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Making Leaders Successul Every Day

Jne 30, 2009

The ROI O Online CstoerSerice Conitiesb Natalie L. Petoho, Ph.D.

or Bsiness Process & Applications Proessionals
http://www.forrester.com/

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2009, Forrester Research, Inc. Reprodction ProhibitedJne 30, 2009

The ROI O Online Cstoer Serice Conities

For Bsiness Process & Applications Proessionals

2

ORGaNIzaTIONS VeNTuRe DOwN THe SOCIaL COMPuTING PaTH FOR CuSTOMeR

SeRVICe

Online communities, a collection o people who want to share their knowledge, perspective,

and solutions, have evolved and grown over time.1 Now, mainstream companies like AlterPoint,

DIRECV, Inusionso, Intel, iRobot Verizon, Lenovo, Linksys, Logitech, NetApp, and Sage

Soware are using communities or customer service (see Figure 1). Tis partial list may give the

aint o heart a reason to consider using social technologies, but it alone doesnt answer the question,

Whats the ROI?

As social technologies have become more visible, more companies want to understand what their

peers have done.2 Tey want to know what advantages online communities provide to customer

service over traditional interaction channels. Some companies have been supporting communities

with inormal budgets and borrowed resources and would like to justiy the investment. Customer

service proessionals want to understand the business justication or emerging social media i.e.,how it will aect customer service experiences and their rms bottom line.3

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2009, Forrester Research, Inc. Reprodction Prohibited Jne 30, 2009



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Figr 1 Soe Copanies That Hae Deploed Cstoer Serice Online Conities

Source: Forrester Research, Inc.48002

Company Customer service online community

B2C companies that have deployed online customer service communities1-1

Verizon http://forums.verizon.com/vrzn/ Peer-to-peer support in which users help otherswith residential, wireless, and SMB productsand services

iRobot http://irobothome.lithium.com/irobothome/

Useful information; discussion of products, theever-changing world of robotics, and sharingstories

Lenovo http://forums.lenovo.com/lnv/ Users to share experiences and expertise in ahigh-quality atmosphere

Linksys/Cisco http://forums.linksys.com/ Users and customers to exchange ideas, tips,

information, and techniques related to theservices

Logitech http://forums.logitech.com/logitech Colleagues to increase eciency, answerproblems, heighten knowledge, and supportinnovative product usage

Palm http://forums.palm.com/palm/ Customers to discuss support topics, learn, andpost questions, as well as answers

SanDisk http://forums.sandisk.com/sansa/ Users to gather as a community to sharethoughts, ask questions, look for answers,give suggestions, and learn

SeagateTechnology

http://forums.seagate.com/stx/ Sharing ideas, tips, questions, answers,experiences; getting technical support

Sprint http://forums.buzzaboutwireless.com/baw/

Wireless enthusiasts and customers to helpeach other in using wireless products andservices

Symantec http://community.norton.com/norton/ Customers and employees to discuss productsand topics, from system tuneup to scrubbingmalware from PCs

DIRECTV http://forums.directv.com/pe/index.jsp Getting help with technical questions,from system setup to features on the remotecontrol

Community provides a place for . . .

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Figr 1 Soe Copanies That Hae Deploed Cstoer Serice Online Conities (Cont.)


Intel http://communities.intel.com/index.jspa Sharing, collaborating, and innovating withindustry technology enthusiasts

SAP https://cw.sdn.sap.com/index.jspa Enabling collaboration between SAP, itscustomers, and its partners to accelerateco-innovation

AlterPoint https://alterpoint.helpstream.biz/ Self-service, asking questions, and sharing

answers

Pitney Bowes http://forums.pb.com/ptnb/ Discussing issues related to equipmentand to mailing and marketing business ingeneral

Infusionsoft https://infusionsoft.helpstream.biz/ Networking online, getting connected, andsharing and growing your business

LANDeskSoftware

http://community.landesk.com/support/index.jspa

Collaboration with experts, to share ideas andnd solutions

NetApp http://communities.netapp.com/index.jspa

An open forum for technical experts around theworld

NationalInstruments

http://decibel.ni.com/content/community/zone

Collaborating on code, sharing developmenttechniques, and learning about cutting-edgetechnologies via a global community ofengineers and scientists

B2B companies that have deployed online customer service communities1-2

Company Customer service online community

(ACT!)Sage Software

http://community.act.com/sage/ All users of ACT! to share, learn, and supporteach other on a broad spectrum of topics

Community provides a place for . . .

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FOuR FaCTORS DeTeRMINe THe ROI OF ONLINe CuSTOMeR SeRVICe COMMuNITIeS

While it is not possible to calculate a precise ROI or the use o social media or customer support

or every scenario possible, knowing whether the business impact o customer service online

communities is positive or negative goes a long way to legitimize the investment in social media.

o put a stake in the ground, Forrester interviewed more than 20 companies, experts, and vendors

to learn about a range o deployment actors. With that inormation and a simplied version o

Forresters otal Economic Impact (EI) methodology, we built a model to determine the impact o

social media on a company with a small to medium-sized contact center.4

Our initial investigation shows that the model will also work or companies with larger contact centers

(i.e., large call volumes) and that the benets all into similar categories as the small call volume centers.

