Here is Part 1. You can download the full PDF version here.
The ROI on CDM
Measuring the value of community or blogging is not easy. Connecting the dots between how someone feels and ROI in dollar terms is not straightforward.
There are a number of ways for you to look at the return on your CDM investment.
One possibility is to use the NetPromoter score. NPS is the brainchild of Fred Reichheld, author of The Loyalty Effect 
, which is outlined in his latest book The Ultimate Question .
As Fred writes:
NPS is based on the fundamental perspective that every company’s customers can be divided into three categories. "Promoters" are loyal enthusiasts who keep buying from a company and urge their friends to do the same. "Passives" are satisfied but unenthusiastic customers who can be easily wooed by the competition. And "detractors" are unhappy customers trapped in a bad relationship.
Customers can be categorized based on their answer to the ultimate question.
The best way to gauge the efficiency of a company’s growth engine is to take the percentage of customers who are promoters (P) and subtract the percentage who are detractors (D). This equation is how we calculate a Net Promoter Score for a company:
P – D = NPS
A second alternative is to use an approach derived from The Balanced Scorecard. In this model, you look at various Key Performance Indicators (KPI’s) to ascertain the health of the initiative.
Not every initiative will have the same KPI’s, you need to figure them out at the beginning (and adjust as necessary), but there are some that give you some insight.
Since we started with the story of Curtis Takahashi, we will examine the work for my client, Dan Pink, and his book, The Adventures of Johnny Bunko: The Last Career Guide You'll Ever Need .
The top line metric is sales of the book. Unfortunately, we cannot easily track the number of sales of the book following Curtis’ “Bunko Breakfast.”
However, there are other things that tell us the “health” of the business.
For example:
- Number of RSS subscribers to the blog -the highest source of permission. People who voluntarily request content on a daily basis
- The mailing list Permission Asset-those who have signed up for the Bunko newsletter of anticipated, relevant information from Dan/Bunko
- Facebook Bunko Group-a measure of potential Raving Fans
- Loyalty-as measured by Google Analytics. Do we have a healthy mix of return visitors and new blood coming into the site?
These may or may not be the best metrics. They are KPI’s indicating the direction and growth of the community of Bunko-maniacs…and a leading indicator of future sales.
A third alternative is to use a model based on Frequency, Reach, and Yield. This model was developed by Olivier Blanchard. He suggests looking at the following (He talks about social media. I have extended it to CDM)
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Frequency and Feedback
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Frequency of Touches-how often do you have a dialogue with your community
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Frequency of Transactions-how often does your community make a purchase
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Reach
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Breadth-how many net new customers have you acquired via your CDM efforts
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Depth-do your current customers buy more of your product portfolio as a result of your CDM efforts
- Yield
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Does the average dollar per transaction increase for those involved in your CDM efforts
No matter how you measure it, your biggest investment is going to be in person-power and time. Someone (or multiple people) have to do the work of identifying, cultivating, and activating.
Still, the cost of a community manager versus the benefits (no matter which method you use), if done correctly, can yield measurable (and outsized) returns.