الرئيسية > Enterprise 2.0, social network, web 2.0 > How ROI can be calculated for Enterprise 2.0 projects

How ROI can be calculated for Enterprise 2.0 projects

According to IDC report (2010), the ROI of Enterprise 2.0 project can be calculated by defining gains and cost of the project. Potential gains from Enterprise 2.0 are multifaceted, and the ability to get any of gains depends on the size of a company’s Enterprise 2.0 projects, and it is up to the company to determine how far it wants to extend the impact of a Enterprise 2.0 projects. Both gains and cost can be associated to single department or functional area (customer service, marketing etc.)

This figure illustrate Gains and Costs associated with ROI:

Source: IDC and Kathy Hermann and Dr. Natalie Petouhoff, 2010

Enterprise 2.0 project Gains explanation:

1- Gains from Sales Revenue

How sales and marketing staff can get valuable insights from social monitoring and engagement that can be used to optimize customer acquisition. For example, a company may have a community of 100,000 members, but only 30% are engaged in the community. That means this company’s online community is potentially influencing about 30,000 current members. Revenue can then be determined by considering the combination of sales conversions and average sales amount.

2- Gains from Consumer Insights

The social web tools allow companies to aggregate insights costumer’s social media interaction and make real-time or near-real-time determinations of consumer behaviors. By ongoing social monitoring, companies will save money and time e.g. Increasing productivity and decision-making capabilities for quicker delivery of results, and reducing traditional market research efforts (e.g. surveys and focus groups).

3- Gains from Brand Protection

Companies can monitor and engage in the social Web proactively to save money through early detections of negative effect of the brand. Quick re-action means money and effort saving. By giving consideration to the potential scenario, companies can determine how to and avoid/minimize brand protection costs: e.g. What percentage of revenue per week would your company lose if the brand were attacked unfairly?

4- Gains from Lead Generation

Lead generation is often associated with high costs from advertising (traditional media, conference). Enterprise 2.0 tools can be used as an alternative the expensive traditional methods. As a result, the money saved from this gains will go directly to a company’s profitability.

5- Gains from Contact Center Operations

As previously mentioned, monitoring social web activity can provide early warning signs of a negative issue. This will give opportunity to the contact centers to apply appropriate solutions that allow customer service representatives to be faster and more accurate with problem resolution. In addition, web 2.0 tools can be used to alert customers about any issue and the action to be done before receiving angry customers calls.

Enterprise 2.0 projects Costs explanations:

1- Costs Related to People:

Enterprise 2.0 projects will involve a variety of employees within the same organization. Members of the project team include strategic, technical, and tactical participants.

2- Costs Related to Technology:

This cost include:

  • Enterprise 2.0 Applications (e.g. Customer Relationship Management, Discussion Forums, etc.)
  • Enterprise 2.0 Infrastructure (e.g. Security, Data Encryption, etc.).

So ROI of Enterprise 2.0 is depends on the scale of the program, investment as well as utilization of people, process, and technology. ROI can be calculated by considering the full range of potential Enterprise 2.0 project gains and costs.

Example:

Total gains for 1st year = $ 9.300.000

Total cost for 1st year = $ 1.200.000

Net results = $ 8.100.000

ROI = 675%

While some people argue that ROI cannot be calculated, this method makes it possible. However, it requires knowledge of social business transformation (which takes marketing, sales, and customer service essentials into consideration) and sound economic analysis fundamentals.

So.. what is your opinion of this method of ROI calculation? and If you have different ROI calculation method please share it

Reference:

How to calculate the ROI of E2.0 or Social Business projects

Determining the Value of Social Business ROI: Myths, Facts, and Potentially High Returns

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  1. 14/09/2011 عند 1:50 م

    I like your post. It gives me a clear explanation about ROI and the structure is simple to understand and informative. measure ROI is really difficult.

  2. 14/09/2011 عند 10:37 م

    Some organisations have a hard time trying to calculate their ROI, though its very hard to get the figures right, its not impossible, its a matter of knowing what we want to calculate.

  3. 16/09/2011 عند 11:12 م

    Great post on calculating ROI – although the costs listed can be turned into revenue generating opportunities also, such as for People – if there can be an increase in collaboration between staff, maybe there’ll be a decrease in time spent searching through different systems for information, and increase employee satisfaction leading to better rentention rates.

    Similarly, for Technology, I guess it’s inevitable that an organisation has to upgrade its systems at some stage of their lives so the investment in Enterprise 2.0 (ie could be moving to the cloud) can provide long-term benefits and cost savings.

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