Community and ROI

    March 23, 2007

The firms I talk to about community building seem to fall into two categories – those that want a Web community right now, and those that question the very value of communities.

The latter group is skeptical for a variety of reasons, ranging from, “If we let our customers post on our website, they may say bad things about our products!” to “Can you really justify the ongoing time and money for administration and moderation? Our people are already really busy, and we don’t have a budget for outsourcing.” These are legitimate concerns, but of course we’ve got good answers for both of them. While working on a post over on Neuromarketing about branding and customer engagement, I dropped by Kathy Sierra’s Creating Passionate Users blog. While there, I found that Kathy’s post, User Community and ROI, provides a slightly different but excellent answer to the “value of community” question.

The CPU blog tends to focus on software, but the ideas you’ll find there are almost always broadly applicable. This one is no exception. Kathy finds value in community building when the community can replace or augment activity that would otherwise be done by company employees:

Think about all the things a strong user community can do for you: tech support, user training, marketing (evangelism, word of mouth), third-party add-ons, even new product ideas.

Every company spends money on helping the users of its products, promoting those products, and designing both product enhancements and new products. All too often, these tasks are performed entirely by paid staff (or outsourced to some other entity), with minimal involvement by the people who actually USE the products. Certainly, getting a community of users involved won’t make the internal staff expenses go away, but the community may both lighten the load in some areas as well as provide a major dose of market insight and creativity.

In estimating community return on investment, it’s often relatively easy to identify the costs, but harder to come up with numbers for revenue/profit. Here are a few questions that may help estimate the impact of a successful community:

  • What is the value of a customer getting a question answered in minutes vs. 24 hours?
  • How much can be saved by not hiring an additional support staffer? Two? Three?
  • What is a part-time brand evangelist worth? How about a large number of them?
  • Would an early warning of product problems be valuable?
  • What is an idea for a new product feature or an entirely new product worth?

That’s far from an exhaustive list, and companies in different fields will have varying specifics. Still, community builders need to make the profit/revenue side of communities as tangible as the costs to create an informed discussion about community ROI.

Getting back to the CPU post, Kathy provides some great tips for building a community rapidly. Among those is an idea I particularly like: trying to move the member along the path of “member evolution” more quickly. I.e., as the question-asking newbie starts to get a bit more comfortable with his knowledge, try to encourage him to start answering questions even if he’s not a real expert yet. Increasing positive contributions from these members will move them more rapidly to more advanced levels, and will enhance the overall community experience for all members. She also suggests,

Above all, keep teaching members to teach other members. Give everyone a crash course in learning theory. The better they become at helping others–the more skills they develop in mentoring/tutoring others–the more meaningful and motivating it is for them to keep on doing it.

There are plenty of other solid tips in the post – if you run a community, or are starting one, check it out.