Digital Signage Connection

I’m not an accountant. I am actually a sales and marketing type. But I am very familiar with return on investment (ROI). It is a basic business principle that we all live with. If a project doesn’t eventually pay for itself, why do it? We are all in business to make a profit. That’s what makes our world go around.

Those of us in the sales and marketing end of business understand that our projects must have an ROI. In the world of finance, the formula is black and white. What did you spend? What did you make? If the expense is higher than the revenue, the project was a failure. In the world of sales and marketing, however, there is a lot of gray area, especially when dealing with the relatively new field of digital signage.

First of all, there are many different kinds of digital signage applications. Is it institutional or commercial? An institutional application, such as digital signs on a corporate campus, may not generate revenue. It is an expense, pure and simple. On the other hand, digital signs in a retail environment have the ability to increase sales, and even generate hard dollars through ad sales.

Can we say that institutional signs are immune from the ROI scrutiny? To a point, I would say yes. However, this application can save the institution money in the long run. Eliminating printed signs, with the manpower and supplies that are attached to them, is a point that can be measured. But there are other less measurable attributes that digital signs can have, which do contribute to the bottom line. A digital signage system on a college campus makes it look modern and forward thinking. More than likely, a possible new student will want to attend a clean and modern campus over a university that seems outdated. Accounting can’t put a price on it, since they will never know why that new student chose your school over another. But, us marketing folks will always believe that digital signage has a positive effect, whether it can be directly measured or not, and is worth the investment. Add to the model the ability to sell space to advertisers at some point, and the project will look more appealing.

When someone starts to talk about digital signage at retail point-of-sale, this is where a finance department really starts to get out the microscope for further examination, as they should. Every penny spent on capital improvements to a store has to be closely examined. However, what factors are the signs judged on? If it is strictly a "revenue out versus revenue in” structure, then the signs will probably fail the test. There are too many variables and unknowns to judge the project only by a mathematical formula.

Here are a few criteria that need to be addressed to judge the project:

1. What period of time will it take for the hardware to be amortized?
2. What would your estimated sales be with and without the digital signs?
3. What is the intrinsic value of modernizing a store?
4. How much will the signs save in printing and manpower costs?
5. Can space be sold on the signs to recoup some of the cost?

As you can see, the formula could become too complicated. Plus, there are so many soft or immeasurable costs to consider to accurately judge the real ROI. Add to that the fact that the technology is too new to have real hardcore statistics on sales improvement to truly judge the effects as compared to other deployments.

Today, there are many methods being developed to gauge traffic, time spent in front of the signs and usage of the content. As these tools become more sophisticated, and more sign systems are placed, the data will be compiled and an accurate snapshot of the effectiveness of the systems will emerge, in both institutional and commercial applications.

In the meantime, true ROI is virtually impossible to judge. It is crucial that companies do not shy away from employing digital signs because of actual ROI. It is effective, it is necessary and its time in both institutional and commercial applications has come.

Digital signage is in a place today where the Internet was 15 years ago. Looking back, it was the early Internet adopters who reaped the greatest rewards of the new technology. The same will hold true for the pioneers of digital signage. They will always be steps ahead in the learning curve.

The traditional method of measuring ROI does not really apply to digital signage, not yet at least. When considering whether to institute digital signage into your facility, be deliberate, be informed, but don’t judge the project strictly on a mathematical formula. The formula is a work in progress. Just don’t get left behind the competition, as you may never catch up.

Perry Goldstein is a veteran of the electronics industry. After spending 30 years in consumer electronics, he has transitioned into the Pro AV industry. Currently, he is sales & marketing manager with El Segundo, Calif.-based Marshall Electronics, where he heads the company’s Digital Signage and MXL Pro Audio division. To contact for questions regarding the information in this article, email perry.goldstein@gmail.com.