How to Calculate the ROI of Online Communities

By Richard Millington

ROI People

It is far more complex to measure outcomes as a result of insights generated from the community.

A community can provide an early warning system to products, generate valuable feedback, suggest new features, show trending topics, yield valuable qualitative and quantitative data. This can reduce time to market, validate ideas, shorten feedback loops, etc. Better yet, if the community generates a killer idea, the value of this is hard to quantify.

Another example comes from television show producers who use the number of pirate shows by online communities (often their community) to estimate popularity and make informed decisions about licensing deals. This is hard to equate to any other metric.

We have determined some of these categories, such as early warning of possible problems, while identifying and fixing bugs are already factored into customer satisfaction and retention.

This process could be extended to measure their influence on customer satisfaction and retention beyond community members using methods we have already calculated (e.g. if the community helps identify and resolve a software bug, what is the impact on customer satisfaction for all customers?).

It is more difficult to measure increased time to market as a result of ideas generated or validated by the community. For example, trending topics and feedback in the community may cause an organization to favorably adjust its priorities and develop a specific necessary product much quicker.

Time to market might be evidenced in a significant first-mover advantage, labor cost savings, or additional revenue from the product. Ideas generated might use costs of generating similar ideas (equivalent man hours) or total up the profit of each community idea implemented and divide this by the total number of ideas submitted.

Once we can clearly define the impact a benefit is likely to have on the business, it becomes possible to track it. For further reading on measuring innovation.



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