What enables some customer communities to be financially productive while others remain a cost center?
In the latest research study conducted by my firm Leader Networks, “The Business Impact of Online Communities,” we found that almost half (49%) of community leaders report revenue gains from their online community. This is an exciting proof-point but it warranted further investigation.
We analyzed the data to identify the winning conditions of the top companies and it became clear that mature communities tend to report greater revenue gains than younger communities. The study found that 55% of communities five years or older generate or influence more than $1 million in revenue, while 43% of communities two years or younger 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 doesn't 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.
But it doesn't have to take so long. Here are three steps marketing and community leaders can follow to recognize revenue faster:
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.
Learn more from Vanessa DiMauro at The Social Shake-Up, which will be held May 22-24, 2017, in Atlanta, GA. Brand communicators from Coca-Cola, Dunkin' Donuts, Microsoft, Nissan, Arby's and many more will speak on a breadth of topics from content marketing to measurement to Snapchat strategy.
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 software firm Kronos, who discussed the importance of planning the business impact of an online community from the start. Kronos just went live with its community in October, and it is primarily a customer-support destination focused on providing answers and managing cases.
“Doing that well drives customer success and loyalty. Also, our sales reps are telling me the community is a unique differentiator with prospects,” Daley says. “And since the Kronos community is on the same platform as our CRM and support, we’ll be able to measure the impact.”
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, 25% of marketing and community leaders report they don’t know or don’t track their community expenses. And almost 40% do not know whether their community saves the organization money.
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.
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.
For instance, to gauge the business value derived from its customer community, Hitachi Data Systems is redefining what and how it measures, according to Michelle Groff-Burling, the company's director of content management, communities and collaboration.
“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,” Groff-Burling says. “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.
Vanessa DiMauro is the CEO of Leader Networks, a research and strategy consulting company that helps organizations succeed in social business and online community building.
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