Sunday, April 18, 2010

Do The Math: Digital Signage 101 Simple ROI Using Foodservice

I have given many presentations about the benefits of digital signage and while costs continue to come down and technology advance, given the current state of the economy it still remains a difficult pill to swallow when it comes to making the investment to put the plan into action. Simply put, the biggest hurdle to clear often is a budgetary one. With that in mind I hope the following inexpensive digital sign solution and simple ROI calculation helps put cost issues aside and makes getting going a priority instead. The inexpensive entry-level solution costs only $1,000. It is a countertop solution that uses a desktop size display in portrait or vertical orientation. You may think this display size is too small and reduces impact, but I don’t think so. It’s more about location then size. Not only does the smaller size allow you to place the display in more strategic locations, it also saves you a lot of money compared to a large flat panel display and its associated install costs. Ideally you want this display to face your customer at point of sale. Where the transaction is made is the best time to cross sell and promote a little something extra to buy with their purchase. The other parts of the $1,000 investment includes a media player that plays promotional content for you based on the time of day, a professionally designed content template that can be used to create your digital sign promotions and other miscellaneous mounting equipment and cables.

Now for the simple ROI calculation…using foodservice as an example, the following assumptions can be made and is based on an investment of $1,000 for the solution mentioned above. The assumptions needed to start are average spend per customer before and after installing the digital sign. Let’s assume then that $5 is the average spend before and that a lift of 3% is achieved with the digital sign. This makes the average spend after $5.15 or an increase of 15 cents per order. At 15 cents per order the digital sign would pay for itself in 6,666 orders. If you do an average 100 orders per day that’s a 66 day payback, or about 2 months. If you do an average 1,000 orders per day that’s a one week payback. If you deduct your prime cost, typically 65% of each dollar for cost of goods and payroll, your net revenue per order would be just over 5 cents and the digital sign would then pay for itself in about 19,000 orders. If you do an average 100 orders per day that’s a 190 day payback, or about 6 months. If you do an average 1,000 orders per day that’s about a 19 day payback, or less than 3 weeks. Assuming you get 3 years out of your digital sign and use these conservative assumptions the ROI would be worthwhile wouldn’t it?