How to Calculate the ROI of Online Communities

Customer acquisition cost (CAC) is very simply the amount of money the organization spends to acquire a new customer. An organization would usually calculate this by dividing the total marketing (or promotional) spend by the number of customers acquired during this time. If you spent $30,000 on promotion and acquired 1000 customers, your CAC is $3000.

Previously, we explained how to measure customer acquisition through lead generation or conversion. This essentially was a process to measure the value of the average customer and multiply this by the number of new customers the community attracted. This assumed that there were additional customers (i.e. not people who would have become customers anyway). This distinction is important. It enables us to include the entire lifetime value of that customer.

In practice, it’s rarely this simple. In many cases, it’s hard to determine if you would have reached a customer by either method. However, for the purposes of this calculation, we’re going to take the absolutist view that every potential customer would be reached eventually, but a community might be a more cost-effective way to acquire these customers. This means we’re not measuring additional revenue generated, but costs saved compared with other methods.

Resolving a problem at the first attempt reduces the overall number of calls the customer service team receives. This is the comparative metric we aim to measure here.

You need six pieces of information to calculate this rate. These are:

1. Number of calls received by agents ‘not exposed’ to the community per month.
2. Number of customers helped by agents ‘not exposed’ to the community per month.
3. Number of calls receives by agents ‘exposed’ to the community per month.
4. Number of customers helped by agents ‘not exposed’ to the community per month.
5. Number of customers who call for support per year.
6. Cost per call.

This sounds more complicated than it is.

Step Two: Compare With Cost Per Lead Via Other Methods

We can now compare this cost with leads generated via other methods. For this, we can use either specific outcomes (e.g. email addresses collected by sponsoring an event) or calculate an average of all direct lead generation efforts (PR, marketing, advertising, etc.).

This helps us get the cost of acquiring leads via the community compared with traditional methods. If a specific budget was compared (e.g. event sponsorship), we would simply compare costs against the costs of acquiring leads via this budget.

This tells us the organization spends on average $85 to acquire a lead via current promotional methods. This is for a single year. You can repeat this for each year.

It’s tempting here to calculate the difference between the two (cost per lead via community vs. cost per lead via traditional methods) to see how much money you are saving per lead. The problem with this is it doesn’t account for the quality of the lead. What if leads via the community are not as good as leads via traditional methods? We need to balance for that.

Step Four: Calculate Difference in Lead Costs and Multiply By Lead Quality

Now we can calculate the difference in costs in leads generated by the community between the two methods and then multiply this by the quality of the lead. This will give us the cost saving per lead generated via the community.

Once we have done this, we can multiply this by the total number of unique leads generated via the community to give us the figure below:

While this sounds like the most difficult process we have covered so far, it’s actually relatively simple as the data is usually much easier to gather.