Improving the Return on Investment of Online Customer Communities


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This presentation was given by Socious and FeverBee. During the webinar, Richard Millington of FeverBee outlined why measuring ROI is important, how to measure the ROI of an online customer community, and how to increase the return on your investment. You can watch the full webinar video at;

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Improving the Return on Investment of Online Customer Communities

  1. 1.
  2. 2. Housekeeping Tech Check Ask Questions in the Q&A Panel or Twitter at @SociousSoftware We ARE Recording!
  3. 3. Online CommunitiesReturn on Investment Richard Millington @RichMillington
  4. 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. 5. “What’s theROI of yourmother???”
  6. 6. “What’s the ROI ofputting your pants on?”
  7. 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. 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 organisations mission (non-profits only)
  9. 9. The problem is......we are terrible at proving it
  10. 10. Common ROI Mistakes1) Measuring antecedents of return (or irrelevant stats)2) Trying to use a single formula3) Trying to be precise (instead of accurate)4) Using biased/dumb metrics (fan -vs- non-fan)5) Not measuring attributable return
  11. 11. Increased spending per customer1) Increase in retention rates (customers stay longer)Increase in retention rates since joining community = (avg. retention rates ofmembers/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 year2) Increase purchases of existing products/services (customers buying more ofwhat you sell)Increase in sales of members since joining community = (avg. value per activemember/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
  12. 12. Spending per non-member, newcomer, lurker, active member per quarter (self-reported)
  13. 13. Increase/decrease in member spending
  14. 14. Increase/decrease in member spendingattributable to community (control group removed)
  15. 15. 3) Sales of new products/services to existing customersIncluded in the repeat purchase rate (tracks all purchases via survey)4) Advertising revenueTotal of advertising revenue connected to communityIf community elements added to existing platform, then the increase between the two(should correlate to the growth in community)
  16. 16. New Business1) Leads generated through misc community activityMeasure # ‘how you heard about us’ and multiply by profit generated bythe deal2) Misc incomeProfits from community events & activities.SponsorshipFocus groupsDirect membership income (incl. in repeat business) - Account for quarterly revenues (divided by 4)
  17. 17. Reduction in Costs1) Advertising/marketing/PRDirect cost savings from advertising/marketing/PR budgets2) Customer serviceDirect cost reductions from customer service team3) Recruiting costsDirect savings from headhunter/recruitmentNote: Must be attributed to community activity
  18. 18. Increased productivity of staff1) Productivity ratiose.g. profit per employeeavg. sales of employees in community -vs- those outthe community etc..
  19. 19. Fulfilment of organization’s mission1) Satisfaction/happiness. - Happiness/self-reported usefulness tomembers/non-members - results from community membersdeducted from non-members - increase attributable to the community - value per happiness (from non-members) - * by active members
  20. 20. AND THE ROI IS...
  21. 21. AND THE ROI IS... - 4%
  22. 22. AND THE ROI IS... - 4% :-(
  23. 23. Not included in the ROI1) Benefits of new product ideas/innovation/research2) Improved performance of staff recruited throughsocial media3) Future value of community4) Off-line referrals
  24. 24. How to increase the ROI1) Keep developing community (links to activity & SOC)2) Tremendous Value Exchange
  25. 25. Tremendous Value Exchange1) Gain great feedback by making it an exclusiveopportunity (or use information in community2) Increase purchases (first opportunity, brandedproducts, special bonus etc)3) Recruitment (only let top members apply, or post asa challenge/activity)4) Word-of-mouth (sneak previews/exclusiveinformation)
  26. 26. FeverBee Community Management Course• 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.• FeverBees 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..
  27. 27. Questions?Socious Online Richard MillingtonCommunity Software @RichMillington