By Adrian Weidman
Founder, StoreStream Metrics

Each year we, as an industry, discuss the importance of defining the objectives and determining the ROI of a digital signage initiative before implementing a viable solution. At the 11^th annual Digital Signage Expo (DSE) being held Feb. 11-13, 2014 in Las Vegas, Nev. at the Sands Expo Center, I will be introducing and moderating a point/counterpoint discussion where we will explore the topic of digital signage ROI through a different lens.

Prospective end-users from a variety of vertical markets including retail, financial, healthcare, corporate communications and QSRs, continue to struggle with defining and implementing these concepts in a meaningful, tangible way within their organizations. Whether it’s identifying or defining an agreed objective or calculating a credible ROI based upon sound financials and ‘believable’ assumptions that pass the scrutiny of an investor or CFO, these concepts remain hollow promises, but are in fact fundamental to launching and maintaining a successful and viable digital signage initiative. In an effort to ‘air’ the challenges between the hollow discussion and fundamental reality of accomplishing these concepts, this session will be a moderated point-counterpoint debate between Matt Schmitt, president and founder of Reflect Systems, representing the industry/vendor perspective and Rebecca Walt, vice president of retail digital strategy at Integer, a shopper marketing agency representing the end-user point-of-view.

As an independent consultant specializing in quantitative intelligence and digital media valuation that drive valued business solutions incorporating digital signage, I have been party to the market’s inception and experienced its growth to what Frost & Sullivan’s recent research predicts will become a $2.55 billion global market by 2018. Yet despite this growth people who have been tasked with either exploring or implementing a digital signage solution struggle with presenting a solid, credible Return on Investment (ROI) argument to the executive decision makers.

Why? There are a number points that have undermined a meaningful advance for digital signage ROI.

1. From a historic point of view, digital signage was a brilliant tactical solution in desperate search of a strategy. Technologists combined the ‘new’ plasma flat panel display, a computer and IP network technology and were able to demonstrate a fantastic and compelling solution. In all my years, I never heard anyone say that digital signage “sucks.” An early encounter with a marketing executive at a major retailer set me straight when, during a technology demonstration, he stopped me and reminded me that “we sell stuff.” In short, despite its visual appeal, if digital signage could not be proven to help sell more “stuff” — and enough stuff to offset its cost, then it was a solution to a problem that didn’t exist.
2. Those that loved the technology, interested in implementing digital signage into their environment, would inevitably ask, “How do I pay for this?” The technology vendors, whose business relied on selling digital signage software and hardware, jumped on the third-party advertising bandwagon. Without going into all of the details, suffice it to say that there were many years lost in pursuit of this financial holy grail — not to mention the millions of dollars wasted pursuing these gambles.
3. Then along came the term ROO — Return on Objectives. Really? A digital signage initiative for a national retailer will require a capital investment in the millions. There isn’t a retailer where that level of financial commitment would not require approval by an executive committee where one of its members would certainly be the chief financial officer (CFO). There is no CFO who values her job that would approve a project costing millions of dollars based upon ROO.
4. Do the math! Most corporations have an understood internal rate of return (IRR) by which every prospective project is measured. This rate is typically between 8 percent and 14 percent. The IRR of a particular project is defined as the “annualized effective compounded return rate” or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment. Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project’s internal rate of return, the more desirable it is to undertake the project. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first. A digital signage initiative that requires millions of dollars of capital investment and is understood to be disruptive in its implementation will require a calculated IRR (based upon real dollar ROI or EVA calculations) to be significantly higher than the organization’s minimum IRR in direct relation to the perceived risk of the project. Perhaps that’s why we haven’t heard of many (or any?) noteworthy case studies of digital signage at retail.

No body will argue as to the importance of digital signage. Digital signage is here to stay and grow. So too, is the question of ROI. ROI can take on many forms but in the end it must be based on specific initiatives and their associated dollar values. Intelligent ROI investigation and quantifiable calculations made with repeatable client data must support viable initiatives. Those are but a few of my personal observations and experiences with regard to digital signage ROI. With the help of our participants at the forthcoming DSE session I will shed light on some of the key ROI challenges in a forum that will hopefully strip away the glossy veneer of this important topic in order for you, our audience, to make intelligent and sound business decisions with regard to digital signage.

Author Adrian Weidman will be moderating Session 8 entitled, “Articulating Objectives & Realizing Tangible ROI,” on Wed., Feb. 12 at Digital Signage Expo 2014 at the Sands Expo & Convention Center in Las Vegas (4:00 – 5:00 p.m.). For more information about DSE or to register for this seminar, click here.