How to Calculate the ROI of Online Communities

By Richard Millington

ROI People

Calculating Average Order Value

The second part of our CLV trifecta is the average order value (AOV). This is essentially the amount a customer spends per order. A business can calculate this by dividing total revenue by the number of orders placed during that period.

Communities typically have less influence over the AOV than over frequency or retention. However, a community might encourage members to upgrade or buy more of an item when they do make a purchase. An organization could also use community data to highlight other products they might be interested in to increase the average order value. This is often common in SaaS products and impulse purchases.

Fortunately for us, the average order value can be calculated using the same methodology as above. The only difference is we can replace frequency with average order value in most places. This means:

  1. Determine change in average order value since members have joined the community.
  2. This can be by direct collection, surveys, or sampling.
  3. Determine change in non-members over the same period using the same method and subtract this from the figure above.
  4. Generalize this figure across the entire group (total members * by retention rate) * by the increase or decrease in average order value attributable to the community.
  5. Multiply by the average gross margin.

Community ROI Template

We have included the table below (remember to download the sheets though).

screenshot-2016-08-31-22-53-28

Summary

  1. The average order value is the typical amount a customer/client spends on each purchase.
  2. Communities have limited influence over the average order value, but might encourage customers to buy upgrades or upsells when they do purchase.
  3. You need six input values to calculate the return generated through increased average order value. These are the average order value of newcomers per month, average order value of members (12 months later), number of members within the cohort, average retention rate, and average gross margin

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