Platt Retail Institute: It’s Always About the Numbers
by Adrian Weidmann, Founder, Storestream Metrics, LLC
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.
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.
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?