Mission Possible: Quantify the value of your community!
Mission Possible: Quantify the value of your community!
Hi there!
Welcome to the July edition of Community Assemble.
In our latest edition, we will be talking about how you can actually measure the value of your community!
Being able to measure the value you provide to your members is very important. When we do not measure value, retention becomes difficult and people will not stay in your community, eventually driving them to drop out of the community.
1. What I mean when I say it’s possible to quantify!
Communities are usually measured in more qualitative forms as it is not easy to quantify the value of a community. But here’s my take on how we can measure and quantify the value of your community!
Firstly, community values can be conceptualized at two levels - one, the individual level that focuses on members’ personal values, connections and commitments to one's community. Two, at the community level that reflects the overall shared values and norms in the community.
You should definitely preach about your community in value-based terms because ultimately, your community must have to do one of three things.
Increase sales.
Minimise costs.
Achieve your objective of forming the community (non-profits).
You need to understand which of the above three you want to achieve through your community. Once you define and understand this, you will be able to automatically define the values of your community.
For example, if you're building an internal online community, you need to talk about how it increases productivity, increases creativity or improves loyalty toward the company. This can all be connected to the first 2 goals i.e. cost reduction or increase in sales.
2. How do you measure the value of your community?
The primary thing to keep in mind is, never depend on a single metric for measuring the value of your community. They can be wrong and it is never good to rely on a single source for such an important aspect.
For example, if someone says that the community provides them great value but you see minimal engagement and all of them made by very few contributors, that is a bad sign. You may also see a lot of engagement but mostly through seeded content, then the measurement will not be accurate.
So it is always good to implement different metrics and then combine a few together to get greater results.
3. Methods to calculate the value of a community:
Typically, any organization will always conduct an analysis on a full set of data that reflects and shows the ROI directly. But in the case of communities, their nature of complexity makes it difficult to procure 100% accurate information. In such cases, we use indirect yet efficient quantifiable methods to determine the value of your community.
Proxy metrics
A proxy metric is the closest related data that represents or is a “proxy” for direct data points. A proxy metric is indirect data that helps when you do not have direct data that you can use to measure.
A classic example is when you use social media engagement rate and impression as a proxy metric to calculate your ROI. If in Twitter you get a certain amount of comments, re-shares or engagement this is translated to a metric that reflects the number of potential customers or leads. The higher the engagement or followers, the more lead generation.Even in the case of websites, we can use the number of visitors or open rate as data points to analyse the number of purchases. For example, you can take an average percentage of visitors who will convert into customers (depending on the business).
Changing one variable and measuring the impact
This is a process that works well, especially with larger communities that have different customer segments. In this process, you change one single variable in a bigger static ecosystem to see if it makes a change and measure the reaction. For example, if you want to understand how one customer segment makes a difference in the community environment, you choose that particular segment and isolate it from the community and analyse the reaction and impact it creates in terms of ROI.When this experiment is conducted using strong statistic standards, it is a great method to understand the cause-effect nature of the community business values. It helps you discover how the community is providing benefits that the company wishes to seek.
Sampling
Sampling is a process used in statistical analysis in which a predetermined number of observations are taken from a larger population. The methodology used is a sample set from a larger population depending on the type of analysis being performedThe sampling method is used when it is impossible to study the entire set of members. Usually, in sampling, we can calculate the value or ROI by analysing the behaviour of a smaller selected subset that is called the “sample set” which is usually chosen from the community based on some criteria. It is usually performed for a fixed period of time to get accurate results.
Direct analysis
The most accurate method to measure the value of a community is through direct analysis. This is usually possible when you have access to the complete set of data of each member and their behaviour (such as engagement, likes, contributions, and sessions per user). Once the complete data set is available you will not have the need to rely on the other indirect methods such as proxy metrics, sampling or variable withholding.
When the complete data set from the community is available, it becomes super easy to measure variables individually, get accurate results and understand different unique aspects of each variable.
Getting access to the entire data set is usually difficult, hence it is very important to choose the right community platform. While there are a plethora of platforms available in the market, choosing one that allows you to access member data and provide the right metrics is crucial.
Direct analysis is by far the most accurate method for measuring the value of an online community.
Community-qualified leads
Much like your SQL(sales qualified lead), a CQL is a community-qualified lead. A CQL uses community engagement as a method of qualifying leads.
When you have a member in your community, being able to analyse and extract the top contributors, their participation levels, number of posts and their engagement in the community helps you understand and gauge who can be a potential lead in your community.
CQLs are a great method to directly measure the business value of your community especially if your company is more focused on customer acquisition.
If you found the concept of CQLs interesting, Mary Thengvall is the author of The Business Value of Developer Relations which helps you understand the concept of community-qualified leads (CQLs).
Calculating the customer lifetime value
The customer lifetime value (CLV) is a simple formula that gives you the total a customer is likely to spend with the company during their lifetime. This is calculated by using the following formula:
CLV = ((T*AOV)*R)*AGM)T - is the number of transactions
AOV - the average order value
R - the average retention rate
AGM- the average gross margin
Source: Feverbee
These are the different methods you can use to measure the value of your community
Try different things. Keep experimenting and try validating them.
Each community is different and will have its own unique aspects that you should measure. Don’t get pressurized into using the standard metrics that are followed by everyone, understand and implement what suits your community the best.
Do share – we’re all in this together as a community! So I would love to know your thoughts on this and which methods worked for you!
Snippets of the week:
“Metrics only tell a little bit of the story. Internally, you need to go build the rallying cry to make sure everyone understands how this community rolls up into other initiatives that you’re working on.”
“One of the things we start with is what’s the outcome of what we wanted to do. Because there are tons of things we can do within the online community, what outcome will we drive? How will we measure the effectiveness or that we had an impact?”
“If I asked you how much your community is worth, could you tell me? Most community managers can't. If you're not getting the attention or support you need, it's your fault. You're not properly establishing the value of your community”.
- Richard Millington
More perspectives on measuring the value of communities:
Establishing The Value Of Online Communities, Richard Millington
Adding Value with Online Community, Social Media Today
Turning Efforts into Impact: Measuring Your Online Community’s Value, Jeff Breunsbach
Measuring the value of online communities, James Franklin, Michael Mainelli and Robert Pay
How to Measure the Business Value of Your Community, Mathijs Vleeming
July Trivia:
Did you know that there's a day dedicated to celebrating the value of emojis in day-to-day communication? Yes, we are happy to celebrate the upcoming “World Emoji Day” on the 17th of July!
#FunFact:
Source: Twitter
As a community manager, I have felt that emojis have been a saving grace, especially for content that can get too technical and boring. Nothing like a good emoji to lighten the mood!
This emoji reflects how we intend to keep our week going!
You saw our favourite ;) Do you have a favourite emoji that you often use in your community? Let us know in the comments below!