Some o the assumptions or large centers must be adjusted or actors that only very large volume

centers experience; even so, the benets regardless o the size o call volume are direct and

continue to grow over time as the community grows.5

Using our EI methodology, companies cancalculate the impact o social media on their businesses (see Figure 2).

Te EI metholodogy provides a road map to systematically consider:

1. Benets. How will your company benet rom customer service online communities?

2. Costs. How much will your company pay, both in hard costs and resources, or customer service

online communities?

3. Risks. How do uncertainties change the total impact o customer service online communities on

your business?

4. Flexibility. How does this investment in customer service online communities create uture

options or your organization?

Figr 2 Forresters Total Econoic Ipact (TEI)


Total

EconomicImpact(TEI)

Flexibility

Benefts

Costs

R

isk

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Ky Bnts: Rdcd Cost To Srvic Cstomrs

Organizations implementing customer service online communities can expect a range o benets that

stem rom reducing the cost to serve customers and more eective use o sel-service channels. Te

scale, timing, and duration o these benets can be estimated by considering key metrics and the value

to the organization o improving those metrics over time (see Figure 3). Benets might include:

Reduction in agent-assisted interactions. Rather than engaging with a contact center agentvia the phone, or instance, a certain percentage o customers may resolve their issues in the

online community with no or little interaction rom your company. rends show that call

volumes decrease aer the deployment o the community. For instance, customers in a laptop

community ound answers to questions in the community to be more current and more

accurate than what customer service agents might have access to. Tis is in part due to the act

that many o the product use type questions arent known to the company, thus arent part o

the standard knowledge base or FAQs. Super users in the community oen are the ones thathave the product expertise to solve some o the most dicult customer questions.6 Te value

o call defection can be measured by looking at call volumes beore and aer the community

is deployed; the savings are measured by multiplying the cost per call by the number o calls

defected.

Increase in rst-contact resolution (FCR). FCR is when the customers inquiry or issue is solvedin one contact, i.e., the customer doesnt recontact the company regarding the same issue. FCR

is an important metric because its an indicator o customer dissatisaction, their propensity to

repurchase, as well as higher operational costs. Te savings rom increasing FCR can be measured

by multiplying the reduction in the volume o repeat calls times the cost or a tier two agent.

Increase in agent productivity. Research shows that agent productivity increases with accessto the content in community postings. Te reason is that the traditional content developed or

knowledge management databases is based on known problems or customer issues and their

known solutions. However, research shows that more than 90% o customers issues havent

been unearthed, and the organization doesnt have answers or them.7 Tese exceptions lead to

long support calls, poor FCR, agent stress, and customer dissatisaction.8

Reduction in agent-assisted email. Te jury is still out on whether agent-assisted email isan eective support channel, providing experiences that gain and retain customers. In some

instances, it can be eective. A growing number o companies with customer service onlinecommunities are nding that they can replace all or part o their email support channel with

the community, and the result is much higher customer satisaction and rst-contact resolution

rates. Te savings rom reducing the use o the agent-assisted email channel can be measured by

evaluating the reduction in cost to process email.

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Increase in product ideation. Companies struggle with how best to conduct voice-o-the-customer studies and assemble that inormation into actionable tasks or all o the aected

departments in an organization. While its not traditionally the job o customer service to

provide product ideation, traditional customer service models shunt the dissemination o

the inormation that is gathered on a daily basis to say, product development engineers, as it

remains stored in the minds and case management systems o agents. As customers describe

their customer service and/or product-related experiences in community postings, they provide

critical inormation on how a product or service would be better i . . .

Increase in relevant Web site content and reduced search engine optimization (SEO) costs.Companies are seeking to increase their search engine optimization results in an organic way,

meaning they want to reduce the cost to obtain a higher ranking in search engines. Tis is based

on the consideration that search engine spiders and algorithms are based on relevancy rankings.

Te content in the community is more relevant than FAQs or knowledge base articles.9

Tis is,in part, because the voting/ranking systems oered by the community technology vendors allow

community users to vote on the relevancy o the content. I the content in the community

is voted on, search engines rank it higher. Tat way, when a client does a Google search, that

company community is more likely to show up higher on the search engine results page. Savings

rom implementing online social communities can be attributed to the reduced amount paid per

month or paid SEO.

Increase in customer retention and customer lietime value (CLV).When customers receivepoor service, they tend to stop buying rom that company. On the other hand, research shows

that community users are more satised customers, more likely to recommend products to

others, so their infuence is large and they are less likely to deect to competitors.10 In essencethey buy more, to the tune o up to 40%; they also buy more oen, and or longer periods

o time than noncommunity users.11 While there are a number o complicated ormulas or

calculating CLV, the benet o higher customer lietime value can be measured by multiplying

the number o community members by the increment in the amount they spend.12

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Figr 3 Eaples O Ke Benets O Online Cstoer Serice Conities

Ky Costs:Popl, Procss, and Tchnology Strtp and Rcrring Costs

Organizations implementing customer service online communities can expect the some startup

and recurring costs, detailed below, when deploying a soware-as-a-service (SaaS) social media

vendor solution. Although there are some on-premise community oerings, we only evaluated a

SaaS deployment. Te costs can be divided into three categories: technology, people, and process

management (see Figure 4).


