How to measure the ROI of your developer community - a complete guide 

A well-maintained community is a valuable asset. It can be your competitive edge and primary GTM strategy, providing a meaningful return on investment (ROI). This is especially true for the highly competitive DevTool space, where traditional marketing tends to fail. 

However, calculating the ROI of your community without disciplined measurement and an understanding of all the metrics it may affect is a challenge - so most companies just don’t do it. Therefore, numbers-driven DevTools can be reluctant to invest in their community, seeing it as fuzzy rather than a revenue driver. 

In the end, and rightly so, management is focused on three things: 

1. How to drive top-line growth (revenue)
2. How to improve the bottom line (cost reduction)
3. How to reduce risk  

Invariably, they will ask, “What is all this money we are spending on our developer community - what’s the return on investment of this?”

The job of the community leader is to be able to answer this question confidently and back it up with numbers. 

Developer communities have wide-ranging benefits, from increasing top-of-the-funnel awareness over a higher customer lifetime value to improved retention rates. To measure community ROI, one needs a complete understanding of the value it provides and the associated costs. 

In the following, we will cover these aspects, and if you are faced with questions about community ROI from your stakeholders, help you build your case.

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What is Return on Investment (ROI)? 

Before we dive in, here is a quick refresher on ROI. Simply put, ROI shows how efficient an investment is in generating profit. The formula for ROI expressed as a percentage is:

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ROI = (Profit / Cost of Investment) * 100

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For example, if you invest 100$ in your community, which results in 200$ in net profit, you would have an ROI of 200%. For each dollar you spend, you earn two back. 

Looking at this formula, you see that ROI can be improved in two ways. Either you can increase the profit generated, or you can decrease the cost. Therefore when we look at the ROI of a developer community, we need to consider where it is a revenue driver and where it can save costs.

There are also two important factors to remember: 

• Diminishing returns: ROI doesn’t stay steady endlessly; the more you invest in something, the less it tends to yield the same results over time. For example, once you have grown a large community in your developer niche and more competition enters the market, finding and retaining new community members with the same resource investment will be harder. 
• Opportunity cost: the money you choose to invest in something, in this case, community, can’t be invested in another department, for example, your sales or product marketing team. Chances are the other investment could have resulted in a higher ROI.  So there is always a tradeoff that has to be considered. 

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Why measure the ROI of your developer community?

Apart from being able to communicate the value of your actions to stakeholders and receive the budget you need to be effective, there are other compelling reasons to measure ROI. 

Improved Resource Allocation

Measuring ROI allows you to allocate resources more effectively. You can identify the areas where you get the most value for your investment by analyzing the financial and non-financial benefits of your community. Examples of this are identifying the most effective marketing channels, the most successful content types, and the most impactful events. You can then direct your resources to these areas while decreasing investment in areas that do not provide value.

Better Decision-Making

Also, measuring ROI allows you to make more informed decisions about your community's direction and strategy. Analyzing the data will enable you to identify areas for improvement and adjust your strategy accordingly. This can include creating new programs, new content types, or collaborating with other organizations to increase community visibility. By making data-driven decisions, you can ensure that your community is constantly improving and providing value to its members.

Better Community Management & Engagement

Finally, measuring your developer community's ROI allows you to assess the efficacy of your community management strategies. Engagement metrics such as the number of active members, participation frequency, and community contributions can be tracked. You can identify the best tactics for your community by analyzing this data and adjusting your strategy accordingly.

The challenges of measuring developer community ROI

While the formula for ROI is simple, quantifying the impact of a developer community is not. Several challenges need to be considered:

Tracking and measuring your community

DevTools have their community spread across several different platforms, and communities can range from just a few members to many thousands. Knowing which of your users are part of your community and keeping track of the different touchpoints they had and the resulting revenue is not trivial. Without diligent measurement and the proper tooling, it's impossible to quantify. Whether you convinced someone at a community event you hosted or a blog post you wrote to signup or purchase your DevTool, you need to track this.

Attributing impact to community

Let’s take, for example, a freemium user who is an active participant in your developer community on Discord; this user decided to switch to your paid plan after a month. Was this switch motivated or accelerated due to their involvement in the community? Likely yes, but probably not exclusively. You need to understand how your community team fits in and supports all your other GTM activities, like those of your sales and marketing team. We can sometimes fall into the trap of attributing 100% to community. 

