How do you quantify the value of an online community?

Online Communities are similar to and different from their physical counterparts

What’s the value of community?

How can you define both the idea of a community and the value of that community for a marketer?

A physical community can be hard to describe, and hard to grasp, as Phil Bartle suggests,

“we can not see a whole community, we can not touch it, and we can not directly experience it….Like the words “hill” or “snowflake,” a community may come in one of many shapes, sizes, colours and locations, no two of which are alike.”

An online community is a strange thing – it’s a hybrid of an idea (a shared space that people experience through their computers, tablets, and phones) and a thing – the interaction of that community in many channels (both online and offline.)

I propose a simple definition for the kind of community that marketers care about – a community is a place where people talk about and to the makers of your product. One of these communities happens online (we’re not not talking about channels – we’re talking about relationships with people)

Communities provide a place where you can have a conversation about the meaning and purpose of your brand, promote new ideas and products, and learn more about how people feel when they interact with you and your team. They are also places where you can guide the conversation, and not control it.

And by the way, how can you evaluate that?

Once you’ve defined the idea of a community, you need to find out who’s participating there. And establishing some hard and soft measurements of KPIs (Key Performance Indicators) will help you measure your progress so that you can know (both directionally and absolutely) whether anything is changing in your community and who’s talking about and to you.

One of the first things you need to do for your community is to learn more about the people who are already there. Who are the existing influencers? Where are they talking now? To whom are they talking, and how often do you engage with them? There are lots of tools and services that can help with this process, and if you stay focused on the idea of activating your 1000 true fans or identifying the 1% of web visitors who contribute the most content.

Ok, so get talking. But that’s really just the beginning.

Establish Hard and Soft Measurements of Value

Quantifying the value of community for a CMO – or for any executive staff member at a company – is going to require some specific measurements of value. We could argue all day whether or not these are meaningful growth indicators when your business is not yet mature, and I think we can all agree that establishing some hard measurements of value is A Good Thing for your business.

Here are some commonly used metrics that can tell you interesting things about your community. If you can nail these, you’re going to be a success (duh.) But the reality is that they provide you with hard numbers that you can use both to manage your business and to communicate about its success to other people in your company.

1. DAU (Daily Active User) and MAU (Monthly Active Users) of site – how fast are you growing? (thx Des Traynor for pointing out the DAU/MAU as a formula is a measure of “stickiness”, not growth and that you need to evaluate these numbers separately.)
2. How many sales can you relate directly to your community – how does community accelerate sales growth?
3. What is the cost of the resource devoted to community – what is the effective COGS of this resource?
4. How many people outside of your community have heard of what you’re doing – what’s your reach and virality?

If you can combine more than one of the attributes above, then you are likely to have an amazing hit. But there’s a problem – when things are going really well people are willing to believe that your efforts contributed to their success. And when things don’t go so well, then it’s hard to prove that you can make it better solely on the strength of your community. The truth – as I see it – is somewhere in between. These metrics are really important because they are operational and provide clues to the health of the business – and they also can be stretched in strange ways to tell whatever story needs to be told.

There’s also another story: how can you extend community reach across other parts of the company through organizational agility (e.g. what can you show to other folks that makes the CMO look good. -> the HERO powerpoint). Also, communities provide a tangible reminder of culture and engagement around brand – or what people feel about you and your brand.

The soft value of an online community is its ability to help you learn as fast as you can about the sentiment (and actions) of the group of people talking to you and about you (especially at qualified events like a product launch, a sunset, a conference, or a noticeable change in the competitive landscape.)

Provide proof points by interacting with the community

You should use agile case studies and trial balloons to make both the hard and soft measurements of value into real data.

One way to do this is to ask your community to make decisions, either through surveys, action in product, or through social channels:

• it could be simple – what color should this widget be?
• it could be brand related or aspirational – what are the best practices for …. (dealing with customers or another idea)
• it could be specific – should we get rid of feature x to devote more resources to other things?

When you propose these ideas as campaigns, and ask people (your influencers) to take actions on them, you are providing real case studies to quantify the hard and soft measurements of value. Whether you ask a “tell us what you think” question, post in social media and ask your followers to share content, or create a Call to action to buy a product, you’re setting up the community to answer your hypothesis – did this create, communicate, and deliver unique value?

Finally, check your numbers (and be honest)

Ok, it’s decision time. Was it a good idea, and how will you know? You should have already built some uncertainty into your model to understand what’s reasonable to expect (after having done a small trial with enough results to guess and show directional intent). And now you need to share your results with your executive team.

If you can answer these questions, you’ll provide actionable data to your team:

1. How many customers did we actually talk to in this channel and across channels?
2. Can we relate these to actual sales, and to how many sales?
3. And did we remove cost from the system by using a cheaper channel? If not, is the quality of the sales improved relative to other kinds of sales?
4. How can we track this cohort of customers to understand whether they fare better over time than other cohorts?

It would also be nice to have some information about softer measures, including:

• What are bloggers and social media saying about us, and what’s the sentiment of that conversation?
• Do we show a directional gain in social media followers without buying them?
• Are there any adjacent or related brand values that you can reinforce with community – e.g. what is the social good that might go along with your products and help sell them. And in the meanwhile, how can support non-profits, etc?
• How can you can share industry expertise – the “useful information” that establishes you as a thought leader in the field?

You won’t always be able to answer all of these questions, but making the effort is great practice and gives you the ability to state both the value that you perceive in the community and to frame that community’s value in the language of the c-suite.

Takeaway: Quantify Results

• Make sure you state your expectations of what’s reasonable, and what’s a BS number.
• Understand the meaning of a directional change (you might need to see if from a multi-month trend rather than just month over month
• Don’t be afraid to use proven models like Porter’s Value Chain Analysis as a framing method for analysis