So How Do You Measure ROI of Online Communities?

by on 6 August, 2008 - 16:28

by: Matt Rhodes

The answer to this question is simple and complex. The simple answer is that you make sure you establish a set of criteria when you launch the community and then judge success against these. The complex answer come with some of the ways in which you may judge success.

The workshops that I’ve run with clients at FreshNetworks only prove that every online community has a different set of aims and so needs to be measured in different ways. However, a few basic principals exist that show the possible ways in which you can measure ROI. First of all it’s useful to distinguish between actual measures of ROI and measures of the health of the community. As people who build and manage online communities, at FreshNetworks we are interested in metrics such as number of people who log-on each day, proportion who make contributions, average amount of time spent on the community and other such measures. These help us to benchmark the community against others that we have run and understand how each community is developing. It’s also useful for us to be able to build a set of metrics across community types so that we can better understand consumer behaviour in them. In most cases however, such measures are not (just) what we use to measure ROI.

A client may want to own the debate in a certain area. It may want to work with its customers to improve or develop its product in an online research community. It may be looking to engage a new audience demographic. It may want to amplify the word of mouth for its services. There are many reasons why people may set up online communities and understanding these on a very granular level is the first stage to effective measurement of ROI.

Then it’s just a matter of work out which factors will help you to understand how you are performing against these aims. There are really two types of data you can measure in a community

1. Qualitative data - this could mean measuring the quality of conversations about the brand, the response to the brand and competitors, the increase in actual conversations and dialogue about the brand, the extent to which these conversations are positive, the quality of ideas generated. Whatever you’re trying to achieve there will be qualitative measures that help you to measure this. Of course the problem with qualitative data is exactly that - it’s qualitative. Although this is the nature of online communities - they’re a space for conversations and discussions. So we often find that establishing detailed qualitative measures of success can be the most revealing and the most informative.
2. Quantitative data - to some extent this is much easier to measure, the trick is measuring the right thing and not measuring too much. From Google Analytics to more bespoke packages there are ways of quantifying a member’s interactions with the site and building a set of measures from this. It may be about reaching more people (possibly of a certain type), or about engaging the same people for longer. Quantitative measures can be good for understanding how people interact with the site.

This is really the fundamental difference between these two types of data and these two ways of measuring. Qualitative data helps us to understand the quality and usefulness of the contributions to the online community. Quantitative data, on the other hand, shows us how people have interacted with the site.

Most are important to measure and different clients have different aims from their online community - this means that different baskets of measures are needed. Sometimes you’re more interested in the quality of debate and so want to include a greater number of qualitative measures; sometimes you’re more interested in the reach and penetration of the community and so want to include more quantitative measures.

Whatever you measure it is that first question that’s important: what are you trying to acheive with this online community; how will it help your business? Answering that is where it all begins and one of the most critical stages in planning a successful online community strategy.

Some more reading

• Social Media Measurement Camp August 08
• Where Does Social Media Sit in a Firm? Probably Many Places
• Great Article on Measuring Social Media ROI
• Social Media + Measurement + ROI = it’s all about CRM
• Measuring the Value of Your Blog: Reflections Over the Last Year
• Communities = more than the sum of their social media parts
• ROI for Social Media Engagement: B-B Lead Generation
• How to Measure Social Media ROI for Business
• Building your Community Strategy
• Online Media Measurement Framework

Original Post: http://blog.freshnetworks.com/2008/08/so-how-do-you-measure-roi-of-online-communities/