Communities, ROI And Misplaced Enthusiasm

April 23, 2012 Comments Off on Communities, ROI And Misplaced Enthusiasm

Many companies benefit from developing communities, but a greater number wont.

They don't have the resources to develop a community, nor sell a product/service that's worth building a community around. 

A few simply wouldn't be able to gain a positive ROI if they did.

I worry people mix the 19% increase in purchases figure here with a 19% ROI. We can all agree there is a big difference. 

If members purchase 19% more of the product/service, and your service costs $5 a year, that's an extra $0.95 per participating member. A community with 33,000 active members would bring in $31,350. 

This wouldn't cover a community manager's salary, let alone the platform expense, overheads, and other opportunity costs. Worse still, 33,000 active members isnt easy. It's going to take a few years. 

However if your products/service costs $1000 per year, an extra $190 per active member, per year really adds up. A community with 33,000 active members now brings in $6.27m per year. Even with 1,000 active members it's worth doing. 

That 19% figure (one of many) isn't the starting whistle for all companies to develop communities, it's a warning. If your feasible audience size multiplied by the service/product fee wouldn't generate a positive ROI, don't develop a community. 

So let's be optimistic about communities, but not overly so. That helps nobody. 

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