It's hard to imagine a serious retailer opening a new store today and not making digital signs part of the shopping experience. But getting retailers to pony up to retrofit their existing stores is a tougher nut to crack. For that, it's a question of, "show me the money." Detailed ROI data is essential and for the most part, that kind of data has been in notoriously short supply.
But that's not the case in the world of Quick Service Restaurants (QSRs). McDonald's, Burger King, Dunkin Donuts, Wendy's and countless other QSRs have shown a big appetite for digital signs in the form of digital menu boards. And their experiences are providing some real insight into how digital media solutions pay for themselves.
Digital menu boards are specifically designed so restaurants can showcase offerings, prices, promotions and more. Instead of employees climbing up rickety ladders to update menu offerings, now it's all done safely from the comfort of a keyboard or, increasingly, a touch screen. That's not only safer, but over time it's also cheaper. More sales take place because instead of stale, static product shots, QSRs can now promote their latest mouth-watering options in vivid HD quality. Want to change pricing or promotions based on time of day or demographics? No problem, with a digital menu board you can do it as often as you like.
Those are the value propositions touted by manufacturers of such systems, but does all of that pay off over a reasonable period of time? The answer is unquestionably yes and yes, but not as much or as fast as the vendors of these solutions would like you to believe. At least that's my main takeaway from a 20-page Digital Signage Today White Paper. I like this piece because instead of just repeating the claims of the manufacturers, the writer went out and talked to a wide range of restaurant executives, vendors and other industry insiders. The white paper dispels some myths while getting under the hood to pinpoint what really drives ROI.
The real sales lift: 3 Percent or 300 Percent?
Various figures have been bandied about claiming that digital menu boards can produce sales lifts of as much as 20 percent and in some cases more than 300 percent. But, as several vendors noted, a 20 percent gain would mean customers are lined up around the block and a 300 percent gain would have caused every restaurant in America, if not the world, to race out and install digital menu boards.
When pressed for more realistic numbers, those who know pointed to an average, across-the-board sales lift of 3 to 5 percent. So, for a typical QSR with roughly $1.2 million a year in gross revenue — 40 percent ($500K) taking place indoors, and therefore impacted by the digital menu boards — and earning a 70 percent margin, a 3 percent boost adds some $10,000 a year to the bottom line, delivering a payback in approximately 18 months. Not too shabby.
But getting to that 3 to 5 percent sales might, in fact, involve getting a 300 percent sales lift on a specific item. Understanding that is your first step toward realizing how digital signs generate real return. Here's why:
While a restaurant implements a digital menu board for its entire menu, realistically, the ROI gains aren’t spread so evenly. In fact, many of the major gains in ROI are likely to come when the menu boards are adapted to promote sales of slow moving but high margin items. A 300 percent sales lift on a single, highly profitable product is going to have an outsize impact on ROI. In effect, to really make a big return, put a big focus on products that themselves generate a big return.
Interestingly, it also seems that some of the big menu board success stories don't even take place inside the restaurant. While the basic premise of these solutions is to showcase what's available and simplify ordering, it turns out some of the most profitable installations are in restaurants located in heavily trafficked food court or promenade locations, where the imagery on the boards acts not as a way to simplify ordering, but as advertising to pull in passersby.
Digital menu boards, as with all digital signage, are infinitely adaptable. You can change content in seconds. To drive ROI, you need to take full advantage of this capability or the results are likely to be sub-par. Simply listing all your offerings doesn't get you ROI. Adapting messages on the fly based on the customer and/or the items being purchased, again guiding customers to higher margin/slow moving offerings and/or reminding them of things that they might not have thought of, that's what generates real return. According to the white paper, one of the few ways in which Burger King will definitively attribute some positive sales results to the use of digital menu boards is by using them to message specific items at specific times during the day.
Unlike traditional paper/plastic signage, the images on digital signage don't fade or break. They look great every day. But to keep your ROI on track, don't go overboard with the graphics. You may not need splashy videos or animation--just great looking pictures and a lot of them. In short, don't cut into your ROI by going Hollywood on your content. In the nano-second that people spend looking at your display, make sure they get the whole story.
Finally, it's a "soft" return, but for many of the biggest names in fast food, branding is what drove them to adopt digital menu boards. When McDonald's rolled out its McCafé displays to a little more than 10,000 locations, it wasn't thinking ROI as in selling more burgers, it was thinking ROI in terms of making its brand competitive with Starbucks. Dunkin Donuts is relying on a major digital signage rollout to support the transition of its stores to all-day dining locations, not just your morning pit stop for coffee and donuts.
So here's the net-net as I see it: Digital signs in all their variations are the wave of the future for on-premises promotion and communications. But they don't lift profits all by themselves. Signs used to promote low margin products in low traffic areas won’t generate much return. To be successful, they need to be tightly integrated into the fundamentals of a business as it is shaped by pricing, promotion, customer demographics and more. That's not a new story, but the experience of fast food restaurants once again shows the essential truth of it.