Calculating Digital Signage ROI for Retail

Digital signage can look like a big line item when you're running a shop. A commercial screen, a media player, installation, software and content all add up. The question every retailer should ask before buying is simple: will it pay for itself, and how will I know?

The good news is that digital signage is one of the more measurable marketing investments you can make, because it sits so close to your point of sale. This guide walks through how to work out the full cost, which benefits to count, and how to measure results without guesswork.

Step 1: Add Up the Full Cost

Start with the total cost of ownership over the life of the screen, not just the purchase price. Include:

• Hardware: commercial-grade displays, media players and mounts. Commercial screens are built for long operating hours, which is why they cost more than consumer TVs.
• Installation: mounting, cabling, power and any building or landlord approvals.
• Software: most cloud content management platforms charge a monthly or annual licence per screen.
• Content: design time, photography or video, whether you do it in-house or outsource it.
• Running costs: electricity, internet and occasional maintenance.

Spread the upfront costs over the expected life of the hardware so you can compare them fairly with the ongoing costs they replace, such as printing.

Step 2: Identify the Benefits You Can Count

Digital signage tends to pay its way in four main ways. Not every business will see all four, so only count the ones that genuinely apply to you.

Extra sales from promoted products

This is usually the biggest benefit. Screens let you promote high-margin products, bundles and add-ons right where customers make decisions. The key is to measure the lift in sales of the promoted items, not total store sales, because the overall number is affected by too many other things.

Print and labour savings

If you currently print posters, price tickets or window decals every month, add up what you spend on design, printing and delivery, plus the staff time to put them up and take them down. Digital signage replaces much of that with a few clicks.

Faster changes and fewer mistakes

Being able to update prices and promotions instantly reduces the risk of advertising an out-of-date price or promoting stock that has sold out. That is harder to put a dollar figure on, but it matters for customer trust and for meeting your obligations under Australian Consumer Law.

Supplier-funded content

Some retailers sell screen time to the brands they stock, or use supplier co-op marketing funds to pay for content. If that's an option for you, count it as income.

Step 3: Run the Numbers

The basic formula is:

ROI = (total benefit minus total cost) divided by total cost

Here is a simple illustration. The figures are invented for the example (they aren't KBServices prices; every signage job is quoted to the space), so swap in your own:

• A retailer spends $6,000 over three years on a screen, installation, software and content.
• Promotions on the screen generate an extra $400 a month in gross profit on featured products.
• The retailer stops spending $100 a month on printed posters.

Over three years the benefit is $18,000 ($500 a month for 36 months). The ROI is $18,000 minus $6,000, divided by $6,000, which equals 2, or 200 per cent. The payback period is the total cost divided by the monthly benefit: $6,000 divided by $500 is 12 months.

Always use gross profit, not revenue, for the sales lift. An extra $1,000 in sales on a product with a 30 per cent margin only contributes $300 towards paying off the screen.

Step 4: Measure Properly

The most common mistake is installing a screen and simply comparing this month's sales with last month's. Seasons, weather, school holidays and local events can easily swamp the effect of the signage. Instead:

1. 1

   Set a baseline.

   Record sales of the products you plan to promote for four to eight weeks before the screen goes live.

2. 2

   Promote specific items.

   Feature a small number of products at a time so you can see which promotions actually work.

3. 3

   Use your POS data.

   Your POS system can report sales by product, hour and day. Compare promoted items with similar products that aren't on screen.

4. 4

   Use a control where you can.

   If you have more than one store, run a promotion on screen in one store and not the other, then compare.

5. 5

   Track response directly.

   Add a QR code or a screen-only offer code so you can count sales that came straight from the screen.

6. 6

   Review regularly.

   Check results monthly and rotate out content that isn't pulling its weight.

Step 5: Get More Out of Every Screen

ROI isn't fixed on installation day. The same screen can deliver very different results depending on how it's used:

• Placement: put screens where customers pause, such as near the counter, along the queue or at the entry, and at eye level.
• Dayparting: schedule different content for mornings, lunchtimes and evenings so you're always showing the most relevant offer.
• Keep it simple: one message per slide, large text and strong colour contrast. Shoppers usually only glance at a screen, so make every second count.
• Keep it fresh: content that never changes quickly becomes invisible to regular customers. Our guide to digital signage content strategy has ideas for a rotating schedule.
• Check brightness: window-facing screens need high-brightness panels to stay readable in Australian sunlight. See our guide to high-brightness window displays.

Make Your Signage Pay Its Way

KBServices helps Australian retailers plan, install and manage digital signage that's built to be measured, from choosing the right screen for the space to organising content schedules. If you'd like help estimating the return for your store, contact us or request a quote.