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HigherLogic and Socious

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How to Calculate and Explain the ROI of Your Association’s Private Member Community

Posted by Christina Green on Thu, Apr 07, 2016 @ 08:30 AM

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“If you don’t know where you’re going, any road will take you there." - Lewis Carroll

This quote probably wasn’t meant to describe ROI and data analytics, but it does. Regardless of the industry you are in, data is used to review the path you’re on, decide where your organization is going, and what road will take it there.

Since they’re so influential, everyone wants to understand the numbers behind what’s being done, and your community is no exception. Your association’s board probably wants to know how the time you’re spending building relationships and the money you’re investing in engagement tools is helping organization. They want you to quantify your progress. Analytics are points on the roadmap to success, after all.

While it seems difficult to place a monetary qualifier on your online community, it can and should be done. Your board will want a number, and even if they don’t ask about the return on investment (ROI) upfront, having that information will help you justify your work in the future and the resources you need. It will make your engagement efforts look less like a social trend and more like the quantifiable business investment.

Calculating ROI for your online community can be tricky. To help make the process easier, you can define ROI generally, and then break up the calculation into steps that are customized for your association’s goals.

Defining Return on Investment (ROI)

Return on investment is easily calculated in most financial outlays. It’s:

net profit (gross profit minus business expenses)  - project investment cost

For instance, if you work in a manufacturing environment and invest in a machine that allows you to produce product twice as fast, you can quickly understand the ROI.

Take your gross business profit, which should have increased because you had more product to sell, and subtract operating expenses such as electricity and staff salaries. That gives you net profit, and you can subtract the cost of the new machinery as your project investment. The result is your ROI, telling you how much your new machine increased your business profits.

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For of a private member community, it is easy to derive the cost of setting up and running the platform, but the results are trickier to quantify. Because of this, the ROI of an online community is less clear cut. How, exactly, do you measure online community profits?

3 Steps to Calculate Your Online Community’s ROI

Measuring the ROI behind human interaction is more nuanced than equipment investment in a manufacturing environment. Before you can begin measuring engagement, you must establish a framework and goal structure for reporting on results.

Step 1: Establish Goals for your Private Member Community

There are a number of reasons to launch an online community for your association. While increasing engagement and providing more value are great objectives, you need to be able to measure what that means to your association in quantifiable financial terms.

Are you looking for increased member retention? Are you basing engagement on increased interaction? If retention is your goal, how much? 100%? A 5% increase over last year? Retention is easily calculated and can then be compared to the cost of your private member community.

Don’t be afraid to ask some of your most active community members or board members about what they’d like to see your community accomplish. Go to management if you want to talk through their goals and align them with your community objectives. Ultimately, you should combine these perspectives to create one to three strategic, specific online community goals.   

Step 2: Define Your Measurement Framework

Once you have a goal in mind, define how you will measure it. How will you define success? If you already have reports on your goal areas, such as retention or sales, find and review them to find out what actions or data you will need to account for. You will also need to create new reports about your online community and its impacts.

Going back to the example of retention as your goal, ask how the investment in establishing an online community will improve retention rates. What methods will you use to encourage customers to stay, and how will you quantify them and their success?

Remember, you also have to account for any other marketing or retention campaigns you launch during this time. Subtract the impact from those campaigns in order to get an accurate measurement from your online community.

Choose data that you can easily find and compare with in-house goals or industry benchmarks to answer your question. In this example, you could calculate the percentage of members enrolled in your member retention campaigns that stay with the company. How long do they stay? Now you have numbers to plug into your equation.

Step 3: Measure Early and Often

Like any comparison, you need to know your starting numbers before you can tell if changes are having any effect. Be sure to measure your rates, whether they’re retention, sales, or other metrics, before you start new campaigns and use those numbers as a reference point.

In our retention example, with a 5% increase in retention as the goal for the online community, it is imperative the association knows its retention rate prior to the rollout. Once the online community is launched, your member retention rate should be monitored and calculated at certain times, such as six months or a year into the campaign. Those rates can then be compared to the rate prior to rollout. Are changes occurring?

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Whether the answer is yes or no, measurement must be done consistently and more than once to show trends. Upticks and downturns over a long-running report will give you a clearer indication of your campaign’s success than a single report.

Pro Tip: Word of Mouth Data

While the association no doubt has a business goal in launching the private member community, it is important to include member input and feedback in reports as well.

People are often driven to action by reviews and word-of-mouth referrals, which your community can increase, but which may not be explicitly shown in data. For instance, data won’t necessarily show that a new member joined because he saw so many positive reviews and insightful conversations in your public discussion forums.

If your members are talking about your organization because of their experience in your online community, those words are worth their weight in gold, literally, as they are marketing promotions you receive with no investment of time or resources outside of your online community.

Online Community ROI Takeaway

Your association’s board will undoubtedly be interested in the return on your private online community. In order to present this effectively, you need to speak to your association’s goals and report consistently within set time frames.

Keep in mind that while you can, and should, quantify your online community’s ROI, you’re not just measuring return on investment. You’re measuring return on relationships as well.  

Relationships are not so easily quantified, but they can result in huge advocacy and loyalty improvements, so make sure you report qualitative member feedback along with quantitative data. Strengthening relationships is invaluable, and will provide a solid foundation for future engagement and ROI measurements.

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Tags: Online Member Communities, ROI, Private Online Communities

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