Return On Interaction

Can you build a vibrant online community that justifies its expense? Sure. The experts explain how.

InformationWeek Staff, Contributor

June 29, 2001

6 Min Read

If you run an online community, then you probably don't need anyone to convince you of its business value. Forum managers and community staff know that the communities build loyalty, give valuable feedback, and contribute to increased sales. But corporate management wants quantifiable statistics to demonstrate that the community effort is paying its freight.

Fortunately, online community managers are finding numbers to satisfy the ROI demand. Better site-analysis tools, which can more accurately track what captures the attention of visitors, and the ascendancy of customer-relationship management have helped the cause.

Online communities represent any form of user-created content. These can be message forums (like InformationWeek's), live chats (from celebrity visits to Wall Street analyst briefings), or user-contributed product reviews. Among at least some businesses, online communities are viewed as a way to connect with and respond to customer concerns and to learn from customer experiences.

Traditionally, users generate content on business-to-consumer sites (such as those run by National Public Radio and Kaiser Permanente), on affinity sites (such as the San Francisco-oriented Craig's List), and among support groups (for topics ranging from colon cancer to romance novel writing).

Business is no stranger to online communities. Companies such as Intuit Inc. and Borland Software Corp. began technical-support forums on CompuServe in the '80s. But the focus was primarily technical and few companies took the time to integrate the community input into their business processes and product design.

Now, a growing number of private business-to-business communities are being created for internal company matters or communication among business partners, such as those run by Cisco Systems and SAP AG. Collaborative discussion forums enable resellers, suppliers, and company representatives to find and fix problems early.

Community managers usually turn their attention to content issues: creating lively discussions, establishing clear rules of engagement for participants, and managing volunteer or paid staff. However, in an era when every department endures budget scrutiny, each online community must justify its existence--proving that it's an investment, not just an expense.

Looking For Success? Start With The Numbers
Statistics help to evaluate the economic impact that an online community can have for E-businesses. A study conducted by consultants McKinsey & Co. found that community members are more likely to be E-business spenders. Among online retailers, for example, the survey indicates that users of community features generate two-thirds of the sales and half of a site's total visits. And the retention rate (the stickiness factor) is twice as high among community users than for casual visitors, according to the October 2000 study, which was commissioned by PeopleLink, an online community services organization.

"I can't emphasize enough the importance of metrics," says Thomas Falconer, VP and executive editor of the Learning Network, which owns several educational sites for children. While sophisticated tracking and analysis tools are great, Falconer points out, even fairly basic approaches can prove valuable. A community's impact (and an estimate of the ad revenue it generates) can be sketched by graphing the percentage of community page views to the overall site traffic.

If your Web logs collect enough information, it may be possible to determine how often the community users view non-community content and how much time they spend on the site. According to the downloadable McKinsey study, which evaluated 300 million user sessions between January 2000 and June 2000, community users had 2.4 times higher page views on non-community pages and spent 1.8 times as much time on non-community pages as site visitors who didn't use community features.

Community managers can also assign a value to specific message content and estimate the dollar amount saved or generated by the community interaction. Using this method with internal and external communities can generate a gross margin contribution, which helps determine a rough ROI.

With technical questions, for example, "we know that a certain percentage of Web tech inquiries would have resulted in an open case to the Technical Assistance Center," says one community manager for a computer hardware company, who asked not to be identified. "Using established statistics from the site, we can count the number of cases avoided (taking into account that many people read an individual message). We know the average cost per case; therefore, we can estimate the total savings." The company is also developing a model for internal communities, calculating the time saved from message collaboration compared with telephone, E-mail, or other methods.

Slow, Measured Steps
Those experienced in winning management approval for a sustained community campaign recommend that the notion "if we build it, they will come" be stamped out aggressively and immediately. It's not true and sets up everyone for failure, say the experts.

Community managers need to set goals for the site--goals that answer a site visitor's needs, reflect the company's mandate, and that are measurable. The best way for a community manager to do so, both politically and financially, is to learn the needs of other department managers and how the community can meet the needs. This integrates the online community better with the business' overall goals and helps establish ROI metrics that management understands.

Working with human-resources, infrastructure, and business development staff would also help an online community manager gain an advocate in each area, points out Lynn Clater, community consultant and past director of Community Development for CNN Interactive. One way a community manager can demonstrate success, says Clater, is to "feed back nuggets [from the discussion forum] to the staff who need it."

Experienced community managers recommend that you build slowly. "Implement only the interactivity you can support," advises Anne McKay, community manager at Consumer Reports Online. Make your mistakes when you're small.

"We thought we could build [an online] community based on user-to-user interaction," says McKay. "That idea lasted about five minutes." Consumer Reports learned from early message postings that its membership wanted more than advice from other users. The subscribers expected interaction from Consumer Reports' own staff. "They know our experts are just behind the curtain," says McKay. "They want to ask the experts for more information. They want to challenge [us] about the latest report."

Yet, keep in mind that not everything can be quantified. "The really important things don't lend themselves to measurement," cautions Craig Newmark, who runs craigslist.

"People talking to each other is one of the most popular uses of the Internet," says Rebecca Finkel, editor for Drama, Performance & Arts at PBS Interactive. "Having a loyal group of people associated with your site is a remarkable thing in this time of very little consumer or brand loyalty."

Site Editor Esther Schindler has been active in online communities since she first logged into Plato's Homelink service in 1984 and has been a forum moderator since 1990. She's responsible for InformationWeek's Listening Post discussion forums, and would love to hear what's worked--and what hasn't--in your own efforts to create an online community.

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