Measuring ROI of Online Communities

Unlike other business expenses, measuring ROI of online communities is not as straightforward as you might think. According to community expert Rich Millington of FeverBee, simply comparing your sales for the periods before and after your community activities is a mistake. Not only are many of your members going to purchase your product anyway, there are dozens of ways in which your community activities are intertwined with your business marketing, making it a challenge to show its direct benefits.

Since the beginning of the commercial social media boom companies have searched for the “holy grail” metric for ROI of online activity. This search has caused social media managers to default to tactics that are easily measurable, regardless of whether they are effective. Yet social media marketing often requires qualitative rather than the quantitative measures more familiar to online marketers.

On the other side of the spectrum, some call for new qualitative measurements such as ROI defined as “return on influence,” or ROE – “return on engagement” – as wholesale substitutes for traditional ROI.

Regardless of whether you believe wholeheartedly in measuring page-views and click-through rates, or you think trying to quantify community engagement is pointless, or you’re somewhere in between, the following questions and guidelines will help you develop a strategy for measuring ROI of your online community:

Community-based Revenue

• Membership fees. Do you charge fees to be a member of your online community?
• Direct sales. Are you selling products directly through the community? Be careful to account for purchases that loyal customers would have made anyway through alternative sales channels and to subtract all affiliate fees paid.
• Other revenue streams. Do you sell community-branded products? Organize events that create revenue streams? Take a percentage of the profits from members selling products through your community?
• Increased page views to website. Does your community increase page views to your company’s website? If you measure the funnel from new visitors to customers then you should be able to assign a value to every page view.
• Mentions elsewhere. Don't forget to track other mentions of your community that lead to a measurable number of visits to your website.

Reduced Costs

Does the community lower your overhead by streamlining service, replacing the need for marketing or advertising campaigns or reducing personnel call center personnel?

Investments and Intangibles

• Opportunity cost. Remember that the money you spent on your online community will be worth less tomorrow. What else could have been done with the investment?
• Sense of unity. Your customers interact in community because they like each other. That increases loyalty to the brand that united them.
• Premium brand. Thanks to the positive image created by the community, can you charge a premium?
• Value of feedback. Not all feedback is equal. Can you quantify the value of the feedback obtained from your online forums?
• Cost of not creating a community. Imagine your competitor had persuaded all your customers to join their community first and you can begin to justify the value of your audience.
• Competitors. Your competitors will find it harder to redirect your online community customers.
• Overhead. Some costs of doing business might well be off-set by online community activity. 
• Future value of the community. Unlike most assets, communities appreciate in value. The work you put in this year will pay off even better next year.
• Non-profits/social good. Does your community fulfill a social need or offer a service that betters the community?
• Value of individual community members. Ask yourself how much each customer is worth; what does she spend per transaction; is she more likely to purchase after social media interaction; and how much does an unhappy customer cost?

Traditional Online Advertising Analytics

If you still need some hard numbers, consider using the conventional trackers listed below from IAB (Interactive Advertising Bureau). But beware that these measures do not take into account whether the comments were complimentary or disparaging.

• Social media sites: Unique visitors, cost per unique visitor, page views, visits, return visits, interaction rate, time spent, video installs, relevant actions taken.
• Blogs: Conversation size (number of sites, links and reach of a conversation whose content includes conversation phrases relevant to the client), site relevance (conversation density, author credibility, content freshness and relevance).
• Widgets and social media applications: Installs (number of applications), active users, audience profile, unique user reach, growth, influence, installs per user.

Finally, according to Rich Millington, remember that the biggest benefit of your online community is that it improves your business outlook incredibly, which isn’t included in ROI metrics.