Dimension Online customer service communities help by providing . . .

Reduce the volume of contactcenter calls

Eective self-service on the Web site

Increase rst-contact resolutionrates

User-based answers that have been proven to work

Increase agent productivity Better answers so that agents can answer more questions per hour

Reduce email as an interactionchannel

Better self-service on the Web site

Improve product ideation Voice-of-the-customer input to products and services forcontinuous, measurable improvement

Improve the Web sites searchengine optimization (SEO)

More relevant content for search engine spiders and algorithms

Increase customer lifetimevalue (CLV)

More loyal customers that spread positive word of mouth, buymore, and buy more often for longer periods of time

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Figr 4 Ke Costs O Online Cstoer Serice Conities


Project phase Key costs

Startup: technology Creating the skin for community to match the corporate Web site

Creating a user registration and sign-in procedure

Connecting the agent desktop and the knowledge managementsystem to the companys Web site and community

Evaluating and improving knowledge management and searchcapabilities

Integrating the community so that marketing has access to thecommunity and can participate

Integrating the community so that sales has access to thecommunity and can participate

Startup: people Project manager who oversees the community project

Community manager who is the operational owner of thecommunity

IT resources that oversee and coordinate the integration with thecompanys IT infrastructure and systems

Training for key personnel in community best practices

Startup: process Marketing and launch promotion for the community

Creating the community plan and developing community policies

Recurring: technology Yearly license fee for a leased platform (SaaS model)

Analytics package to measure key performance metrics

Reporting capability for analytics

Recurring: people Community moderator

Community owner who is the operational owner of community

IT resources for ongoing IT infrastructure support

Knowledge management manager to update KM content

Recurring: process Ongoing marketing and promotion to continuously engagesuper users and community members

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Tchnology Strtp Costs

Te technology costs are a combination o the community technology and upgrading your current

contact center or Web site technologies. Te ollowing represent typical startup technology costs:

Community Web site design. Tese costs are related to creating an initial skin or thecommunity pages so that they are seamlessly incorporated into the corporate Web site.

Depending on the complexity o the Web site, the points o integration, and whether it was

developed with open source or proprietary soware, costs will vary.

Community single sign-on (SSO). SSO provides a single sign-on or customers so that theydont have to remember multiple passwords. Te cost o SSO can vary depending on i it has an

active directory or security modeling.

Integration to the contact center.While the community is a new interaction channel or mostorganizations, it should be integrated with the other customer interaction channels to provideconsistent cross-channels experiences. Tere are initial costs or integrating the community to

the agent desktop, the knowledge management system, and the company Web site.

Integration to knowledge management/FAQs/search.Te advent o a community mayprompt a review o the current knowledge management (KM) capabilities. Depending on the

current condition o your KM database, the company may or may not incur some costs in this

category. Te addition o a community might be the time to upgrade your KM capabilities,

clean up knowledge base articles, and/or add advanced search capabilities like natural language

processing, or intent- or reasoning-based query technology to provide better search results.

Integration to the marketing management system. Integration o the community so thatmarketing representatives can participate depends on the community platorm you choose and

your marketing management system. Companies will want to treat the customer lie cycle to

include marketing, sales, and customer service as cohesive organizational assets versus siloed

departments with separate MBOs so as to increase CLV.

Integration to the sales management system.Integration o the community so that sales repscan participate depends on the community platorm you choose and your sales system. Because

customer service has become the new sales, companies must approach marketing, sales, and

service as an integrated capability to increase CLV.

Popl Strtp Costs

As with any technology deployment, the people part o the costs is as or more important than the

technology. You might have the right technology, but without the right people to deploy and use it, it

has little real value. Below are typical people startup costs:

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Training. raining on how to manage the community platorm, moderate, and participatein a community is critical to its success. Generally there are at least six people that need to be

trained: the community manager, the community moderator, I, the customer service director,

and at least two customer service agents.

Project manager. Te project manager oversees the design and implementation o the socialcommunity initiative. Te cost o his or her participation needs to be accounted or.

Community manager. Te operational owner o the community manages the community on aday-to-day basis, and the cost o his or her participation needs to be also needs to be accounted or.

IT support resources. Tese resources are responsible or integration with the companyscurrent I inrastructure and systems and providing ongoing support, as required.13

Procss Mngmnt Strtp Costs

Deploying social media means that some o the ways you currently do business are going to change.

Below are some o the changes or additions you will need to make to your current processes:

Marketing and launch promotion activities. Te initial launch o a community requiressubstantial promotional activities. Customers wont know that the community exists, its

benets, or how to use it unless you make this visible to them. Adoption o the community

is directly proportional to awareness. Promotional activities might entail sending email

messages, providing launch activities contests, giveaways, etc. You must budget or the cost o

promoting your community in the market.