Long-term benefits of community 

Especially if your business is new, it's difficult to assess the long-term impacts of investing in community building. Retention is often a benefit of having a community with dedicated users who are less likely to churn, but this will only be measurable after some time. 

Keeping these challenges in mind will help assess a community's impact more realistically. You will also have to be comfortable using some proxies and estimates if you are set on calculating a number ROI. 

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How developer communities can drive revenue & reduce cost

As mentioned, community should impact revenue drivers (directly or indirectly) or cost savers. Depending on your particular business model, in this section, we will list out the main ways your community can do this.

However, before jumping into the metrics, a point on attribution and measurement. As we went over in our challenges section, attributing actual revenue uplift or cost reductions to community is a challenge. It would be misleading to attribute all revenue generated from community members to your community team, as they may have paid for your product as a non-community also. 

For several of the following metrics, we suggest making use of cohort analysis. If your team is using CRMs (e.g., Hubspot), CDPs (e.g., Segment), and Product Analytics tools (e.g., Amplitude), where possible, tag or create “Community” as a lead source or cohort (e.g., community referrals, direct traffic, identified leads) and compare it to other relevant ones such as “Marketing” and “Sales”. 

With crowd.dev, a community data platform for developer tools, you can also make use of two-way integrations into your CRMs or CDPs if you are part of our custom plan. This makes it much easier to create your community cohort and track all the touchpoints your community members have with you.

Over the lifetime of these different cohorts, you can then compare different metrics and attribute differences to your community efforts. For example, if you determine that a community member spends, on average, $1200/month vs. $1000/month of a non-community member, you can more confidently attribute that extra $200 in revenue to your community efforts. 

For other metrics, for example, open-source contributions, this will not be necessary as they come directly from your community and will potentially affect all users. 

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Potential revenue drivers of community

Increased customer lifetime value (CLV)

The CLV of a customer is impacted by the length of time they stay loyal to your product as well as the amount they spend during that time. Both can be positively impacted through a thriving community. 

Retention rates: Communities can cause users to stay with your product longer as they feel a connection and added value from the community, not just the product. They may also have a better understanding of all the use cases over time, which makes them more satisfied and stay longer. Metrics to track:

• Average retention rate/customer lifespan
• Customer churn

Revenue per user: Communities create opportunities to sell new products to existing members and drive greater product adoption. When you bring out new products and paid-for features, your community presents a direct channel to present these. Metrics to track: 

• Average order volume 
• Upselling, cross-selling 
• Purchase frequency

Improved customer acquisition 

Lead generation: Community building activities help to attract new users for your developer tool by increasing awareness for your brand. Through things like content, engagement with it, and word of mouth, your identification and pool of interested users (top of the funnel) increases. Metrics to track:

• # of community qualified leads (leads who had a first touch point with your community before joining the sales funnel)
• Website traffic from community campaigns (e.g., from community-generated content)
• # of social mentions, reach
• Net promoter score (NPS), referrals

Lead conversion: Your community can directly affect converting interested or freemium users to paying customers. Metrics to track:

• Time to conversion
• Visit to lead rate 
• Lead to customer rate

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Potential cost reductions

Reduced marketing costs

Developers hate traditional marketing tactics. They are allergic to “marketing speak” and would much rather get a product referred to them by their peers they respect and trust. Community-building activities help spread the word about your product more naturally and can reduce the amount of money spent on paid ads. Metrics to track: 

• Customer acquisition costs (CAC)
• Content ideas generated, trending topics 
• Community-created content 
• Lead generation 

Reduced support costs

Developer communities commonly have a vital support element. Not only can problems get fixed at speed, but they are also an excellent repository for users to find information and have fewer questions. Peer-to-peer support can also happen, and your team sometimes doesn’t even have to get involved. With crowd.dev, you can automatically publish your community support content to Google-indexed landing pages, so all users can use and benefit from this content. Metrics to track:  

• # of support tickets
• Time to close 
• Peer-to-peer support 

Reduced recruitment costs

Whether it is for hiring developer or engineering roles for your organization or identifying developer advocates or evangelists, your community is an excellent source for hires or referrals. It's not uncommon for engineers who already love your product and engage well with your team to be great hires. This can significantly lower recruitment costs and result in more successful onboarding. Metrics to track:

