ROI for Communities

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By: Idris Mootee

One big
challenge marketers face all the time is the ROI of developing online
communities or social networks. The question is what’s in it for them as a
brand/company and this is always a little tricky. The second question is how
close/distant this community needs to be from the company site.

Should that
resides outside or should it be branded separately? It seems that 25%-35% or so
of major online businesses in the process of or has already implemented an
online community (1.0 or 2.0) or social network while the other 65%-75% are
wondering where to begin. The primary considerations are:

1/ the business objectives and purpose of the community –
without a goal, you cannot measure success. It also needs to be time specific.
I will not go for more than 3 years.

2/ a
community require ownership and or should I
say co-ownership with your members. That needs to be clear up-front. You don’t
own them.

3/ we need
to determine upfront the nature of the communities and
take into the level of involvement that we desire to have (high involvement vs.
low involvement product categories)

reciprocity is key – the community will succeed only if the marketer benefits
(ROI) and the audience benefits. This value
needs to be properly communicated and revisited every 12

5) Return on
Investment –  As marketers or publishers – you not only have to satisfy your
audience, you have to justify the investments (both
one time and operational cost). There’s no simple answer to this. In fact, I am
building a comprehensive model to calculate the ROI. The variables that drive
the return on investment vary based on your industry and may include reducing
support costs, decreased attrition rates which lead to higher revenue, improved
customer loyalty, customer, building buzz, product launches, competitive
differentiation, rapid product innovation, etc. In general they belong to one
of the three categories below:

– Customer
Service and Support

– Product
Development (ideas and collaboration)

– Brand or
Product or Category Marketing

starting on your ROI, this will give you some general ideas:

– Community
users remain customers 50% longer than non-community users. (AT&T)

– Community
users spend 54% more than non-community users (EBay)

– Cost per
interaction in customers support averages $12 via the contact center versus
$0.25 via self-service options. (Forrester)

– Community
users visit nine times more often than non-community users and have four times
as many page views as non-community users (McKinsey).

– 56%
percent of online community members log in once a day or more (Annenberg)

Original Post: playground/2007/06/roi for communi.html