Planning and policies. An organization must take into account that social media is new ormost organizations and people. Considerable eort must be placed around establishing the tone,

the culture, and the posting policies or the community. Firms also want to consider security

and privacy considerations. Rather than invent these rom scratch, work with the vendors who

have accumulated insights through supporting other communities that have burgeoned during

the past ve years.

Rcrring Tchnology Costs

In this particular model we looked at deploying a SaaS community platorm. ypical recurring SaaS

technology costs include:

Community platorm subscription ee. Te typical community platorm is leased under thesoware-as-a-service (SaaS) model, requiring a yearly license ee.14

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Premium analytics. Analytics is a necessary tool that is oen not part o the communityplatorm and must be purchased separately. Some customer service community platorm

vendors have created a relationship with an analytics company and provide a pre-integrated

analytics platorm. For instance, Lithium has a partnership with Ominture. nGeneras KB

tools include an ROI reporting component to help managers understand the cost o KB,

community utilization, and call defection and is developing a partnership with an analytics

company. Helpstream provides its own waterall analytics report package with its soware.

Reporting. Most community platorms come with a reporting unction. Check to understandwhat reporting capabilities come standard with your soware and additional costs.

Rcrring Popl Costs

Te success o a community depends a great deal on the leaders o the community. Below are some

o the recurring people costs to be expected when deploying a community:

Community manager. A community manager provides operational leadership, and the costs othis position need to be included in budgets or the ongoing running o the community.

Community moderator. Te community moderator duties range rom welcoming new users,engaging super users, ensuring that questions get answered, and enorcing community policies.

Knowledge management manager.Te current KM manager will need to take on someresponsibility or the content in the community. Te incremental cost or additional duties and

participation in the community needs to be accounted or.

IT resources. I responsibilities include maintaining the community and ensuring that it workswith the companys current I inrastructure and systems.

Rcrring Procss Mngmnt Costs

As with any business process change, there are ongoing costs that involve new or additional

processes. Below are the recurring process change costs:

Ongoing marketing and promotion activities. An online community requires ongoingpromotional activities. Tese are important to continue to build the community with new

members as well as to engage and keep super users enrolled. Tereore, budget needs to beestablished or ongoing promotion o the community to customers but also within the

company, as well.

Risks

Companies are struggling with all types o social media, rom blogs to communities, and or most

companies, it is uncharted territory. Although there are many companies that have had successul

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communities, the launch o a community not is without risk. It is important to consider some risks

when creating a business case, a strategy, or an implementation plan and schedule. Te risks to

consider include:

Reputation/trust risk. Part o the draw o a community is the transparency and authenticity othe postings.Companies must be ready ace public customer comments about their community

and not delete or edit all negative posts. Potential risks and exposure via online communities

are real; however, many o the vendors have thought through the risk actors and designed

their platorms with substantial capabilities to reduce risks. I a company doesnt deploy using

community best practices, it can end up with an unsuccessul community.

Implementation risk. Te No. 1 reason community plans are stalled/halted is because keyplayers (legal and corporate communications) werent involved rom the very beginning. Invite

I, eService, sales, marketing, CxO sponsors, legal, and corporate to your meetings. Use best

practices to create your community policies and make the community a shared, cross-unctional

responsibility.

Measurement risk. Without the right measurements, it is dicult to determine the health othe community or what corrective actions to take, and it may come up short o expectations.

Collectively determine your metrics, analytics, and reporting process to consistently measure

the right things and manage changes quickly.

Scale risk. I you are doing things right, your community could easily grow to millions ounique users within several years or aster. You dont want to start and then later have to stop

and revamp your community because it outgrew the platorms capabilities. Choose a vendorthat has grown communities with a platorm that can easily sustain your projected user base.

CaLCuLaTING THe VaLue OF ONLINe CuSTOMeR SeRVICe COMMuNITIeS

o arrive at a quantitative assessment o the economic impact o customer service online

communities, Forrester evaluated the key drivers o benets, costs, and risks or a hypothetical

organization considering implementing customer service online communities that:

Provide both phone- and Web-based technical assistance. In our example company,customers seek help about product and services theyve already purchased and have a greater

propensity to call a customer service agent than use the Web site.15 As such, a reduction in calls

would provide a reduction in the cost to serve customers.

Achieve indirect call defection and direct call defection. For our example, we consideredtwo types o call defection. In a direct call defection scenario, a customer goes online to the

community (instead o picking up the phone),posts a question in the community, and gets his

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answer via community responses. Te second and higher volume o call defection comes rom

indirect defections. Te ratio o super users to posters to lurkers is reerred to as the 1:9:90

community participation principle.16 Most people in communities are reerred to as lurkers

they visit the site and read the questions and answers, but dont post (ask questions). For instance,a lurker would choose to search on the Web site (rather than call the company) and nd the

answer to her question by reading what other people have posted.

