Why Calculating the ROI of Customer Engagement Matters

Engagement is one of those intangibles increasingly important to the economics of digital commerce. But it is also one whose dimensions are becoming more complex the more researchers unravel its component factors.

As ecommerce becomes more widespread - and thus less of a differentiator as well as more central to future growth, the degree to which the nature of customer engagement can be measured may determine the financial prospects of the enterprise. JL

Rachel Happe reports in Harvard Business Review:

The average (digital) community is achieving estimated engagement rates of 50% lurkers, 23% contributors, and 27% creators (in 2016). Engagement is a set of behaviors, not a switch. It needs to be calibrated to business goals to be effective. (And) engagement behaviors are progressive. As individuals get more comfortable and connected to the social environment in which they are engaging, they will exhibit more complex engagement behaviors.
We know that customer engagement matters. Yet much of our thinking about engagement remains simplistic. Most current definitions of engagement are bimodal – someone is either engaged or they’re not. But this is a limited view that hampers our ability to manage engagement in meaningful ways.
A more sophisticated understanding of engagement allows community managers to effectively influence and change it, and even to calculate an ROI for engagement.
Community management is the discipline of building technical and social environments in such a way that individuals can easily organize and collaborate to achieve an objective. And what good community managers have learned is that, first and foremost, all engagement is not the same. There are a number of behaviors within the broader umbrella of engagement that need to be understood and measured in order to impact them. Engagement is a set of behaviors, not a switch. It needs to be calibrated to business goals to be effective. Second, engagement behaviors are progressive. As individuals get more comfortable and connected to the social environment in which they are engaging, they will exhibit more complex engagement behaviors.At The Community Roundtable, we’ve worked to define these engagement behaviors in enough detail so they can be measured and addressed through community management. We call this TheCR’s Work Out Loud framework and it includes the following behaviors:

• Validate Out Loud includes liking, sharing others’ posts, commenting, bookmarking or responding to posts. This is often the first visible behavior beyond consuming that people exhibit and is the equivalent of dipping their toes in the water to feel how warm it is in order to assess whether the social environment is comfortable.
• Share Out Loud includes sharing documents, graphics, updates and ideas. People tend to start with sharing content that has been written by someone else or approved and as they feel validated and connected, will start to share their own observations and ideas.
• Ask and Answer Out Loud includes asking and answering questions. Individuals tend to start with logistical questions (“where can I find x?”) and if they find the culture to be validating, supportive and trustworthy they will evolve to asking deeper questions that expose a gap in their knowledge or confidence (“what is the best way to manage a customer situation?”).
• Explore Out Loud includes open-ended questions or questions about ambiguous topics where there is no right or known answer. This requires individuals to feel like the community culture is both supportive and challenging, making it a safe space to explore, admit vulnerability and share half-baked ideas. This stage is where rich collaboration and innovation lies.

This model helps community managers measure the culture in their community or network and then apply management techniques that prompt and move each segment of their community to adopt more complex engagement behaviors. For example, a customer support community may be getting a lot of views and likes, but very few questions or answers. To address this, the community manager may redesign the home page to highlight a question box and also design a weekly newsletter that highlights unanswered questions. This focus on asking and answering questions will trigger community members to exhibit more of that behavior.
By understanding what kind of engagement is in play, community managers can significantly impact both how much the community engages and how much value is generated. In 2006, Nielsen published the still oft-cited 90-9-1 rule of engagement, that says you can expect a community or network to have 90% of its members lurking/reading, 9% contributing and 1% creating. What we’ve found in our research is that while that rule can still be applied to large social networks, it is outdated for well-managed communities. In 2016, the average community is achieving estimated engagement rates of 50% lurkers, 23% contributors, and 27% creators, according to our 2016 State of Community Management research.
While all of this is helpful, it still doesn’t define engagement in terms of a quantifiable financial value. To do that, we focus on the engagement behavior that generates the most value – answering questions. While communities are applied to many different, complex use cases, at their core they are about enabling people to connect with a network of peers to get information directly from each other, instead of going through a formal structure. That information sharing is prompted by a question-and-answer dynamic in every community – no matter its use case. This is where we start to formulate a ROI for engagement.
When we think about the value of answers there are two categories:

• Value of the Answers: There is immediate, incremental cost savings of not having to manage and route the question to the appropriate person and assign them to the task of answering (i.e. overhead cost savings) as well as the value of capturing answers that never would have been asked in more formal channels.
• Networked Value of the Answers: The geometric value of making an answer available to the entire community forever (i.e. cost avoidance, productivity and opportunity identification)

To calculate the ROI of engagement, you include the cost of generating that engagement – all of the program expenses (like software, content/programming and staff) related to community management or culture change:

One challenge in looking at the ROI of engagement over time is that in new communities and networks, asking and answering does not happen right away. Most individuals need to feel comfortable and connected before they are willing to ask a question that might make them feel vulnerable. This means there is a lot of work for community managers to do to prime the culture of the community so that people do feel comfortable and connected. For this reason, the ROI of engagement is typically negative until the culture supports and rewards regular asking and answering.
Once the culture supports asking and answering, the floodgates of value open up and typically the value curve becomes geometric as both more people answer and more people come to the community looking for answers.
We’ve seen this firsthand in our work with the H&R Block community.
Started as a community of practice — a community focused on sharing expertise and learning — the H&R Block community evolved to a highly effective and widely utilized client self-service resource, where we could calculate in financial terms the geometric growth in value that communities theoretically generate, but is seldom reported.
In its first year, the community did not pay for itself yet because membership and activity was just beginning, but the number of members and quantity of accumulated knowledge was growing rapidly. As membership grew and we worked to make the community more supportive and constructive, more people began asking questions — and getting good answers. As more of those discussions and content elements were captured, more and more people were able to find answers by searching rather than asking directly — creating a positive feedback loop of value.
Four years in, the community is producing amazing results and has become the go-to resource for people looking for tax support. That helps H&R Block extend its brand presence by offering trusted support and access in a way they never could before.
Looking at engagement through its most valuable behavior — asking and answering — can help make cultural maturity more visible. If the culture of your employee community or customer community is not encouraging and rewarding this behavior, you could benefit from a more structured approach to community management.