEI) is a highly customized methodology that enables IT professionals
to understand and demonstrate the worth of a technology to an organization, align its implementation with
business strategy, and improve partnerships with other key business stakeholders. We adapted this approach
for interactive marketers for this report (http://www.forrester.com/TEI).
4
Jeﬀ Sandquist, director of developer and platform evangelism at Microsoft, and Lenn Pryor, currently
director, Mobile at eBay, launched Microsoft’s Channel 9 following the 2003 Professional Developers
Conference, hoping to bring greater transparency to Microsoft’s development process and to showcase the

January 24, 2007
12
talented, passionate, and very human engineers working on Microsoft software. Channel 9’s small staff
functions like an in-house press corps, conducting video interviews with key developers and surfacing ideas
fermenting within the developer organization. The name Channel 9 was inspired by the audio channel on
airplanes where nervous passengers can hear pilots’ routine (and reassuring) communications about the
flight (http://channel9.msdn.com/).
5
While Microsoft doesn’t formally track the number of negative blog posts, Channel 9 representatives told
Forrester that the Web site monitors blogs daily via free tools like Technorati and via PR citation services.
They have subjectively observed a clear change in the tone of dialogue about Microsoft and topics discussed
on Channel 9.
6
The Net Promoter Score is a scale developed by Frederich Reichheld to measure companies’ consumer
loyalty and growth prospects. Net Promoter Scores are calculated by taking the total percentage of
technology users who are Promoters (those who answered 9 or 10 on a 0 to 10 scale of the likelihood that
they would recommend the technology to a friend) and subtracting the total percentage who are Detractors
(those who answered 0 to 6 on the same scale). Those who answered 7 to 8 are considered Passively Satisfied
and don’t figure into the calculation. Source: Frederick F. Reichheld, “The One Number You Need To Grow,”
Harvard Business Review, December 2003.
7
This second approach takes as its basis the advertising value equivalency (AVE) approach to public relations
measurement. Source: Fraser Likely, David Rockland, and Mark Weiner’s, “Perspectives on the ROI of
Media Relations Publicity Efforts,” The Institute for Public Relations, May 2006 (http://ipr.wieck.com/files/
uploads/2006_ROI_LRW.pdf).
8
Launching and maintaining a blog will be an unfamiliar process to most marketers in the go/don’t go
phase of decision-making. To organize this unfamiliar process, marketers can follow David Allen’s “natural
planning model.” Source: David Allen, Getting Things Done, Penguin, 2001.
9
A reasonably customized platform can cost $25,000 a year, while formal monitoring services like Cymfony
or Nielsen BuzzMetrics can run from about $90,000 to $300,000. Companies that customized their own
blogging and tracking tools in-house using open source software spent less than $250,000 annually on
developer time. See the June 27, 2006, Tech Choices “The Forrester Wave™: Blogging Platforms, Q2 2006”
and see the September 13, 2006, Tech Choices “The Forrester Wave™: Brand Monitoring, Q3 2006.”
10
In June 2006, Dell’s head of customer service, Richard Hunter, told BusinessWeek Online that Dell’s customer
service handles half a million consumer calls per week. Source: “Dell Spiffs Up Its Service,” BusinessWeek
Online, June 13, 2006 (http://www.businessweek.com/technology/content/jun2006/tc20060612_046085.
htm). In a November 2006 article, the Database Marketing Institute’s Arthur Middleton Hughes reports
that customer service calls cost as much as $3 to $5. Source: Arthur Middleton Hughes, “Customer Service
and the Web,” Database Marketing Institute, November 18, 2006 (http://www.dbmarketing.com/articles/
Art186.htm). Based on these numbers a 5% increase in costs could add up to $0.15 to $0.25 per call, or $3.9
million to $6.5 million per year for Dell, given the volume of calls it receives. BusinessWeek Online reports
that expenses represent just 9% of sales for the low-cost computer manufacturer. Source: Louise Lee, “Dell:
Facing Up To Past Mistakes,” BusinessWeek Online, June 19, 2006 (http://www.businessweek.com/magazine/
content/06_25/b3989045.htm).

13
11
Marketers must think not only about the cost of the outcome, but also about the costs of measures that
would prevent the outcome. Both costs should be factored into the model. In some cases, the preventive
measures would completely eliminate the risk, in which case they become, in effect, the outcome. In the
Southwest Airlines case, for example, the truly catastrophic risk of more than 500 comments showing up
on each blog post is that the company doesn’t answer the posts and the consumers are disillusioned, stop
flying Southwest, and change from being Promoters to being Detractors. If the company were to respond
by hiring staff to address these comments, the risk would be totally eliminated. In this case, the cost of the
potential outcome of extreme consumer interactivity would be the cost of hiring additional staff to manage
the comments.
12
In the most likely scenario, where the benefits are $500,000 and costs are $400,000, the calculation is
($500,000-$400,000)/$400,000, yielding a 25% ROI.
13
In the best-case scenario where the benefits are $700,000 and costs are $400,000, the calculation is
($700,000 − $400,000)/$400,000, yielding a 75% ROI.
14
In the worst-case scenario where the benefits are $500,000, costs are $400,000, and the cost of the lawsuit
settlement is $25 million, the calculation is ($500,000 − $25,400,000)/$400,000, yielding a -$6,225% ROI.
15
To calculate the risk-adjusted ROI, multiply the probability of each scenario against the ROI of each
scenario and then add together the resulting ROI. The calculation is (25% ROI x 74.5% probability) + (75%
ROI x 25% probability) + (-6,225% ROI x 0.5% probability) = 6% ROI.
16
For a guide on using Icerocket.com’s Blogs Trend Tool to measure conversation share, see Steve Rubel’s
“Mind The Conversation Gap” (http://www.micropersuasion.com/2005/10/mind_the_conver.html). For
a guide on using Technorati to search for past blog posts about a brand or product, see “Search Basics”
(http://www.technorati.com/help/search.html). To set up Technorati “Watchlists,” which track mentions
of keywords in blogs as they are posted, users must create a free Technorati account. Source: Technorati
(http://www.technorati.com/watchlist/). For an introduction to Google Blog Search, see “About Google Blog
Search” (http://www.google.com/help/about_blogsearch.html).
17
Hewlett-Packard’s (HP’s) Backstage at Sundance blog featured beautiful, high-resolution images of
celebrities, simultaneously demonstrating the quality of HP’s photo technology and leveraging celebrity
appeal to drive blog traffic and jazz up HP’s image. Source: Backstage at Sundance, HP, (http://h20325.
www2.hp.com/blogs/sundance).
18
Microsoft told Forrester that it is so confident in the caliber of its employees that it has no official blogging
policy, believing that they are fully capable of observing the company’s general employee code of conduct in
the blogosphere, just as they would if they were at a conference or in any other public space.
19
Southwest Airlines CEO Gary Kelly’s blog post soliciting Halloween costume suggestions featured funny
pictures of him from previous years and provided a window into Southwest culture, where Halloween is a
major event. This post both underscored the humorous, folksy voice of the brand and created the sense that
customers were part of the Southwest community by inviting them into a company tradition. Forty-seven
consumers responded to the post. Source: Gary Kelly, “Halloween Help,” Nuts About Southwest, October 3,
2006 (http://www.blogsouthwest.com/2006/10/03/).

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