By Rick Kiley, Co-Founder of SoHo Experiential
I once felt that the best parts about working in experiential were the experiences themselves, witnessing the joy on attendees’ faces, seeing clients’ pride at the consumers immersed in their brands. Over time, however, I’ve grown to appreciate a different aspect of my job — the feeling that comes from reporting analytics which show that we’ve created not only a memorable experience, but one that is a verifiable difference maker.
This “difference” can be defined any number of ways, but it usually comes down to an uptick in sales. It doesn’t matter if you are recruiting new consumers, increasing use by existing consumers, generating PR impressions, or increasing social media buzz — ultimately those metrics always support a business sales objective.
Experiential marketers would do well not to fear this reality, but rather embrace it. In my opinion, proving ROI on a brand experience is far clearer than any marketing discipline other than coupon redemption. Furthermore, most client side brand builders don’t view shopper marketing as a brand building activity; instead, it’s viewed as one that supports commercial partnerships and achieves short term sales goals.
Experiential leaders must take the time to educate our clients to look beyond the social buzz, twitter impressions and “Top 2” box ratings, and work with them to ensure that we measure our programs in a way that shows tangible, sales-based ROI. When you (or your client) goes in front of the CEO to report on the program, do you want to say that your campaign generated 50 million Twitter Impressions? Or do you want to say your program generated a 5% increase in sales on Year 1? I, for one, always prefer the latter.
Here’s how it’s done:
Step 1 – Define Success In Terms Of Incremental Sales
If I were to cut this list down to one step, this would be the one. The simplest method for achieving this task is sitting down with the client and engaging in a simple mathematical conversation. Start with this question:
How long are you willing to wait to earn back what you invest in the experiential program participants?
Meaning, if your Cost Per Attendee (CPA) is $100, how long can you wait until you earn back that $100 in the form of profits from incremental sales?
For ease, let’s say the answer is one year. Next, your client needs to deliver a Gross Profit (GP) per unit constant for our algebraic formula. Again, for ease, let’s say it is $10 per unit. In this example, our goal will be to design a program where, on average, each participant buys 10 or more incremental units over the course of a year. $10 in profit x 10 units/year = $100 Cost Per Attendee.
The equation for any example would be [GP(y) ≥ CPA], before your time limit expires. GP is always constant, “y” is the number of incremental sales units that result from the program, and the CPA is the all-in cost to drive someone through the experience. If, after you evaluate a program, you end up with a left side that is MUCH larger than the right side, then you have a very successful program. If the right side of your equation is higher than the left, you need to either figure out a way to make it more efficient (read: cheaper), or go back to the drawing board and come up with a new concept.
Step 2 – Establish A Baseline Understanding Of Product Usage
To properly measure incremental sales, we first need to understand where we are starting from. If a person attends our bubblegum event, and then starts going through 10 packs of bubblegum a month, we need to know whether they were chewing 2 packs or 9 packs the month prior. Increased usage can vary dramatically, so before guests participate in our experience, we need to know their current relationship with, and usage of, the brand.
We usually try to capture more, but there is really only ONE question required to set a good sales baseline:
How much of my brand (i.e. client’s bubblegum) did you consume in the past 30 days?
Once we get that answer – from the people who have never heard of our client or their bubblegum, to those who are already chewing it constantly – we can average it to create a Baseline for Program Participants. We can then measure the change in the baseline after the event in order to create our ROI model.
Step 3 – Conduct Follow Up Research
We suggest conducting two follow-up research studies after the event, and don’t let your client cut the budget for them! The first survey should come 30 days post-event, to record changes in behavior, and the second 60 days after that, to see if the initial changes were temporary or sustained.
Email surveys are the easiest and most cost effective to implement. We always recommend providing an incentive for completion ($5 Amazon or Starbucks gift cards work well), so that you can ensure you can capture a statistically significant sample size (10+% of participants).
Through this research we can capture anything our clients wish to know (e.g. which other brands of gum do you chew?), and most importantly, we ask the questions relevant to our ROI model. We will repeat the question from step two, and add a second as well:
How many people did you speak to about the event OR brand in the past 30 days?
Once we can accurately assess our results, we have enough information to create a sales based ROI Model.
Step 4 – Build The Model
I know. More math. Stay with me. Essentially, we want to show an increase in consumption for attendees, and then make some assumptions about the people our attendees speak to about the brand/event.
Part A – Determine usage increase of attendees
If attendees, on average, chewed two packs of gum every 30 days before the event, and then chewed FOUR packs of gum in the 30 days after the event, then the incremental increase is TWO packs of gum. Hopefully, when you conduct your second survey, you will see that the result is still an additional two packs a month. If this is the case, and your time horizon to earn back the investment was one year, you can say that your program contributes 24 incremental sales units/per year, per attendee.
Plug that into our equation from Step 1 to see if GP(24) ≥ CPA. If it is – you are done! Please stop reading this blog immediately, call me, and tell me what you did. I’ll likely try to hire you on the spot! You will have created an extremely successful program, since it doesn’t even rely on peer conversion to deliver on its sales objective. However, if GP(24) ≤ CPA, then we need to move onto Part B.
Part B – Estimate incremental sales due to peer conversion
On paper, this is easy; however, it requires a client (and their CEO) to buy into an idea and agree, in principal, to three numbers. It’s even better if you can deliver some insight through 3rd party research, or your client’s internal planning department, which would make the estimate more grounded. The numbers are as follows:
- The percentage of people a program attendee speaks to about a brand/event that will increase their usage
- How many incremental sales, on average, will result from those who increase their usage
- How many incremental sales, on average, will result from those who attendees trial on usage (“trial” means: when people not only tell their friends about the gum, but give them a piece to try while telling them how awesome it is)
This blog is getting long, so I’m not going to get into the equations here, but this is really where your scale comes from. If someone speaks to 10 people about the brand/event in 30 days, and are still doing that when you conduct the 90-day measurement, you make the case that they influence 120 people a year. Then, if 25% of the people they talk to increase their usage, that’s 30 people per year who do so. And if those 30 people buy just one pack of gum every 2 months, that 180 extra units per year!
So, our litmus test for incremental sales, GP(24) ≥ CPA, is now GP(204) ≥ CPA! By adding in the resulting peer conversion, this fake program just became 8 times more effective!
Step 5 – Optimizing Your Efforts
In reality however, once going through all ROI exercises, more often than not, we still aren’t delivering the sales target. Do not fear, it doesn’t have to mean the death of your program.
If, after nailing down all of the numbers on the left side of the equation, we still haven’t hit our sales goal, then we have to start working on the right side of the equation, by reducing cost, and making it more efficient. This isn’t always easy, but we wouldn’t be event professionals if we didn’t know how to do something for nothing!
Sometimes you can get there by increasing throughput, and cutting extraneous program elements. It may sound counterintuitive, but sometimes the best way to get there is by adding scale and asking your client to increase their investment!
Sound crazy? It’s not. It’s easy to ask someone to double or triple the investment if I have an ROI model that shows how they will make their investment back in a year. You know what’s crazy? Trying to ask for more money without one!
Don’t Fear The Numbers
My hope is that those of us in the events business embrace quantitative program measurements, because it will truly set us free. With quantifiable figures at our back, clients will be able to truly grasp the uniquely effective manner in which experiential marketing drives sales.