ROI and TCO of Digital Signage

Digital signage in becoming more and more popular, which is understandable when you look at the performance statistics. In retail, sales of four out of five products experienced almost a 33% increase when promoted on in-store digital signage. In addition, digital signage can help to achieve other business goals. For example, digital signage can improve customer experience at checkout lines through reduced “perceived wait time” by up to 40%

We understand that there are often a couple of challenges when discussing digital signage with stakeholders. Firstly, we have found that people do not understand the entire cost of digital signage solutions. Secondly, we have found that they often fail to recognise the benefits.  

Alpha Digital Networks PLC aims to help people to understand the full details of our digital signage solutions so that you can build a comprehensive case based on your needs. This article will explain the total cost of ownership (TCO) so that you can calculate the ROI of digital signage. 

Some digital signage manufacturers have online TCO calculators. However, TCO calculators can be very effective but they are not comprehensive. We understand that every digital signage project is different so there is no ‘one size fits all’ calculator that can help. Signage solutions can vary in size and complexity. Therefore, to create an accurate representation of the costs, you must look at the project as a solution, not simply a piece of hardware.  

We have found a framework to help calculate these costs. With this list, we will look at what you need to think about as part of the costs and we will go through how to work out the real ROI of digital signage. 

digital menu boards
Digital Menu Boards installed at Cheltenham Racecourse

Key Cost Components of Digital Signage 

Firstly, we will look at the costs involved in owning digital signage. This will include all the upfront costs and on-going running costs. Therefore, this will make up your TCO calculations.  

The initial cost of display system is the thing that most businesses are careful with when assessing the value. These costs can include the screens, mounts, cables, installation, media player and content development. However, this upfront cost is only the beginning. Most businesses do not think about the costs of repairs and upkeep. 

One very easy thing to overlook when investing in the hardware is, if you are planning to run your screen for 12 hours a day, you will need a commercial grade screen. A normal TV screen will work for a short while but then break so it will need replacing. This is false economy as it is not just the screen cost, it will then cost you extra in labour and repair costs. Furthermore, a broken screen also means that your customers are not seeing your important information. Therefore, this could lead to a loss of revenue. So, it is worth investing in a commercial grade screen to avoid these issues. 

Benefits of Digital Signage 

After now having looked at the costs involved, it’s important to factor in the possible savings and advantages. However, if used properly, the benefits of digital signage can outweigh the costs. 

Increased Impact 

Digital signage allows you to showcase your products in an engaging, eye-catching way. You can use colourful, dynamic images and videos to capture audiences. Adding the ability to use touch on our digital signage allows you to get great engagement levels from your audience too. 

Statistics show that digital signage can create higher reach and engagement from audiences. It also can be highly effective in motivating customers to take action when compared to traditional static or paper media: 

In this study, static ads have been compared with digital ads. Both mediums asked the exact same number of customers to go to the desk to get a free gift, far more people who saw the digital ad actually did this. Only six people who saw the static ad collected their gift. However, 610 of the people who saw the digital ad collected their gift.  

Value 

Digital signage delivers much better value for money than traditional static signage. For example, you can update our digital signage instantly and have numerous messages showing on a loop. This is much better value than paying for one space on a static billboard which does not change.  

Also, commercial grade screens can be much better value than TV screens. Digital signage displays bring a better visual performance, are able to operate for long hours and can have greater brightness for outdoor use. Commercial screens will also last longer so save money on repairs. 

Flexibility 

The flexibility of digital signage is fantastic and worth a lot to businesses. Businesses often spend a lot on printed materials, such as, leaflets, menus and posters. All of these have lots of costs involved. They need designing or writing, printing and distributing. Digital signage is much more flexible. You can update digital content instantly and remotely to eliminate the distribution and printing costs.  

Resources 

Digital signage can save lots of personnel time and, therefore, costs. For example, you can automate some repeated tasks and save human error. Digital signage can be used to save on personnel costs at events where totems can be used direct and inform visitors. You can also use digital kiosks to take customer orders. Digital signage can provide information in a highly engaging and personalised ways.  

Video Wall installed at Ikon Furniture

Measuring Success 

Businesses need to be able to measure the success of their digital signage investment. There are two ways to measure the success of digital signage: 

Return on Investment (ROI) — looking at how profitable the investment is. 

Return on Objective (ROO) – setting a goal and then measuring success against that goal.  

As we are calculating the TCO, we will focus on the ROI and see how it can be calculated. It might sound complicated, but if you have all your costs, it is simple. Calculating ROI is based on the money you’re making from the investment, the true cost of the investment, as well as the amount of money you’re saving from your investment. To put it simply, less cost and more sales amount to more profit. 

Calculating ROI 

The way to calculate the ROI of your digital signage is to compare sales data from before you had the digital signage solution to your current sales. Alternatively, if your business has multiple locations, you can set up digital signage in half of the locations and using traditional signage in the other half. Ideally, you could compare two locations with similar annual profit and footfall.  

If you have a small business with just one location, try to compare one month with and one without your digital signage. Just try to pick two similar months to make the result fair. 

Then, track the sales data in both scenarios, ideally year on year to avoid seasonality and events affecting the outcome. 

When tracking sales, think about: 

Total revenue 

Gross profit 

Net profit  

Once these numbers are correct, think about what you needed before the digital signage solution, such as staff, TVs, and printed literature.  

Bringing it all Together 

Now, you should understand: 

The true total cost of digital signage 

The benefits of digital signage 

Based on your sales analysis before and after digital signage, a monetary figure of how many sales digital signage has brought in 

Based on pre-digital signage cost analysis, a monetary figure of how much you spent on staff and printing 

Then, here is the equation: 

TCO of a display x Number of displays required = TCO of the digital signage solution 

Sales increase + Signage cost savings – TCO of the digital signage solution = ROI on digital signage 

Now we have explained how to calculate the TCO and ROI involved in digital signage solutions, you can look at these figures to decide on if you feel digital signage is for your business.  

Alpha Digital Networks manufactures, supplies, installs and maintains high-quality digital signage and content solutions. From ultra-bright screens to freestanding digital displays or LED panels, we are happy to see if we could help you with your digital signage project. You can see our product range here. Speak to our team at 03300 020120 or info@adnplc.com for more information or a free, no-obligation demonstration.  

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