How to measure digital signage ROI
This is part one of a two part series analyzing digital signage ROI
Return on Investment (ROI) is a financial term, often calculated using a simple formula: sale profit from an investment minus the cost of that investment, divided by the cost (again), and the ROI is expressed as a percentage. As an example, Michaela buys $2000 of stock in Acme Corp, and later sells that stock for $2600. She takes the $2600 she sold the stock for, subtracts her initial cost of $2000, and gets a net profit of $600. She then divides that $600 by the initial cost of $2000 to get 0.3, which then gets multiplied by 100 to get a percentage of 30 percent for her ROI. Simple enough when it comes to money matters, but what about measuring something a little less tangible, like digital signage ROI?
A digital signage system should be looked at more like marketing than straight costs vs. profits, since the goals aren't necessarily always about money, but about engagement. John Wanamaker, founder of Macy's, famously said, "Half the money I spend on advertising is wasted; the trouble is I don’t know which half."
Today, there are formulae for measuring marketing ROI. No matter which formula a company uses, the goal is to get the highest return possible and to increase that ROI percentage over time. One method looks at gross profits vs. marketing budget, another uses Customer Lifetime Value (CLV) in place of gross profits. This seems a little closer to what we might think about when considering digital signage ROI, but still deals with income from sales.
Digital signage is different
Marketing is used to try to influence people to choose your products and services over those of your competitors. Much of retail digital signage is used in this way. But organizational digital signage is different – it's used to inform and entertain internal audiences and visitors, so they engage with the organization, understand its values, and stay updated and motivated to internalize a message or take a desired action.
There are measurable costs to set up and maintain a digital signage system:
- Hardware (screens, media players, etc.)
- Software (content management software, design applications)
- Infrastructure (network, power, cabling)
- System training
- Content subscriptions
- External design services
- Support and maintenance contracts
- Labor for consulting, installation, etc.
Then there are the additional operational costs of paying staff to create and schedule content, and generally maintain the digital signage system.
That's all easy enough to add up. But it's very difficult to assign dollar values to the results of general communications that aren't sales-focused. Many of the benefits are intangible (brand loyalty, guest experience, employee morale, etc.), and contribute to other larger business factors (employee retention, guest satisfaction, etc.). So then, what is the "profit" from digital signage?
Instead of Return on Investment (an accounting benchmark), focus on specific goals for individual communications or campaigns by looking at qualitative feedback, behavioral changes and business outcomes. Borrow ideas that come from measuring internal communications, where professionals use SMART objectives, KPIs and other tools. Instead of Return on Investment, a better term for this might be Return on Involvement.
What has value here isn't money, but information. So, to measure digital signage ROI, you need to have information that tells you:
- If people are engaged
- If they're having a good experience
- If they're informed or entertained
- If they'll continue to use the digital signage system because they feel it's valuable
Objectives determine the task
It is essential that you have a clear idea of what exactly you want your digital signage system to achieve. Is it to improve productivity? Increase event participation? Improve the guest experience? Boost online interactions? Your goal has to be relevant and measurable, and shouldn't be simply to give people information. Your objectives will determine both what you're going to show on digital signs and how you’re going to judge success, so they need to be well-thought-out.
The weird truth is that we care about what we measure, not the other way around. So, make sure you figure out what you want to know before you decide on methodology. It's easy to publish statistics and graphs, but they are ineffectual without analysis that you can use to further your goals. Measure something that is useful and gives clear data, or you may find yourself going down a rabbit hole following unproductive lines of inquiry.
Since a lot of the answers to engagement questions are subjective, a good way to get those answers is quite simply to ask your audience. But there's another powerful tool as your disposal — one that you should already be including in every message, and one that turns each message into its own ROI measurement tool — a clear call to action.
Stay tuned next week while we discuss how to use a clear call to action.
Image via Istock.com.
Companies: Visix Inc.