Bslins and assmptions

For the purposes o this analysis, we established a set o baseline assumptions rom numerous

end user and technology vendor conversations. o apply the model to your company, you may

need to adjust some o the assumptions. Our hypothetical example company has the ollowing

characteristics:

Has multiple customer service goals to address through an online community.Our examplecompany was seeking to reduce call volume, to reduce support costs, to retain more customers,to participate in and redirect negative customer word o mouth, to increase the number o

online advocates, and to provide an overall better experience rom the customers point o view.

Is a small to medium-sized center. Our example company receives approximately 30,000calls per month. Te agents handle time is about our calls an hour with aer-call work time

included. Te burdened rate or a tier one agent is $20 per hour. Te company has 500,000

customers. Tere are about 400 new community threads per month (questions posted) and

10,000 community searches per month. Adjustments to the model must be made or call centers

with larger call volumes, threads, and searches.

Uses a three-year time rame or analysis.For our example company, the analysis considersbenets, costs, and risks over a three-year time period. Te startup period is considered to be

between Months 1 and 3. Te recurring period is rom three months and beyond. Changing

market conditions and technology may warrant urther adjustments to your own model.

Uses a ederated Web site search capabilities approach.We assume that the search on theexample companys Web site is ederated. Tis means that the community is set up so that when

a customer/customer service agent uses the search unction on the Web site, it returns answers

rom posts in the community, the knowledge base articles/FAQs, and the Internet.

Requires metrics and statistics or the community moderator and customer service director.Although many more metrics are required to understand and maintain a vibrant community, we

assumed that the community would be deployed with the ability to measure several key customer-

community interaction metrics. Tese are the number o : 1) user sessions per month (unique user

visits to the community per month); 2) new threads per month 3) threads marked as answered

by community members; and 4) answers marked as solved by community members.17

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Routes unanswered community questions to customer service agents.We assumed that i acustomers question could not be answered by either a moderator or the community members

within a specied period o time in the community it could be escalated to a customer service

agent. Tis implies that the community and the contact center technologies are integrated.

Allows customer service agents to have access to community answers.In our examplecompany, we assumed that customer service agents could search on both the knowledge

base/FAQs as well as community answers. And that having access to the community answers

increases the agents ability to solve more complex issues quicker and more completely. Tis

results in higher FCR, increases customer satisaction, and reduces the propensity or customers

to vent their displeasure at agents.

Enables customers using the community to nd answers they need or get help rom an agent.

Adoption o an interaction channel is related to customers perception that their issue will behandled. In our example company we assumed that customers were helped through the use o

the community and i not there, then by an agent.

Engages the community to stimulate product/service ideation.Our example company seeksto engage their community to improve customer service as well as provide new ideas. Tis

voice-o-the-customer (VOC) data would save product development, Q&A, manuacturing, and

production engineers time, energy, and costs, as well as acilitate bringing product and service

improvements to the marketplace aster.

Uses the community to provide more relevant Web site content or enhanced SEO results.Our example company seeks to increase its search engine optimization results in an organicway, meaning that in a Google search, or instance, the company would have higher rankings

without paying or placement. Tis is based on consideration that search engine spiders and

algorithms base rankings in part on content relevancy. Because users can vote or rank the

community content value, the search engines rank community content high.

Increases customer lietime value though positive word o mouth.Our example companyseeks to increase its customer lietime value, i.e., to increase customers propensity to spend

more with the company or longer periods o time based on improving positive word-o-mouth.

It assumed that customers who are engaged in a community make more recommendations to

other customers, spend more, spend more oen, and are more loyal.

Reduces the cost to market and sell products by taking advantage o community input.Our example company wants to use VOC data to create better products to lower the cost o

marketing and sales. Marketing with VOC data means that targeted marketing campaigns can

result in a higher lead-conversion rate. And the VOC data means that sales closer rates and

transaction values would also increase.

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evltion Tim Frm

Our analysis assumes that the project begins and runs continuously through Year 3. Tis time rame

includes the ollowing phases:

Investment phase. Tis phase, lasting one to three months, includes the upront monies to getthe project running. Tis phase includes internal planning, vendor, and product selection and

implementation and integration.

Initial benets phase. In Months 4 to 12, the organization will begin to realize benets romthe community. Te benets will most likely ramp up to a ull benet run rate at the end o this

phase. For the purpose o this analysis, the benet ramp rate is considered linear.

Full benet phase. During the remaining months o the analysis period, the organization will

likely realize the ull potential benet o the community, subject to the risk actors dened.Likewise, during this phase, operational costs will also remain, although likely at a reduced run

rate.

Onlin Commnity Dploymnt assmptions

Te example organization deploys a customer service community by placing a button on its Web

site, either on the home page or listing it on customer service pages on the corporate Web site. Te

company anticipates questions ranging rom technical support to questions about products and

services. We assume the company will experience:

A growing volume o customer participation in the community. Te example companyanticipates that the community will be staed by a moderator. A typical moderator review

process might be 15 minutes every 2 hours, rom 9 a.m. to midnight. Te company anticipates

an increasing number o community participants each month. During this time, the moderators

have secured and enrolled super users who are the main content providers.

