In our latest research study, “The Business Impact of Online Communities,” we
found that almost half (49%) of communities report revenue gains from their
online community. This is an exciting proof-point, but it warranted further
investigation. What enables some communities to be financially productive while
others remain a cost center?
To answer this question, we analyzed the data to identify
the winning conditions that bring in the green. It became clear that mature
online communities tend to report greater revenue gains:
- 55% of communities five years or older generate or influence more than $1M
- 43% of communities that have existed for two years or less generate or influence less than $10,000
At first glance, it seems that it takes at least five years
for a community to stabilize, build critical mass, break even, and generate
revenue. But then we started to peel back the onion to better understand
the drivers behind this hunch.
Based on in-depth conversations with our clients, backed by
additional research, we’ve found that “ramp up” issues don’t stand between
communities and revenue – measurement and reporting issues do.
In fact, it does not
typically take five years for an online community to realize revenue. It
takes five years for community leaders to develop processes and metrics to
measure and report revenue gains.
It does not have to take so long!
Here are three steps marketing and community leaders can
follow to recognize revenue faster:
1. Build a
business case
Too often, organizations build online communities based on a
single use case – such as customer support or employee advocacy – not a
full-blown business case that articulates a clear path to an ROI. As a
result, community managers put their time and attention into the tactical
aspects of managing their communities instead of focusing on the business
impact that the community is making.
The catalyst for change usually occurs when the community
graduates from being a social experiment and becomes aligned with a line of
business. That’s when an executive steps in and wants to know how the
community is advancing his or her business goals. And that, in turn,
forces the community manager to articulate KPIs and success measures.
It’s time to put the horse before the cart! By
building a solid business case – including a revenue model – at the outset of
the process, community managers can measure what matters from the get-go.
We spoke with Leo Daley, Director of Services Marketing
& Community at Kronos who discussed the importance of planning business
impact from the start. He says “We just went live in October, and our community
is first and foremost a support destination, so we’re focused on providing a
great customer experience in finding answers to support questions and managing
support cases. Doing that well drives customer success and loyalty. Also, our
sales reps are telling me the community is a unique differentiator with
prospects. And since the Kronos community is on the same platform as our CRM
and support, we’ll be able to measure the impact.”
2. Get your
financial house in order
You won’t know if you’re achieving the benefits of your
business case if you’re not tracking basic financial data. Yet, in our
research study, 25% of marketing and community leaders – one in four – report
that they don’t know or don’t track their community expenses. And almost 40% do
not know whether their community saves their organization money or not.
The mandate for community managers is crystal clear:
know what you’re spending and know what you’re saving. Even if your
community is generating revenue, without a clear picture of spend and
yield, it’s impossible to calculate ROI.
3. Connect
the dots
In our study, we found that 36% of online communities
influence revenue via customer retention and satisfaction – which is how the
majority of marketing and community leaders define competitive advantage.
If your community platform is not integrated with your other
customer-focused platforms, how can you measure the influence on revenue?
You must connect your member data to customer data.
And Michelle Groff-Burling, Director of Content Management,
Communities, and Collaboration at Hitachi Data Systems had more to add.
“One of our key initiatives is to redefine what and how we measure to
gauge the business value derived from our community,” Michelle explained.
“As a start, we mapped the community’s purpose to our organization’s business
strategy – associating all the work that takes place in community back to our
goals. This provided the foundation for measurement areas that will offer key
ROI insights. Some examples include identifying sales inquiries attributed to
community, the number of resolved issues, and support call deflection.”
So what’s the bottom line? Revenue is not dependent on
community maturity. Communities that generate or influence more revenue
do so because they have developed a financial model for tracking revenue.
With a solid business plan, sound financial metrics, and integrated customer
data, you can cut to the chase – measuring and reporting revenue sooner, rather
than later.