Ask a savvy investor to divulge the five-year average return on the mutual fund he's using for his 401k investment, and he'll rattle off the answer quicker than the Fed can print money.
Ask a farmer how much a given fertilizer costs and how much bigger his crop yield is because of it, and he'll respond with more certitude than the rooster that crows at dawn.
But ask a digital signage network operator about the return on investment (ROI) of his digital signage system, and the answer may be tinged with a degree of uncertainty and hesitation.
Why? Because in many ways the factors that go into determining the ROI of digital signage can be a bit, for lack of a better term, "squishy." Figuring out the ROI of digital signage can be like walking through a heavily rain-soaked field: You know eventually you'll reach something firm on which to build your next step, but getting to that solid foundation can be a little tenuous.
Wouldn't it be great if it were as simple as looking at the cash spent to set up and maintain the network, measuring the cash generated or saved by the digital signage network, dividing the latter by the former and coming up with a return? While that might be practical in some digital signage applications, the "squishiness" of many others makes arriving at the return on investment of a digital signage network much more difficult.
To illustrate the difference, consider these two scenarios: a casino that's replacing all printed promotional signage with digital signage and a corporation setting up a digital signage network to communicate with employees.
In the casino scenario, the gaming facility typically spends $300,000 annually to print promotional signs, plus an additional $50,000 annually for the salaries of employees who replace old signs with new signs to update patrons on the constantly changing entertainment acts, restaurant specials and casino promotions.
By replacing the traditional signs with a digital signage network, the casino will have a one-time expense for the cost of the LCD or plasma panels, the digital signage media players, network cabling, routers, and ancillary hardware. Let's set that one-time cost at $300,000, and throw in $50,000 annually to maintain the network.
For the sake of this scenario, the cost of creating content will be virtually the same. Graphic artists using Adobe Photoshop and InDesign to create print ads will now use Adobe Photoshop, Premiere and Flash to create content for the digital signage network.
Figuring out the five-year return on this digital signage network is a snap: $1.75 million in printing and labor savings ($350,000 x 5) divided by $550,000 ($300,000 for the initial installation and $50,000 x 5 years for maintenance) = 318 percent return for five years, or about 64 percent annual return.
While there could be other factors impacting the total ROI of this system (such as advertising revenue from allied businesses wishing to advertise on the network) this scenario illustrates that there can be a straightforward ROI assigned to some digital signage applications.
Squishy comes into play in scenario No. 2, the corporate digital signage network. A corporation installs a modest digital signage network that includes a sign to greet visitors in the lobby, several digital door cards to identify what's booked for various conference rooms and a digital sign in the corporate lunchroom.
The squishy factor in this scenario relates to identifying and measuring employee and visitor behavior as it relates to the digital signage network. Did a visitor to the company feel more welcomed when she saw a personal greeting on the sign in the lobby? Did that feeling translate in even the smallest of ways to a more productive meeting with the person she was there to meet? Did that translate into some monetary value?
Do the signs used as digital door cards inform the people of the right conference to attend? Do they reduce interruptions, help meetings to start and end on time, and in so doing improve productivity? Can that be measured? What's the monetary value?
Does the sign in the lunchroom create a degree of loyalty to the company by recognizing achievement? Does it improve the experience of employees by keeping them better informed of what's going on in and around the premises? Is there a monetary value that can be measured?
These sorts of benefits are much more difficult to reduce to a simple ROI equation because they're squishy. But just because they are squishy doesn't mean they are not important or real. Being squishy just means it's harder to identify the true ROI of the digital signage network, not that there is no ROI.
David Little is the director of marketing for Keywest Technology. This commentary originally appeared on the Keywest Technology Digital Signage Blog.
