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Calculating Digital Signage ROI: 3 Metrics that Matter

Published on: 2005-04-07

Picking up where we left off last time (in "Calculating Digital Signage ROI: Understanding the Limits of Your Data"), I'd like to focus on some specific metrics that might be useful to digital signage network owners trying to discern the true value of their systems.  While there are probably thousands of different variables that you could choose to analyze, I've picked 3 tried-and-true marketing statistics that exist outside of the digital signage world to show that even though our medium may be new, some of the ways to analyze it are as old as the hills.

Metric 1: CPM
Ah, CPM, the granddaddy of marketing statistics.  A three-letter acronym for Cost Per Thousand viewers, CPM shows its age by having part of its name written in Latin ("M" is the Roman numeral for 1,000).  While many people debate the value of CPM metrics in today's era of Tivo ad-skipping and Internet clickthroughs, I maintain that CPM is useful simply because there is such a vast quantity of CPM data available that we can use to establish baselines and normalize our data.  Basically, the way to calculate CPM goes something like this: get the average weekly traffic numbers from your venue.  For the sake of this example, let's say that our sample retailer has 5,000 customers each week, based on register sales and quarterly audits.  To keep the example simple, we'll also assume that the average customer spends 10 minutes in the store, and our digital signage content loop is 10 minutes long, consisting of 100% advertising.  Thus, on average, every customer in the store would see each ad in the loop about once.  Finally, assume that a single spot in the loop costs $150 per week.  We can thus calculate that each impression costs about $0.03 ($150/5,000), so the cost per thousand is about $30.00.

Metric 2: Impressions
Very similar to CPM is the notion of impressions.  Instead of tracking only the number of unique people that see an ad, impressions is a way of measuring the number of times that any given person sees the same ad (even if they've seen it more than once).  For example, let's use our scenario above.  Once again, our sample retailer has 5,000 customers each week,  and the average customer spends 10 minutes in the store.  Our digital signage content loop is 10 minutes long, consisting of 100% advertising.  Once again, each impression costs about $0.03 and our cost per thousand visitors is about $30.00.  However, what if the average visit length was really 20 minutes instead of ten?  In that case, each viewer would see each ad an average of twice.  Now, even though our CPM is exactly the same (since it's the same number of visitors as before), our cost per impression has been halved, to only $0.015 per impression.

How do we tell whether it's better to use CPM or impressions?  Well, like everything else, it depends.  In this case, it depends on what you, the digital signage network owner, are trying to sell.  If your network places screens in high-traffic areas with short average visit duration, a CPM-based pricing system probably makes the most sense for you, since it more accurately describes the kind of traffic that you have and the kind of impact that you're going to be able to make.  On the other hand, if you have a captive audience that tends to stay in the venue longer, you'll be able to present the same (or similar) content to your audience several times in a single visit.  In this case, it might make sense to measure impressions, and price your network out that way.

Metric 3: Immediate feedback response
There's no generally accepted term for what I call immediate feedback response, or IFR, even though it's an extremely common method of measuring different kinds of out-of-home marketing and advertising campaigns.  In an IFR system, the marketer uses some kind of simple but measurable feedback system to record the presence of a user, and then uses that conversion number (e.g. the number of viewers who were converted from passive viewers to active participants) as the basis for other measurements, like sales conversions, brand recall, and so on.  For example, imagine a digital POP display that instructed the viewer to take a free recipe card from a stack beneath the monitor.  By recording the number of recipe cards given out, and the frequency with which the stacks need to be replenished, a retailer can gauge (with reasonable accuracy) how many people are paying attention to the signage.  This technique can yield more accurate results than just using baseline traffic data, and more importantly, it helps demonstrate who's looking at the signage, instead of who's just walking past it.  The key to a successful IFR experiment is to keep the feedback loop short, simple and attractive to the viewer.  If it's challenging or time-consuming for your viewers to respond to your promotion, they won't.

These are three of the quickest and easiest metrics to investigate, and they require relatively little activity on the part of the store owner (which can be critical, since getting owners or managers to do extra work for you is not always going to be an option).  As I mentioned before, the metric that you choose to track will be highly dependent upon the type of network that you run, the frequency and duration of your content, and the kind of audience that you are hoping to attract and appeal to.  And in some cases, you might need to track something completely different than the metrics I use above.  However, these should serve as a good baseline, and we'll use them as examples in the next installment of this article, Calculating Digital Signage ROI: Methods to Gather your Data.

Stay tuned!


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