- What Is a Social Business?
- What We Can Learn from a 9 Year Old
- The 5<sup>th</sup> Revolution in Mass Communications
- Harnessing Advocates to Create Community
- It's All About Your Advocates: Program Dynamics and Strategies
- On Developing a Social Business Strategy
- How to Develop Meaningful Metrics and ROI
- The Elusive Question of ROI
- Final Thoughts
The Elusive Question of ROI
To sustain corporate investment and top-down support of social media initiatives, we often need to reveal and clearly articulate positive business outcomes. Not coincidentally, positive business outcomes are most often tied to positive customer outcomes as well, where it can be demonstrated that customers are actively engaged, creating and receiving value, and ultimately more satisfied with your company operating as a social business than not.
However, even though positive customer outcomes and other interesting measures such as “reach” can be correlated to business outcomes, they can only be considered precursors to ROI—not a measure of ROI itself.
It should not be inferred that metrics other than ROI are not important to measuring impact to the company—they are. In addition to representing the mix of characters, themes, and subplots that develop your ROI story, even on their own, different internal stakeholders have different interests and uses for different metrics. This is a salient point: We need to provide the right metrics to the right audience.
For simplicity, we can segment audiences into three groups with different metrics requirements. Community managers are likely interested in media metrics, such as members, clicks, active visitors, top content, and contributors, whereas business managers are likely interested in customer metrics, which might include measures of community effectiveness, knowledge harvesting, and insights on the voice of the customer. Mention success in any of these areas to executives and you might be greeted with an initial curiosity, but that will quickly change to some form of, “So what?” Executives simply want to know how all the time, money, and company resources you are pouring into this unfamiliar concept called “social business” is paying off in terms that are meaningful to them—KPIs like customer loyalty, retention, and importantly, ROI.
ROI is a financial measure—it’s all about the P&L—and should be interpreted only as such. For example, measures of customer satisfaction (CSAT) are critical for understanding the health of a business, but improving CSAT does not explicitly spell ROI unless you explicitly create a financial correlation between the two. Sure, we can assume that improving CSAT is good for business and likely equates to some amount of revenue retention or increase, but executives will want to know how much you invested to improve CSAT by X percent and how that X percent equates to dollars. When thinking about ROI, think in terms of the P&L.
Let’s look at one of the more popular approaches to developing an ROI story for customer support.
Case deflection is among the most-practiced measures of ROI, especially in technology companies with established communities. Oddly enough, this is essentially a measure of something that MinionPro-It'>didn’t happen. I touched on this concept earlier—some companies (not Zappos) try to measure the effectiveness of their communities in terms of reducing the amount of incidents opened with their call centers, which can be explicitly equated with cost-savings, and therefore, ROI.
There are at least two approaches to measuring case deflection. The first works to understand the impact of a new community or initiative on the volume of support cases. Generally speaking, the idea is that you launch a new initiative, wait for the impact, and then simply compare pre-and post-incident rates. If your incident rate drops after the launch of your community, there might be a correlation between the two. The problem is that you need to be patient while you wait for results to trend over time, but even more problematic, is that other organizations or initiatives could be responsible (or even claim responsibility) for your apparent success.
A more reliable measure of case deflection-based ROI has to do with obtaining direct feedback from customers who have indicated their support question was resolved in the community. To some, understanding the community’s resolution rate might spell ROI, but it’s only assumed ROI unless we make a direct correlation. That’s why we need to determine whether the customer would have opened a support incident if it were not resolved in the forum. This type of information is almost always obtained through a simple, two-question survey:
- Did you resolve your issue in the community?
- If yes, would you have opened a case otherwise?
These simple surveys either “pop up” during the community session, or they are e-mailed to the customer after the session. And survey best practices apply—it’s important not to inundate the same customers with the same survey on repeat visits (which is one of many reasons why customers should be encouraged to engage in auditable channels where you can track activity, contact history, and more). Remember that not every visit needs a survey. As with most surveys, it’s important to accurately gauge sample size to reflect the impact of your entire population. I’ve observed many companies using a confidence level of 95 percent (also the standard in most quantitative research) with a margin of error of 5 percent. (These two boundaries equate to a statistically significant sample size of 370 respondents for a population of 10 k.)27
Cisco recently reported cost-savings due to case deflection of nearly $10 M over a 12-month period ending in January 2014,28 and that ROI is expanding as the community gains momentum noting that cost-savings increased 48 percent over the last two quarters alone. Although Cisco has been reporting ROI from its various support communities for years, its recent success is the result of a new effort to change the way its engineers not only collaborate with each other, but also how they share valuable content with customers, all in the same channel. The 2-year-old community is called Tech Zone (built on the Lithium Technologies platform) and was recently recognized as the winner of the 2014 Groundswell Award for Employee Empowerment. As word of the community’s success has spread, many different groups within Cisco are organizing to empower their engineers, connect them with customers and reap similar benefits, while their vast partner community and more and more customers are taking notice.
However, just because Cisco sees ROI in case deflection, it doesn’t mean that’s necessarily the right metric for everyone. If you remember our Zappos conversation, case deflection would likely be considered negative ROI by the likes of Tony Hsieh, as he views each customer contact as a moment of truth for both selling and relationship building. There are many methods to evaluate the effectiveness and value of your social media implementations—from metrics that describe the initiative’s effectiveness at repurposing content, to describing how social can lead to a better understanding of the voice of the customer. But when it comes to true measures of ROI, it makes sense to correlate outcomes with tangible financial results—noting how your initiative has generated revenue or saved costs.