Platt Retail Institute: It's Always About the Numbers
Through a special arrangement, presented here for discussion, is a summary of a current article from the Platt Retail Institute's Journal of Retail Analytics.
Having been immersed in the ever-evolving industry we call "digital signage" for the past 11 years, focused on the retail sector, I am continually confounded by the number of times I've observed the same failed strategies and implementations being repeated. I remember meeting with a media buying agency executive in 1999 and he dismissed digital signage as a "fad." It is clearly not a fad, but the digital signage industry has not yet generated the revenue streams, with several notable exceptions, that have been anticipated for the past 10 years.
The reason digital signage has not flourished financially is because the justifications to implement these networks are not founded upon business fundamentals.
Most digital signage projects begin as an exercise in technical curiosity instead of being founded on serious economic considerations. How many Requests-for- Proposal (RFPs) for a digital signage implementation have been authored by the financial department of an enterprise? I have yet to read one. All too often, these RFPs are issued by organizations that require insight and education on the features, functions and capabilities of the various technologies along with a spreadsheet that contains four core columns: the product/service description, unit price, quantity, and extended price. This exercise inevitably leads to some form of the following response: "It's too expensive." All too often this response is a convenient excuse.
Is a $10 million investment "too much" if that investment is shown to bring a $55 million annualized reward within 18 months? The answer is: it depends. It depends on where and how you got your numbers and the associated risks. Anyone can determine and manage costs; it's the revenue side of the ledger that is far more difficult to assess. Revenue projections, whether factored as advertising dollars, units sold, incremental margin, etc., are always bridled by risk assessment. A solid business model will minimize those risks while optimizing both sides of the ledger. Any business assessment will be made based upon the client's acceptance and ownership of these figures.
I once worked for a CEO who, despite efforts to focus and discover the underlying business substantiated by the sales numbers of a pilot program, insisted that the purchase decision was going to be "an emotional decision." The project never went beyond the pilot. Decisions that involve this much money and directly affect careers will not be made solely on emotions. It didn't in this case and it won't in others.
Business decisions have always been based upon risk/reward. "If I invest $X will I make $5X?" This is usually followed by "How fast can I make $5X?" These questions are the cornerstones to making informed and educated business decisions, no matter how many zeros come before the decimal point. With all the complexities associated with a digital media network, answering these basic business questions should be a priority because the answers are vital to securing the funding necessary for these systems.
Discussion Questions: Beyond sales lift, what's the biggest area where retailers can justify a return on investment from digital signage? Will adoption ultimately occur/fail to occur, despite a positive return, because 'everyone else is doing it'? What are the particular challenges in making a financial case for digital signage?