Digital Signage: Understanding ROI, counting the costs

One of the biggest advantages of digital signage is to deliver more relevant ads at the right place and time to the appropriate audience.

One of the biggest advantages of digital signage is to deliver more relevant ads at the right place and time to the appropriate audience.

Digital signage can be complicated to understand. This is probably the topic that has been most written about and most asked about, yet, perhaps, the least understood when it comes to the digital signage space. Nearly every client the author’s company meets with asks the inevitable question, “What will my return on investment (ROI) be?” To formulate an answer, many people in the industry expand the question to be return on objective (ROO) or return on activation (ROA) which, in some cases, serves to make the matter even more confusing. That said, the real question one should be asking is why should this network be implemented and what will the impact be on the business?

An attempt at providing a straightforward answer 

To calculate an ROI, two figures are needed. First, what is the investment (i.e. how much will the digital signage solution cost the company)? Second, what is the return or the revenue/value of the resultant action caused by the solution? If the second figure is higher than the first by a factor that is acceptable to the client, everything should be good, right? Not so fast.

Calculating the cost is easy; however, calculating the revenue or value is not. For instance, what if the client decides not to proceed with the project unless this calculation is completed in advance?

One of the biggest advantages of digital signage is to deliver more relevant ads at the right place and time to the appropriate audience

One of the biggest advantages of digital signage is to deliver more relevant ads at the right place and time to the appropriate audience

How does one calculate revenue/value in advance in digital signage?

To do this, it is important to start with the revenue calculation. Every digital signage project (or individual campaign) needs to have a clearly defined set of objectives. For example, this objective might be to have someone purchase something, sign-up for a loyalty program, share personal information to be marketed to in the future, or a means to improve the customers’ experience to ensure return visits. It could be all of the above or something completely different. It does not really matter as long as they are clearly defined.

As important as it is to have these clearly defined objectives, it only matters if one can measure the results. Using tactics like controls and baseline data offer the ability to define the current situation. Using unique codes helps to attribute an action to a specific campaign or message. Isolating the message to the channel that is being measured will offer a cleaner data set. Perhaps, most importantly, identifying the presence or absence of those factors that directly impact the desired action will provide a true picture of the effectiveness of the overall solution.

After identifying these objectives and devising a measurement methodology, a value needs to be assigned to them. An analysis of historical point-of-sale (POS) data may provide an indication of a sales increase resulting from different campaigns. Most retailers know what the value (in dollars) is assigned to a new client, a repeat customer, or a visit. An attempt is made to filter out any ‘noise’ (influence from other sources/channels) by assigning some type of unique code to a campaign, which allows for cleaner tracking.

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