Success with indirect call defection. In most communities, much o the savings comes romindirect call defection. In our example company, customers who visit the community can

oen nd an answer without posting a question. In addition, to determine the percentage

o customers who nd answers via browsing the posted questions and answers, our example

company provides a random, popup survey that asks the customer i he got the answer he was

looking or; about 10% o the customers answer the survey. We assume that this 10% representsa smaller number o customers than actually got their questions answered, but it provides a

conservative but nevertheless reasonable indicator o indirect call defection.

Gains rom the benets o direct call defection. In our example company, we assume thatthe community platorm allows customers to mark a question as answered. Tis means that

a thread they started gets answered by the community or the moderator. Estimates show that

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although most all customers question are answered, only about 30% o customers mark the

thread as answered. Tis is most likely a conservative estimate because companies monitor

and make sure that most, i not all, threads or questions are answered.

Support rom super users. Although the content is the primary driver o site usage, ourexample company is able to recruit ve super users and the super users are not paid by the

company. Te company might provide the super users with beta products, an advanced notice

o new releases, or other types o inormation via a private VIP community, making them

unique experts. Te moderators make sure that the super users stay engaged, answer customer

questions, uphold the communitys policy guidelines, and deal with customers who dont

comply.

More satised and loyal customers. Experience has shown that community users not only ndanswers to their questions but also have a sense o belonging, gain a sense o ownership or the

community by participating in the community, and nd that interactions can go beyond just

customer service support and result in long-term riendships and business partnerships.

ONLINe CuSTOMeR SeRVICe COMMuNITIeS CaN DeLIVeR HIGH ROI

Over a three-year time rame, our example company will invest a probability-adjusted outlay o

approximately $1.2 million. Over that same time rame, the project produces an expected risk-

adjusted return on investment (ROI) o 99% and a risk-adjusted net present value (NPV) o

approximately $1.2 million (see Figure 5). Tis project achieves payback within the rst year o

operation less than 12 months rom the initial community project kicko date (see Figure 6).

Figr 5 model: TEI Analsis Sar Online Cstoer Serice Conities


Year 1 Year 2 Total

Presentvalue (PV)

Benet $904,400 $904,400 $2,713,200 $2,330,727

Cost $516,060 $418,310 $1,352,681 $1,168,535

Net cash

ow$388,340 $486,090

Year 3

$904,400

$418,310

$486,090 $1,360,519 $1,162,191

NPV $1,162,191

ROI 99%

Payback < 12 months

The spreadsheet detailing this model is available online.

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18

Figr 6 TEI Costs verss Benets Online Cstoer Serice Conities

FLexIBILITY: DePLOYING CuSTOMeR SeRVICe COMMuNITIeS PROVIDeS FuTuRe VaLue

Flexibility, as dened by Forresters EI methodology, represents the benets to the organizationin the creation o uture options rom an initial investment. Tere are multiple scenarios in which

a company might choose to implement online communities or one reason and later leverage the

platorm to take advantage o additional uses and business opportunities. By adding additional

communities, the company might derive incremental additional value rom the original investment

or only modest additional costs. Although we will not quantiy the monetary value o these options,

understanding that the social networking inrastructure is a platorm that can be expanded over

time clearly adds benets above the direct ROI.

An example o this is that as a company deploys one type o community, it gains best practice

knowledge.Communities deployed or customer service will pave the way or other communities or product developers, marketers, sales, quality assurance, etc. Te costs o these communities will be

reduced because the company has already deployed one community, and it can leverage the expertise

gained rom its learning curve.


Cumulative cost

(US$millions)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Year 3Year 2Year 1

Cumulative benet

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19

R E C O m m E N D A T I O N S

DeFINe YOuR CuSTOMeR COMMuNITY GOaL

Prdigms shit; so mst yo. Cstoer serice proessionals st nd innoatie wasto engage with social cstoers ia eerging social edia technologies. Online cstoer

serice conities ake sel-serice a ore satising cstoer eperience, in addition

to redcing costs or the proider. Copanies that are still spending one on sel-serice

soltions that dont delier good cstoer eperiences are hrting their brands and their

botto line. The tie to shit gears and join the social edia bsiness reoltion is now.

Idntiy th v orst rs rly in th procss. Copanies oten ear the worst whendeploing soething new. This is oten in the case with social edia. Howeer, ost o

those ears are nonded. That onl becoes obios when the ears are nearthed

earl in the process. Instead o allowing nspoken ears to doinate the decision to oe

orward with social edia, acilitate a eeting where the stakeholders are allowed to let theiriaginations rn wild, enisioning the ost disal otcoes, ro worries that no one will

coe to the site to nightares abot trobleakers will posting lies abot the copan.

Categorize the ncertainties into bckets o costs, benets, and risks and learn ro best

practices that ost social edia ears are nonded.

Focs on improving th cstomr princ. The isse with an cstoer sericetechnolog plators and processes is that the are still based priaril on achieing cost

redctions and efcienc gains, not cstoer eperience enrichent or better cstoer

retention. The ost critical step is designing cstoer eperiences rst, and then aking the

sbseqent technolog choices to enhance the cstoer eperience, not destro it.

