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Measuring the ROI of Free (a Case Study, and a Guest Post)
Today, I want to take all this discussion of Free and Sustainability in a more concrete direction. Josh Kashorek, who's participated in the comments here quite a bit, offered me this guest post on measuring the ROI ("Return on Investment") of Free. I think it's very useful stuff, and I'll be using it as I re-assess my landscape of Free here on this blog. I'd love to hear how this post lands with your thinking about Free.
This is a continuation of the awesome discussion Diane started, dealing with “The Sustainability of Free”. This is a topic I’ve been wrestling with for a few years now and while I still don’t have all the answers, but I do have a process. Diane has generously agreed to let me share the steps I take to measure the ROI of free. So let’s dig in…
One of my new year's resolutions is to learn more about woodworking with hand tools. As with most things, when you’re just learning you make a lot of mistakes. As I’ve learned how to fix these mistakes (and better yet avoid them) I’ve been taking notes. And now I'm planning a new website about woodworking. The plan for this website is simply post my notes to the Internet so others can learn from my mistakes as well.
Now that you know what the project is we can move onto the process.
Step 1 – Measurable Goals
Anyone can tell you their goals, but few are able to articulate them. (i.e, a common goal is to get more sales, but this just leads to more questions: how many more sales? Selling what? How are you getting the sales? And so on) We’re working towards articulation here.
So, my goals for the woodworking website are:
- Goal 1: Help others find easy solutions to common problems. (This goal is purely about giving).
- Goal 2: Network. (This is a non-monetary goal but it’s about both giving and getting).
- Goal 3: Support My Hobby. (This is the monetary goal).
Step 2 – Determine Metrics
Ok my goals are laid out, now I need a system for measuring them.
Goal 1: Help others – I’m going to measure this by search volume. I want people to search for a solution, find my site, read my answer. (There are many options here but this is simple and aligns nicely with my goal).
Goal 2: Network – I’m going to measure this by my time spent on the site, vs. the number of people I connect with. (By "connect with," I mean people who get my personal email address or phone number or I meet in person, because we want a relationship beyond following each other on Twitter).
Goal 3: Support Hobby – Goal 3 is easier than the rest because it’s tangible. I can track how much I spend and how much I make and see if they match up.
Step 3 – Assign Value
This step is where the rubber meets the road. You know your goals, you know how to track them, but until you know how much they are worth, you can never know if you’re getting a return.
Goal 1: Help Others – This is where it gets tricky because I’m trading time for the satisfaction of helping others. Since there is no set formula I can use to convert time into satisfaction, I have to guess. (Even Google couldn’t tell me the answer to “1 hour = X satisfactions solve for X” – maybe it’s 42). So for now I’ll say 1 hour of my time is worth 100 visits from search.
Goal 2: Network – This is another challenging goal; however, with this one I’m going to track it relative to other methods of networking. (i.e, if I go to a 5-hour workshop locally and meet 5 people, but spend 40 hours on my website and meet 1 person, I can then determine if I want to continue using the website as a networking tool or drop this goal).
Goal 3: Support Hobby – This goal is simple. Since I just want to cover my costs, I do not need to count the value of my time. It’s a straight comparison of spend vs. earn.
Step 4 – Set The Timeline
Very few goals that are worth chasing are achievable overnight, so you need to set an amount of time that you’re going to commit to working on the project – whether or not you’ve hit your goals. This keeps you from quitting too early. You can pick any amount of time you think is reasonable. For this project I’m using 6 months.
Step 5 – Evaluate and Adjust
Whether you’re working on a personal diary blog or promoting a multi-billion dollar brand it’s always important to reevaluate how you value your goals. Priorities change, projects evolve and experience changes the way you do things. To keep it sustainable, your ROI has to evolve as well.
So there’s my process – it’s simple but it has worked for me on many projects. What about you? What’s your process? How would you improve my process?
Josh has been involved in Internet Marketing since 2004, as both a consultant and in-house marketer (as well as working on personal projects). He currently works as the Ecommerce Manager at Premier Packaging. If you want to get in touch with him, he’s pretty much always reachable via LinkedIn.