The Three Facets of ROI for Your Digital Signage

When we talk about return on investment (ROI) for any capital asset, we usually think of how quickly the asset will pay for itself. More specifically, ROI is the value of the benefits gained by making the investment compared to its actual cost. That’s a valuable number, especially when you’re comparing the performance of different assets. However, that only works if you can identify and quantify the value derived from the asset—and if you have something with which to compare it.

Take digital signage, for example. In retail stores, you can certainly measure the increase in sales for items you promote via digital signage and use that in your calculations. But what if revenue wasn’t the only business objective you identified for your digital signage network before you built it, as we discussed in our post on Building a Digital Signage Content Strategy? How do you assign value to general brand awareness, brand story, and brand loyalty? And if it isn’t retail or another sales-oriented business, it gets even more complicated. Using digital signage for employee communications has no such metrics to compare. Let’s examine various facets of ROI where digital signage is the asset in question, so you can decide the best way to calculate yours.

More money coming in—revenue-based ROI

One of the most common business objectives for digital signage initiatives is to boost revenue. While this is true in retail, it also applies to consumer banking, healthcare, and other environments. There are two core components of revenue-based ROI: sales lift from promotions and advertising.

Sales from promotions are by far the most powerful lever for ROI. No one will argue that using digital signage to promote your products can increase your sales. After all, what better venue to promote and encourage a sale than right in the store? However, using your digital signage as one long, continuous promotion—or worse, just to replay television commercials—can cause it to fade into the background as noise. When it ceases engaging the audience, it can negate the very sales lift you intended. At any rate, a sales lift is easy to measure, and thus the benefits derived from digital signage and content are easily attributed.

The other revenue-based ROI lever is advertising, the third-party monetization of the signage. Digital signage billboards use this lever exclusively, but many organizations find that renting out “ad space” on their digital signage to complementary third-party brands can be a lucrative revenue source. When these are endemic brands—brands that sell their products in the retailer’s store—the retailer gets both a sales lift and advertising revenue. Regardless, you can easily include the resulting advertising revenue in your digital signage ROI calculation.

Less money going out—savings-based ROI

On the flip side of increasing revenue, another major objective is cost reduction. Savings-based ROI applies to almost any industry. As with revenue-based ROI, savings-based ROI has two components, hard and soft savings.

Regardless of industry, there are hard costs you can reduce or even eliminate with digital signage, the most notable being those associated with static signage. Organizations often underestimate the actual cost of static signage because the expense is rarely limited to just printing and shipping the signs. It requires employees or contractors to distribute and install the signs across the organization’s many venues. And every time there is a mistake, it must be corrected, printed, shipped, and installed all over again. With digital signage, you simply update your content via your digital signage platform and instantly push it to any or all locations. The savings from the eliminated hard costs directly contribute to your ROI.

Then there are the soft savings realized by reducing employee turnover by investing in employee training programs. Keeping workers up-to-date, constantly improving themselves, and engaged in the workplace boosts employee engagement and loyalty. As with static signage, you have to produce, print, and distribute paper-based training, then have trainers administer and teach the courses—expensive for materials and labor. Training materials require constant updates, too. Creating, delivering, and updating training materials via your digital signage network is more efficient, effective, and timely, and the savings are twofold. First, it reduces the cost of creating and delivering the training. Then the improvement in engagement and retention drives down the cost associated with constantly recruiting, hiring, and retraining new workers.

Is “return on objective” a better measure?

Of course, ROI doesn't always tell the whole story. Quantitative data like sales and expenses aren’t the only variables that go into determining the value, effectiveness, and performance of your investment in digital signage. It’s essential to look at the impact of your investment beyond just its financial return.

What if your primary business objective is to boost customer satisfaction? For example, most customers hate waiting in line. In an amusement park, where waiting in long snaking lines can be tough for kids (and fray the nerves of their parents), engaging content on digital signage can entertain guests to reduce the perceived wait times. Retailers can use digital signage to stream content (including news, local weather, daily specials and more) to engage shoppers while they wait, or even provide self-service kiosks before even going to the checkout. And healthcare providers can use digital signage content to engage, educate, and entertain patients to relieve the anxiety of the waiting room. All these can improve customer satisfaction, even if it isn’t easily measure in dollars and cents.

Objectives such as brand awareness and enhancement, customer loyalty and satisfaction, employee engagement, and similar goals are less dollar-driven and more strategic. Meeting objectives such as these using digital signage doesn’t always have a causal relationship to revenue or savings, so a relative “return on objective” may be a better measure than trying to calculate an ROI. For example, consumer surveys can tell you if your brand awareness or customer satisfaction has improved. There are online tools that can help gauge changes in employee satisfaction. Statistics like worker retention rates can be tracked easily enough. Just remember, while these may be relative or qualitative measurements, they may result in additional revenue or cost savings in the end, even if you can’t immediately put a dollar value on them.

What’s at the heart of ROI for your digital signage?

The simple answer is that your ROI for digital signage depends on the business objectives you set for the initiative at the very beginning. With these in mind, you can calculate ROI based on revenue, cost savings, or a mixture of both. At Reflect Systems, our digital signage solutions—ReflectView, Reflect Xperience, Reflect AdLogic, and Reflect Spark, to name a few—can help ensure your digital signage delivers on all your objectives. We invite you to connect with us on LinkedIn and Twitter for the latest about our solutions, or better yet, contact us to find out how our core functionality can deliver the digital experiences that will keep your audiences coming back for more.