Strtgi, strtgi, strtgi. Deterine what o want to accoplish with theconit and sta on point. I a copan is nclear wh it wants the conit hasnt

clearl deterined the strateg, prpose, and the reslts its looking to achiee the

copan is likel to get ied or poor reslts.

Choos vndor isly. Not all conit soltion endors hae deploed their soltionsto spport cstoer serice. make sre to interiew both the endor and its client list.

And dont liit or interiews onl to the reerenceable cstoers the endor proides.

Deterine i or se case is siilar. Dont be caght b srprise to learn that the soltion

will take hndreds o thosands o dollars to integrate to or contact center, wont scale to

a growing ser base, or has been priar deploed as a cstoer listening plator. The

goals and reslts o the arios tpes o conit plators dier. Edcate orsel and

choose wisel or or particlar tpe o application and size o contact center.

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20

SuPPLeMeNTaL MaTeRIaL

Onlin Rsorc

A spreadsheet associated with the online version o Figure 5 is available as an interactive tool to helpyou calculate the return on investment o an online customer service community. It includes the

detailed set o assumptions upon which the conclusions o this report are based.

Mthodology

Forrester Research uses a dened methodology or analyzing and evaluating the costs, benets, and

risks o a proposed solution. Tis methodology, termed otal Economic Impact (EI), provides

a holistic view o the decision by including an analysis o costs, benets, fexibility, and risk. By

including an assessment o risk, EI provides a realistic view o expected outcomes, rather than one

shaded by early optimism and enthusiasm.

Unlike a cost- or technology-based analysis, EI does not rely on industry averages or actors that

are applied to all organizations but is a methodology or evaluating projects. Te EI methodology

orces the determination and quantication o relevant metrics in light o an organizations current

state and uture goals. Firms can use the EI model as a proactive and predictive tool.

Compnis Intrvid Or Rsrchd For This Docmnt

AlterPoint

Carphone Warehouse

DIRECV

Fair Isaac (Myco.com)

Helpstream

Inusionso

Intel

iRobot

Jive Soware

Lenovo

Linksys

Lithium echnologies

Mzinga

NetApp

nGenera

OSIso

Overtone

Palm

Pitney Bowes

RightNow echnologies

Sage Soware

salesorce.com

Socialtext

elligent

Verizon

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eNDNOTeS

1 Te rise o Social Computing means that customer service proessionals must nd innovative new ways

to cope with the emerging phenomenon o social customers. Forrester talked with nine early-adopter

companies and reviewed the social technology capabilities o six leading CRM solutions vendors to

understand the business tactics and new technologies that CRM proessionals are using to achieve the ve

objectives o social customer strategy: listening, talking, energizing, supporting, and embracing. Leading

edge organizations are actively using social technologies to orge new and tighter relationships with their

buyer communities, and social technologies are driving business results. See the November 13, 2008, CRM

2.0: Fantasy Or Reality? report.

2 Josh Berno s groundbreaking book provided some o the seminal work around how companies could

begin to strategize on how to use social media or business. See Charlene Li and Josh Berno, Groundswell:

Winning in a World Transformed by Social Technologies , Harvard Business Press, 2008.

3

In this economic climate, no one can aord to lose a customer. Rather than halting spending, smartcustomer service executives will use this economic downturn as an opportunity to regroup and reprioritize.

What should they ocus on? op customer service recession-busting strategies that cut costs and generate

more revenue include: proactive chat, agent-customer co-browsing, online customer communities, unied

communications, and multichannel knowledge management. See the January 21, 2009, Te Economic

Necessity O Customer Service report.

4 For an in-depth discussion o EI and the individual elements within the methodology, please see the

August, 4, 2008, Te otal Economic Impact Methodology: A Foundation For Sound echnology

Investments report.

5 Conversations with Je North, Principal Consultant (EI), Forrester Research, helped to determine the

parameters when developing the ROI model or social media customer service. Tis eld is brand new andno models to date exist exactly like this.

6 Super users is the term reerred to between 1 to 2% o the community members that contribute between

40 and 60% o the community content. Te term 1:9:90 reers to the act that 1% o your community

creates most o the content; 9% will reply to what is posted; and 90% will just read what is posted.

7 Te Consortium For Service Innovation research shows that organizations are good at solving known

problems with known solution. However, those issues account or about 1% o the customer service issues.

Te balance o customer demand or support is divided into 9% issues that are known, but you havent

created inormation or customer service agents and 90% issues that are unknown and thus the solutions

are unknown. Online communities and peer-2-peer interactions provide companies with some o the best

content or these issues. Consortium For Service Innovation (http://www.serviceinnovation.org/included/

docs/kcs_tcpaper.pd).

