The Digital Signage Insider
WireSpring's blog featuring tips and analysis from a team of industry experts

Calculating Digital Signage ROI: The Ground Rules

Author: Bill Gerba on 2005-03-16 23:55:33

Given the obvious benefits and proven returns of in-store marketing and POP advertising displays, a large portion of the digital signage industry is perpetually trying to up the ante by offering dynamic signage to retailers and in-store merchandisers. From new digital signage start-ups to old POP display manufacturers, everybody is looking for the next big thing that will increase revenues and improve customer satisfaction on the sales floor. Whether or not digital signage will be the next big thing still remains to be seen, as a number of challenges must be overcome before the medium is widely accepted by retailers and marketers alike. Of these, the most important (and perhaps the most difficult) is determining the return on investment of the digital signage network. Without a quick and easy way to calculate ROI, no amount of flash and sparkle is going to save our beloved plasma screens and networked media players from the scrap heap.

Because there are so many different business models that a digital signage network owner could subscribe to, it would be impossible for me to cover all of the different ways to calculate ROI. So instead, I'm going to focus on techniques for coaxing the number out of the most common kind of network: ad-driven or ad-supported retail networks. I'm also going to avoid interactive kiosks and interactive signage that have more obvious, feedback-driven methods for deriving ROI numbers for now (these will be the subject of another article). In this, the first in a series of articles covering the basics of calculating digital signage ROI metrics, I'm going to start by introducing a couple of concepts to get you in the right mindset for determining your signage network's return on investment. In subsequent articles, I will try to provide some ideas and methodologies for accumulating and analyzing your data to come up with the magic number. So, without further ado, let's get started.

First, Know Thy Metric
Do you know what you're going to try and measure? Ok, the obvious answer here is "how much did we lift sales?" But depending the focus of your project, how tightly integrated it is with the rest of the store/product/brand marketing, and the size of your data set, you might be trying to measure one of several different things. To explain, I'd like to introduce a little diagram called the retail marketing funnel:

              / \
             /   \ <- SALES
            /_____\
           /       \ <- IDENTIFICATION
          /_________\
         /           \ <- PREFERENCE
        /_____________\
       /               \ <- PERCEPTION
      /_________________\
     /                   \ <- RECALL
    /_____________________\
   /                       \ <- RECOGNITION
  /_________________________\
 /                           \ <- AWARENESS
/_____________________________\

There are probably a hundred variations on this diagram (which I think everybody has seen in Marketing 101), but I'd like to do a quick overview of what I believe each of these stages to mean:

Awareness is simply the cognizance that a brand or product exists. Awareness marketing targets the largest groups of people, and simply strives to "get the brand name out there," wherever "there" may be.

Recognition is the stage where a consumer can mentally link a brand to a product or marketing slogan. Many marketers like to correlate recognition numbers with sales numbers, so there's a lot of recognition data out there.

Recall, the next stage of the funnel, tests the opposite of recognition: given a particular product, can the consumer remember the particular brand image or redeeming qualities of the product? Most TV commercials for consumer products strive to make it to the recall stage, but in reality, they're typically relegated to recognition or awareness status.

The perception stage relates to how a brand or product is generally received and comprehended by consumers. The notion of "positive" or "negative" brand image and equity commonly comes from marketing efforts at this level.

The preference stage is the first funnel stage where marketing has solidly influenced the customer's beliefs. This level of marketing promotes specific features and benefits of the brand or product (often at the expense of competing products) to try and become the customer's brand of choice.

Identification, in this case, is literally the point at which the consumer visualizes him or herself as a user of the brand or product. Marketing at this level will often involve showing the brand or product being used by a particular class of individual that (hopefully) the target consumer will be able to identify with and relate to, thus creating a bond between consumer and product, and motivating the sale.

And last, but not least, is the sales stage itself. This is the point where the customer makes their active purchase decision, whether that means choosing between brands, or deciding whether to make the purchase at all.

The funnel shape is used for a couple of reasons. For one, it shows how you can pump a ton of resources into brand awareness campaigns but only see minimal sales increases. Also, it demonstrates how you often have to walk a shopper through all of the funnel's stages before converting him into a buyer. However, if we look at the diagram as a pyramid instead of a funnel, it suggests that increased sales can only be built on top of a foundation that includes brand awareness, recognition, recall, and so on.

Now that's not to say that every advertising tactic needs to focus on every stage of the funnel. In fact, quite the opposite is true, since an ad campaign that tries to do everything probably isn't going to do anything particularly well. Let's think about a retail digital signage network (perhaps an in-store TV network) in this context. A retail digital signage network is probably going to be most effective between the awareness and perception stages, although there are certainly cases where it could influence perception and preference as well. As a customer moves down the aisles of a grocery store, for example, he is already primed to make purchases. A typical grocery store aisle might contain 1,000 different products, and unless your product is the one the customer has come to buy, it's probably not receiving much attention from him. However, if the customer happens to pass a digital sign displaying an ad for your product as he walked through the store, he is now mentally primed with your product's image, and is more likely to notice it during his walk down the aisle. In fact, according to a recent study by Arbitron (and sponsored by digital signage provider CoolSign), "having the [digital signage network] in a mall seemed to raise the average recall for an advertiser by 18 percentage points." On the other hand, if your network is narrowcasting long-form content in a captive audience network, the priming effect isn't really in play, since your audience won't be able to buy the advertised product immediately. In these cases, your network's content will probably serve to better improve awareness and recognition.

When trying to decide which stage of the funnel you want to improve with your digital signage deployment, think about the immediate goal of the system. For example, do you want to:

• Drive more traffic into your store from outside
• Drive traffic to specific locations within your store
• Encourage "up-sells" to higher margin products
• Encourage cross sales of complementary products
• Improve awareness of a particular brand, service offering or product line

Each of these goals targets a different stage of the sales funnel. So the goal of your network is going to determine the method and metrics that help you determine your ROI.

I'm going to stop here for now, but I'll pick up soon with the next installment of this article: Understanding the Limits of your Data.

Comments (8)

Subscribe to comments for this article | Trackback

Leave a Comment

Digg this! | Del.icio.us


Previous Article: Web-Enabled ATMs: What Could Possibly go Wrong?
Next Article: What does Clarity's Acquisition of CoolSign Software Mean for the Digital Signage Industry?

Front page of Digital Signage Insider Blog