How to Calculate the ROI of Online Communities

By Richard Millington

ROI People

Technology Investments

Technology costs include every tool and service related to the online community. These can be separated into one-off costs, which we may wish to amortize over a period of time (e.g. three years) and recurring costs.

One-off costs will include the following:

  • Software license. This is the cost of acquiring the software license. Most software platforms operate under a licensing agreement, whereby the organization purchases a license for a period of several years (yet, may incur the full cost up front). Enterprise software licensing can range in cost from upper five-figure and into six-figure numbers. Most of the larger enterprise vendors will assume a multi-year agreement with an annual cost based upon usage (number of users/logins) built into the pricing.
  • Installation and implementation fee. In addition to the license, some enterprise platforms may charge an installation or implementation fee. This is the cost of setting up your instance of the community platform. This will usually be a multiple of several months of the license fee. However, this is less common than it used to be. The activation of community software typically involves configuration of basic platform functionality and training. These activities tend to be included in the software licensing fee and may appear as an increase in the first year’s support package costs.
  • Custom development. This is the cost of any development beyond that provided by the enterprise software. This may be required if you wish to integrate the platform with existing systems. This might include single sign-on (the ability for existing customers or members to use the same password and not re-register for the community). This might also include integration and upgrading databases related to sales and marketing. In addition, you may also need to invest in federated search (combining search results from your website’s content management system with those of your community platform). Search features on the site may also wish to incorporate knowledge created in the community. Finally, custom development may also include the creation of brand new ad hoc features that do not come standard with the platform. The more complex the existing systems, the higher the cost. Most out-of-the-box implementations usually require at least one or two integrations. Assume a low five-figure cost for the lightest weight implementation. More involved implementations with multiple integrations and custom functionality may easily range in costs reaching the mid-six-figure numbers.
  • Design. These are the costs associated with designing the community (or creating the community ‘skin’). This ensures the community reflects the current branding provided by the organization. This might be the cost of the designer or additional development time by the platform vendor. Creating a user experience with wireframes and developing a skin for an enterprise platform typically requires an investment of mid-to-upper five-figures.

These costs are one-time costs typically incurred when creating or upgrading the community platform. In addition to technology costs are hardware costs. These costs include:

  • Software licensing fees. Most enterprise platforms charge a recurring fee as opposed to a single, fixed, licensing fee. This fee is, therefore, a recurring cost. We have included this both as a possible one-time cost or as a possible recurring fee. You can add in the relevant figure based upon your platform license.
  • Hosting (server or hardware purchases). This is the cost of hosting the community. Most enterprise community platforms will also host the server for a fixed fee. For open source platforms, the organization will need to buy hosting from an existing provider. In the very largest communities, the organization may also buy its own servers to reduce the monthly hosting costs (however, this is rare). Host fees will typically increase as the community grows.
  • Upgrades and fixes. During the lifespan of the community, the organization may need to upgrade the platform with either the latest version of the software, the updated branding identity or simply other new tools and integrations that have risen in popularity (or are being driven by new business needs). This will require additional costs. It is possible to classify this either as one-time or recurring costs.
  • Additional services/modules. The organization may also require additional services. These services might include software for analytics, gamification, customer relationship management tools, sales, communication (mailing list software), security, moderation, social media tools, analytical software, webinar software, event registration and management tools, and workflow management tools.

Costs Summary

The costs noted above are shown below:

Technology costs

(all hardware and software costs associated with developing and hosting the community platform)

One-time costs

  • Software license (one-off or recurring)
  • Installation and Implementation fees
  • Custom development
  • Initial platform installation/implementation fee
  • Design

 

Ongoing

  • Software licensing fees
  • Hosting (hardware and software)
  • Service and support fees
  • Ongoing enhancements
  • Ancillary products/web services (analytics, member management tools, communication tools)

Community ROI Template

We have created a common example of what these fees may look like within our accompanying spreadsheet package here. You can see these below:

screenshot-2016-08-31-10-52-56

Your technology costs will vary considerably. Critically, be sure to amortize costs where relevant to get a better understanding of the ROI of the community.

Summary

  1. Technology costs vary by platform and needs. Some platform fees are based upon usage, while others are based upon flat fees.
  2. Amortize one-off costs over a period of years (typically three) to provide a clear picture of the return.
  3. Any technology cost will require significant upgrades and add-ons to be a useful package. Expect to incur significant additional costs here.

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