[ Home | Online Community Toolkit |Online Community Resources ]
Full Circle Associates: http://www.fullcirc.com

Your Community of Customers

By Nancy White

The jury is out on determining the return on investment (ROI) for online communities. Communities are significantly diverse, they are relatively new, and they are difficult to quantify. One theory is that the ROI increases over time and as a result of the "maturity" of the community and the rate or level of participation by the members.

Significantly, the communities that have been studied have all been associated with big sites. (For some great white papers on online communities, visit Participate.com and click on "whitepapers" under "research.") But what is the ROI for a small business that runs an online community? How can you tell if you are "getting your money's worth"?

I wish I could tell you for sure, but I can't. However, we can look at some of the factors to help you get a sense of what you are putting in and, perhaps, getting out of your online community.

The Costs

There are "hard" and "soft" costs associated with an online community. (Hard costs are any measurable out-of-pocket expenses, and soft costs are related to your time spent working on your community.) Try filling out the following table to estimate the monthly costs of your existing (or imagined, or planned) online community:

Item Cost Factor Total Item Cost

Did you buy a software license (a one-time fee, e.g., for Allaire Forums )? Divide by 12.

Do you use free software or Web-based services (e.g., World Crossing , which provides free, Web-based discussion rooms on its server)? Enter $0.00 in the "Total Item Cost" column.

Do you lease space and/or service (e.g., Web Crossing at $95 - $495/month [U.S.] per month for discussion space hosted on its server but totally branded for your use)? Enter the monthly cost.

Hardware Did you buy a server specifically to host your community? Assume a two-year period and divide by 24 to determine monthly cost.  
Technical support and/or hosting Do you pay someone to host your software and/or community? Enter the monthly cost.  
Your time Estimate how many hours you spend on your community and multiply that figure by your hourly rate.  
Others' time Do you pay someone to help moderate your community? If so, multiply the hours per month by his or her rate per hour. You might want to calculate the value of volunteers as well!  
Marketing costs Do you buy banner ads or do any other marketing for your community? Enter the monthly cost.  
Total monthly cost:    

Surprised? Especially at the value of your time? Now, on to the benefits and/or revenues.

The Benefits and/or Revenues

Think about the ways online interaction and relationships might benefit your company. Can you put a dollar value on them? Most of them are rather intangible, but if you can at least gain a sense of how your online community is benefiting your business, it might help you solidify your determination to make it work, or to adjust your strategy. Consider some of these factors:

Acquiring New Customers

What is the cost for acquiring a new customer? of forming a positive human relationship with your client? Does your community make your customers more loyal to you and more likely to provide you with more business? You just saved money on new member acquisition!

Word of Mouth

Do your customers tell others about your community? This can help you gain new customers. You just saved money on marketing! (Yes, word of mouth!)

Closing Sales

Are you able to close sales through the interaction in your online community?

Building Loyalty

Do your customers who participate in your online community represent a greater revenue per person than those who do not? Calculate by how much per month!


Does your online community help solidify your brand or image with your customers better than offline methods of advertising? As well as your offline branding activities? At a lower or higher cost?

Improving Responsiveness

Do you have a better sense of what your customers want and need because of the conversations your online community affords? Has this helped you make better short- and long-term decisions about your company? Has this affected your bottom line?

Facilitating Collaborations

Does your online community save you time, if you use it to work with collaborators? Does it improve the quality of your collaborations? Reduce information loss?

Saving Money on Postage

Is your online community more or less cost-effective than paper and postage, if you use it as a dissemination point for newsletters or to conduct surveys?

Increasing Site Traffic

Does member-generated content (review of your products and services, Q and A) draw significant page views , providing you with an additional point of visibility?

Reducing Customer Service Costs

Do you reduce your customer service costs (time, long-distance telephone charges, postage) by providing this service via your online community? Calculate how much per month! Anecdotally, I figure that this saves me $50 to $100 per month in telephone, photocopy, and postage costs with one of my clients. My online availability through a free Web site messaging service, humanclick.com, has garnered me two new clients whom I never would have known existed otherwise! They were surprised by my availability and willingness to help.

Like trying to value the benefits of public relations activities, measuring the ROI for an online community is part science, part art, and part magic -- at best. But keeping the issues top-of-mind might help you do what you do a little bit better. Good luck!


Participate.com white papers (You can reach the following and other articles by registering free of charge on the whitepapers home page):

  • Participation: Bringing Net Markets to Life
  • Return on Community: Proving the Value of Online Communities in Business

contact us

Full Circle Associates
Seattle, Washington, USA
(206) 517-4754

© 1999-2006 Full Circle Associates - content
© 1999-2006 WWCoCo New Media - design and graphics