{"id":5517,"date":"2013-10-03T15:00:00","date_gmt":"2013-10-03T19:00:00","guid":{"rendered":"https:\/\/www.wework.com\/creator\/?p=2656"},"modified":"2020-03-30T23:22:04","modified_gmt":"2020-03-31T03:22:04","slug":"roi-community","status":"publish","type":"post","link":"https:\/\/www.wework.com\/ideas\/professional-development\/roi-community","title":{"rendered":"The ROI of community"},"content":{"rendered":"<p><a href=\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2013\/10\/community.jpg\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-2701\" alt=\"community-inspiration\" src=\"https:\/\/www.wework.com\/ideas\/wp-content\/uploads\/sites\/4\/2019\/06\/community.jpg?resize=640%2C356\" width=\"640\" height=\"356\" \/><\/a><\/p>\n<p>One of the most common push-backs on investing in a community manager is the uncertain return on investment. Why hire for community when you could hire an acquisition marketer &#8212; particularly given that <a href=\"http:\/\/adage.com\/article\/cmo-strategy\/coca-cola-sees-sales-impact-online-buzz-digital-display-effective-tv\/240409\/\">the ROI on social media is next to none for sales<\/a>? It\u2019s pretty easy to ignore high churn rates when investors are just looking for hockey stick growth \u2026so said the slowly dying, cash-burning startup.<\/p>\n<p>But really, how do you measure the ROI of community? Keeping in mind that <a href=\"https:\/\/www.wework.com\/creator\/knowledge\/difference-community-management-social-media\/\">one of the major goals of community is retention<\/a>, consider these facts:<\/p>\n<ul>\n<li>It costs 80% less to retain a customer than to acquire a new one.<\/li>\n<li>Increasing customer retention rate by 5% can increase profits by up to 95% over the long-term (<a href=\"http:\/\/hbswk.hbs.edu\/archive\/1590.html\">HBS<\/a>).<\/li>\n<li>Increased engagement on community sites can result in up to 25% increase in revenue (<a href=\"http:\/\/www.msi.org\/reports\/social-dollars-the-economic-impact-of-customer-participation-in-a-firm-spon\/\">MSI<\/a>).<\/li>\n<li>Friend recommendations are the number one influencing factor in purchase decisions (<a href=\"http:\/\/www.amazon.com\/dp\/1118336038\">Brand Advocates<\/a>).<\/li>\n<\/ul>\n<p>Perhaps the ROI on community isn\u2019t so uncertain after all. For companies with revenue models and digital businesses, consider the following hypothetical scenario:<\/p>\n<p>WidgetSquare, a well-funded, new\u00a0monthly subscription service for widgets, sells subscriptions for $10 per month. As of September 1st, they have 1,000 paying users. All growth is driven by acquisition marketing for which they have a $10,000 monthly budget and a constant return of 40%. However, WidgetSquare\u00a0churns 30% of their users each month. WidgetSquare\u00a0also has an on-site content forum on which 5% of users engage and most users visit to learn about and troubleshoot for widgets. As expected, they saw net 10% user and revenue growth in September.<\/p>\n<p>Looking to increase retention and lower acquisition costs, WidgetSquare\u00a0hired a community manager to begin October 1st. Everything went perfectly, and WidgetSquare\u00a0saw the following immediate results by November 1st (<a href=\"https:\/\/docs.google.com\/a\/weworknyc.com\/spreadsheet\/ccc?key=0Av-5afLmFKMIdDlMa0xFUDRvNC02OEJJZEpaVHNFa0E&amp;usp=sharing#gid=0\">follow along with the calculations here<\/a>):<\/p>\n<ul>\n<li>Participation on the forum increased to 9% and visits skyrocketed. This correlated with an 40% decrease in churn to 18%.<\/li>\n<li>All of the users were extremely happy and shared with friends. This resulted in a 10% successful referral rate which decreased the average cost per new acquisition from $25 to $18.18.<\/li>\n<li>Due to the increase in retention and the user referrals, WidgetSquare&#8217;s\u00a0user and revenue growth increased 32%.<\/li>\n<li>New support resources on the forum eliminated the need for full-time support staff, which allowed WidgetSquare\u00a0to allocate resources towards hiring a junior front-end developer.<\/li>\n<\/ul>\n<p>These numbers must convince you that community was a worthwhile investment for WidgetSquare, no? In reality, the investment in community takes much longer to realize (usually 3-6 months), and the measurement of ROI is not so cut and dry. This is just one way, specific to an e-commerce business, to measure the impact of community. To measure the ROI of community for your company, identify which metrics community impacts and how that relates to the bottom line.<\/p>\n<p>For example, if you&#8217;re a UGC content site that&#8217;s driven by advertising dollars, pay attention how community efforts impact content contributions and page views. If you&#8217;re a marketplace, pay attention to how community efforts impact volume of supply listings. And, so on.<\/p>\n<p>It must be noted, however, that there are two additional returns from investing in community that cannot be so easily measured: happiness and loyalty.<\/p>\n<p>The relationships that users develop with each other can extend beyond your community to offline best friendships or in some cases, <a href=\"http:\/\/startupgrind.com\/2012\/02\/exclusive-airbnb-creates-its-first-marriage\/\">even to marriage<\/a> &#8212; and those types of relationships have significant impact on one\u2019s day-to-day happiness. As for your company, a loyal user base will stick with you throughout your ups and downs from bad press to bad quarters. These two returns are potentially more valuable than any monetary ROI.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>One of the most common push-backs on investing in a community manager is the uncertain return on investment. Why hire for community when you could hire an acquisition marketer &#8212; particularly given that the ROI on social media is next to none for sales? It\u2019s pretty easy to ignore high churn rates when investors are [&hellip;]<\/p>\n","protected":false},"author":923,"featured_media":33639,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[43902],"tags":[],"class_list":["post-5517","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-professional-development"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.4 (Yoast SEO v25.3.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The ROI of hiring a community manager<\/title>\n<meta name=\"description\" content=\"Why hire a community manager when you could hire an acquisition marketer? 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