• # of hires from the community 
• Cost per applicant
• Successful onboarding rate 

Reduced product feedback/research costs

One of the main drivers of having a community is the shortened feedback loop for your product and reduced research costs. Community members can easily be sourced to participate in interviews and surveys. They will also provide fast feedback and be able to spot any bugs and improvements. Metrics to track: 

• # of surveys/interviews with community members
• Feedback 
• Idea generation/feature requests 
• Idea validation 

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Open source contributions

Specifically for open-source projects, one of the main goals of building a community is to encourage external contributions to the code base. These contributions can turn into revenue drivers and value add for a product. Additionally, they may mean cost reductions, as your team did not have to build this feature themselves.

Calculating both the revenue and cost reductions here can be more difficult. First, you would need to determine whether the contribution was made due to your community (e.g., was it an active community member, was it encouraged through a community campaign). 

Next to measure revenue or cost impact, one way would be to survey users and try to find out how much a given contribution is delivering value for them and is a reason for them to pay for the product. 

Another method would be to compare customer acquisition and spending rates prior to and after the contribution to determine an uplift. 

Different here is that a contribution to your open-source project will impact users regardless of whether they are community members or not. 

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The costs of developer communities

Identifying costs associated with your developer community tends to be much easier. 

Going through the process of calculating your community ROI can be a great way to stay very conscious of your costs. Track carefully which community costs are really working for you and create results. For example, events can be an easy trap: they can be effective if the right audience is there and you are participating effectively, but they can also be a considerable cost factor without creating meaningful leads. Determine what costs incur through impactful programs, do those a lot, and stop those that aren’t working for you immediately. 

Below we put together the most common costs related to a community that need to be considered when calculating your community ROI. 

Costs of employees & external staff

• Salaries of community team & time invested from other teams when needed
• Salaries for external contributions, developer advocates, developer evangelists
• External consultants & experts (e.g., community experts and content creators)
• IT, Legal, and tax support services 

Costs of technology

• Software costs
• Implementation fees 
• Community management and analytics tools 

Other costs

• Events
• Conference participation
• SWAG
• Referral programs

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Calculating the ROI of a developer community 

We urge you to review all the metrics above and list the ones you suspect apply to your community. To calculate an ROI, ideally, you tie them directly to your revenue or an experienced cost reduction. Otherwise, it becomes hard to argue why you are a good investment compared to other departments. 

At this point, you have the increased revenue, reduced costs, as well as the associated costs (or investment) of community. To now calculate a % ROI, you need to do two things. First, any revenue you have identified you need to convert into net profit by multiplying it by your average gross margin. 

As the final step, add up the resulting net profit and reduced costs and divide it by your investment. 

Make sure your time component is consistent with all these components, for example, maybe you are calculating your ROI for 2022, then you need to make sure that this is reflected in your revenue and costs. 

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How to communicate ROI to stakeholders

Community is a component of an overall go-to-market strategy - management wants to know we are leveraging our community to drive hard metrics. It's not enough to calculate ROI. You need to communicate it to your team and business.  

We recommend setting up a public dashboard to which everyone has access at all times. With crowd.dev, for example, you can create community reports and make them accessible to anyone in your organization. 

ROI should also be just a component of how you communicate the value of your community to your different stakeholders. Depending on who you talk to, it might not even be the driving element in your value story. 

When reporting to other teams, always think about their goals and what’s most important to them. This will differ if you present the progress of your community efforts to general management, the sales team, customer success, or the marketing department. Adjust accordingly. 

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Conclusion

A well-maintained and measured community is a valuable tool that can help you retain customers longer and identify new leads before your competition does. The idea that community is fuzzy and doesn’t significantly impact your top and bottom line is outdated. 

Whether your organization has set up a community to sell your product through the developer, help developers build for your product (open-source contributions), or deepen engagement and retain your customers long-term, community helps drive hard metrics.

To prove the importance of community to stakeholders, it's crucial to try and quantify the ROI as best as possible to ensure it is taken seriously and receives the budget it needs.

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crowd.dev takes away the pain of measuring your community activities and keeps a record of all your user's interactions. This way, you have a 360-degree view of your user journey and can more easily attribute the impact of community to net profit. Try out crowd.dev for free and get started in minutes.