8 For example, a customer might have a complicated customer service issue picture a multiple vendor

situation (a computer, a router and an ISP combination). Because o the complexity o the combination o

technologies, the computer company, the ISP, nor the router manuacturer may be able to answer why the
http://www.forrester.com/go?docid=45753&src=48002pdfhttp://www.forrester.com/go?docid=45753&src=48002pdfhttp://www.forrester.com/go?docid=48321&src=48002pdfhttp://www.forrester.com/go?docid=48321&src=48002pdfhttp://www.forrester.com/go?docid=42030&src=48002pdfhttp://www.forrester.com/go?docid=42030&src=48002pdfhttp://www.forrester.com/go?docid=42030&src=48002pdfhttp://www.forrester.com/go?docid=42030&src=48002pdfhttp://www.forrester.com/go?docid=48321&src=48002pdfhttp://www.forrester.com/go?docid=48321&src=48002pdfhttp://www.forrester.com/go?docid=45753&src=48002pdfhttp://www.forrester.com/go?docid=45753&src=48002pdf

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customer is experiencing trouble. Agents are le to tell the customer its the other companys ault. Online

community participants however, have oen encountered the same issues (issues with usability, installation,

conguration, interoperability, and deects) that many o your customers are experiencing, have resolved

the issue and generously desire to share their knowledge with other customers. Te community contentprovides more relevant content to agents, making them more ecient. Te savings rom increasing agent

productivity can be evaluated by looking at the increase in the number o calls agents can answer per hour.

9 Aer online searches, 70 percent o service seekers (i.e., consumers contacting customer service at least

once during the past six months) purchased products or services online, and 42 percent called customer

service phone numbers. Indexing knowledge content or inclusion in major search engines is a given or

most service organizations. See the May 20, 2008 SEO Strategies or Service Organizations report.

10 Forrester believes customer engagement is a key business metric and by understanding the brand

engagement o various segments o customers, companies will better be prepared to engage those customers

and derive more value rom them. See the June 25, 2008, Social Loyalty report.

11 Infuential customers drive purchase decision and infuence how others eel about a brand. Companies need

to take into account the social value o their customers and prospects. See the April 24, 2008, Social Multi-

taskers Have the Highest Social Value report.

12 Forrester denes customer lietime value (CLV) as a customers potential monetary worth through the

course o his or her relationship with a business. In the current economic slowdown, customer valuation

techniques like CLV take on an added signicance because the retention and cost to satisy a customer

become even more relevant. See the March 11, 2009, Executive Q&A: Customer Lietime Value report.

13 o date most I departments have resisted Web 2.0 ools, oen viewing them as consumer grade and

secondary to other I investments. Te application o social media to customer service has started to

change this trend. See the January 25, 2008 op Enterprise Web 2.0 Predictions For 2008 report.

14 Choosing a community platorm vendor means understanding not only what vendors exist, but also how

they will integration to your companys existing technology solutions. Source: Forresters Vendor Product

Catalog: Community Platorms For Te Interactive Marketer (http://www.orrester.com/rb/vpc/catalog.

jsp?catalogID=60).

15 Customer service models very by industry. Banking and nancial services companies, or instance, can have

a very high percentage o sel-service or automated service. In contrast, technology or service industries

have traditionally a larger percentage o calls going to customer service agents.

16 Super users is the term reerred to between 1 to 2% o the community members that contribute between

40 and 60% o the community content. Te term 1:9;90 reers to the act that 1% o your communitycreates most o the content; 9% will reply to what is posted and 90% will just read what is posted.

17 A thread reers to a customers interaction with the community. When a customer posts a thread, this

means that he did not nd his answer by reading the community and posted (wrote) a question to the

community. In our model, we assume that either the community members or the moderator generally

answers most all questions or threads posted to the community.
http://www.forrester.com/go?docid=52763&src=48002pdfhttp://www.forrester.com/go?docid=45292&src=48002pdfhttp://www.forrester.com/go?docid=45711&src=48002pdfhttp://www.forrester.com/go?docid=45711&src=48002pdfhttp://www.forrester.com/go?docid=47858&src=48002pdfhttp://www.forrester.com/go?docid=43882&src=48002pdfhttp://www.forrester.com/go?docid=43882&src=48002pdfhttp://www.forrester.com/go?docid=47858&src=48002pdfhttp://www.forrester.com/go?docid=45711&src=48002pdfhttp://www.forrester.com/go?docid=45711&src=48002pdfhttp://www.forrester.com/go?docid=45292&src=48002pdfhttp://www.forrester.com/go?docid=52763&src=48002pdf

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Te phrase threads marked as answered by community members reers to questions posted to the

community that have been answered, meaning that the person who had asked the question voted by

marking that an answer had provided a satisactory answer to his question.

Te phrase answers marked as solved by community members, means that a community member did not

post or write a question, but instead read the answer to another persons query and voted by marking the

answer as having provided a satisactory answer to their question.

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Forrester Research, Inc. (Nasdaq: FORR)

is an independent research company

that provides pragmatic and orward-

thinking advice to global leaders in

business and technology. Forrester

works with proessionals in 19 key roles

at major companies providing

proprietary research, consumer insight,

consulting, events, and peer-to-peerexecutive programs. For more than 25

years, Forrester has been making IT,

marketing, and technology industry

leaders successul every day. For more

inormation, visit www.orrester.com.

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