How to Calculate the ROI of Online Communities

By Richard Millington

ROI People

The Benefits And Value of An Online Community

There are many reasons why an organization might create an online community. They might notice competitors poaching their customers and decide to build a close-knit community for their customers. They might notice employees duplicating work and create an internal community to share information. They might want to reduce their customer service costs.

Very often, communities are created without a specific target to hit. Sometimes, they are created by accident (taking over a fan community) or by an employee who has since departed (yet the community survives). Occasionally, they are created based upon the immediate whim of the CEO.

The benefits of an online community vary by the type of community. ‘Online community’ is an umbrella term describing a broad range of approaches to achieve a range of goals. The common element within them is using member to member interaction to achieve the organization’s objectives.

These objectives might be directly related to revenue (e.g. increasing spending from existing customers) or they might be one layer removed (e.g. improving net promoter score). In this chapter, we have reviewed each of these. This is not a comprehensive list, but an attempt to tackle the most common benefits.

It is not easy to classify benefits as different terminology is often used to describe the same objectives. Where possible, we’ve tried to be clear about the most common terms used, what they mean, and how they relate to each other. The structure reflects the broad goals of the organization.

Classifying The Benefits of Community

Customer Lifetime Value (CLV)

Increased spending from existing customers

Retention rates

Length of time an individual remains a customer of the community

Customer loyalty

Customer sentiment

Customer satisfaction (CSAT)

Customer churn

Share of wallet

% of spending within the product category spent with the organization

Average order value

Frequency of purchase

Upselling, downselling, cross-selling

Ads served / CPM Quantity of ads delivered

Advertising rates

Customer Acquisition

Attracting new customers to the business.

Lead generation.

# of leads generated by activity

Lead identification

Customer advocacy

Net Promoter Score (NPS)

Search engine traffic and search rankings.

Reach / Mentions

Lead conversion

% of leads who convert into paying customers

Lead conversion time.

Visit to lead %

Lead to customer %

Reduced Marketing Costs

Attracting new customers to the business.

Customer Service Costs

Reduced cost in customer service attributable to the community

Call deflection

Indirect call deflection.

First contact resolution

Average handling time

Customer Acquisition Costs (CAC)

Reduced costs of acquiring a customer.

Web traffic

Lead generation

Lead identification 

Research Costs

The equivalent cost of gaining similar insights from elsewhere

Focus groups

Surveys

Interviews

Idea generation

Idea validation

Alerts of potential problems

Bug identification

Trending topics

Improved speed to remove problems

Reduced Recruitment Costs

Recruitment Costs

Reduced cost in hiring and training a new staff member

Cost per applicant (CPA)

Cost per qualified applicant (CPQA)

Time-to-full productivity

Social Return

Improved lives of individual stakeholders.

Capacity Building

Increasing the ability of stakeholders to handle their environment

More informed members

Social support

Improved social structure

Social Impact

Influence change on a broader social level

Petitions

Protests

Crowdsourcing knowledge/revenue

Donations

Eliciting donations from community members

Peer to peer fundraising

Social proof

Challenges and milestones

We will explain each of these benefits and how they are related to the community over the next few pages.

Chapters

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