The ROI Of "Owner" Communities

Two of the most common questions we receive from marketers are “How do I know if it’s worth having a community?” and “How can I prove to my executives that my community is worth their investment?” To get the initial funding and keep support coming for an owner community — one which you operate and fully brand on your own website — you must be able to clearly measure and communicate the value up to your CMO and CFO. That means capturing the effect it will have on your company’s profitability as a part of your overall marketing investments.

As a part of a new research report I just published today with Shaheen Parks, we built upon Forrester’s Total Economic Impact™ (TEI) methodology to provide you with a reference framework to estimate the ROI of your community. 

We suggest that you focus on these three qualitative benefits, which form the core of our framework:

  • New lead generation: How many new leads or prospects come to your company each year because of your community, multiplied by your average deal size and overall lead close rate.
  • Increase in lead close or conversion rate: The effect your community has on your overall lead close rate, multiplied by your average deal size.
  • Deflection of support calls: How many potential support calls get answered by the community, multiplied by your average cost per call.

As well as two “softer” quantifiable benefits which are not part of the formal framework:

  • Improved products and solutions via ideation: Product improvements informed by soliciting ideas for new features and product direction via your community.
  • Increased customer satisfaction with your company overall: Increases to your company’s Net Promoter Scores and similar metrics because of their positive experiences in your community.

And then account for these three costs:

  • Community managers: The fully loaded cost of your community managers.
  • IT and development resources: All costs associated with developing and maintaining your community.
  • Platform cost: The annual spend for the technology that your community is built upon.

To illustrate how these factors come together, we created a reference model of a successful owner community implementation for a B2B company with an average deal size of $100,000 and 2,000 qualified annual leads:

A total economic impact analysis reference model for owner communities

I’d love to hear your thoughts on the model in a comment or a tweet, and if you’re a client, I encourage you to read the full report, which includes an interactive version of the framework and many examples from other marketers we have spoken with.

Comments

Because of the community

"How many new leads or prospects come to your company each year because of your community"

How do you know it was "because of your community"? Purely from calls-to-action (CTA's) from your community site or are there other ways to draw this straight line of cause-and-effect?

Multiple ways

There are two straightforward methods --

First, track click-throughs to purchase and to sales channels from your communities the same way you would an email campaign, and measure results directly in a marketing automation or CRM tool.

Second, survey new customers on a frequent basis, and ask them what information sources they consumed and were relevant to their purchase decisions.

Do you hand out sales leaflets at parties?

I would hope not! It would be regarded as inappropriate and almost certainly prove ineffective. Yet this is what some businesses do with Social Media (SM) communities in a short-sighted effort to demonstrate rapid ROI. It doesn't work like that!

The community is an environment where you build relationships over a period of months and years with a wide circle of prospective customers. Having established regard and trust, they are much, much more likely to respond to invitations to attend events, webinars or whatever. They may well download White Papers too and thereby signal their interest.

But naming a SM community after your organisation is like inviting people to a party in a shop. They will assume they will be sold to and they won't attend.

And trying to aggressively source sales leads through a SM community will backfire too. You need to be much more clever than that!

(BTW, the biggest LinkedIn group we own has >780,000 members, so I am writing with the benefit of practical knowledge here)

Agreed, with caveats

I agree with much of what you're saying -- we have brand new survey data back which says by far the #1 thing that discourages people from coming back to a vendor's community is being sold to.

It can't be a direct pitch, and you can't let sales take over a community or it will wither and die.

That said, your communities will, if you allow them to grow naturally, generate leads for you on their own, and it is worthwhile to track that.

Owner communities

I should also add that communities you own and operate fully on your own site are just one type of community we look at here at Forrester -- we also see the strong value of what we call a Promoter community, such as one one LinkedIn. I choose to focus this report on the communities brands fully own and operate because of the support cost deflection which is a major part of the model. I'll try to put up a blog post in the next week about the four major community strategies we lay out.

On the other hand...

I would agree that company run and named communities NEVER work. And I would caution other readers not to ignore that NEVER part.

You may go in armed with all the good intentions and research without the most important step which is knowing or understanding your customer's willingness to come and discuss your products in front of you.

Just like Dave's comment about handing out leaflets as a party, you need to think about the human nature aspect of your social community. Your best and most vocal customers may pipe up about what they like and do not like about your products and services to your face but most people, especially the ones you want to hear from, will not.

No all this is not to say that the idea is doomed to failure. You just should not launch and host this community on your company website. And certainly do not make it a closed community that requires a customer ID for access. People like to be social but if there are locked doors or secret passwords baring their entry to the party then you will loose the most valuable members.

You will want to setup a community that at least seems to be agnostic and focuses on your business segment. Yes that means you'll have some competitors trolling the community too but that's life and you will gain invaluable insight to what they have to say. They certainly wouldn't come and share their thoughts on your company site based community.

Hosting the community if not on your company site is a big decision to make as well. LinkedIn is a great place for groups and gives you a quick start up since everything is in place, but don't forget that you do not own LinkedIn and you do not own the contacts of the people who participate in that community. You also can not mold the impressions of what people see and do while in that group. So choose a platform or application that lets you own the environment as well as the group. This will let you more readily monetize the community and do so in a less intrusive fashion than let's say "handing out sales leaflets at a party."

It depends what your goals are

Patrick -- thanks a lot for your comments. I agree with much of what you're saying, but I think it really depends on what you're trying to accomplish with your community.

Some communities work well on your own site (Owner communities, we call them) -- especially including support communities. Others are much better served on larger web properties -- what we call Promoter communities.

As you correctly state, it depends on what audience you're trying to reach as a marketer, but I have to disagree that communities you run on your own site never work -- I've seen plenty of examples where they've been wildly successful, just as I've seen plenty of examples of successful LinkedIn or Facebook communities.