What is the Return on Investment for a Sign?

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What is the Return on Investment for a Sign?

There are several factors that go into calculating the return on any investment.   Before you whip out your fancy-dancy calculators, we need to take a few of these factors into consideration.

Factor                                                                                                                                   Sample Data

  1. Total Cost of the Sign                                                                                                            20K
  2. Response rate from current forms of advertising                                                               1%-2%
  3. Customers that responded who actually make a purchase                                                 10%
  4. Average Sale Amount (annual sales/number of sales)                                                    $535.00
  5. Annual advertising budget (ie: direct mail 1M pieces)                                                         $60K
  6. Annual traffic count (SE Michigan go to SEMCOG.org)                                                 2,500,000

Based on the traffic counts, this sample company could spend $20K on signage and anticipate sales of $1,337,500.  That’s only $1.50 for every $100 sold.  Here’s our calculation using the sample data above::

Traffic Count   x   Response rate   x   Customer purchase rate   x   Average Sale Amount = SALES
2,500,000             x              1%          x              10%        x              $535       =   $1,337,500

If we apply our sample data to a retailer who uses direct mail types of advertising we could conclude that the sample company spends $60K on direct mail to generate $1,070K in sales or $5.60 per $100 sold.  Ie:

Ad Impressions   x   Response rate   x   Customer purchase rate   x   Average Sale Amount = SALES
1,000,000             x              2%          x              10%        x              $535       =  $1,070,000

In conclusion, wouldn’t it make sense to re-allocate some of those direct mail dollars and invest in signage?  Essentially, the signage would pay for itself.  Should this Sample Company choose to continue to spend $5.60 per $100 in sales on direct mail marketing?  Could advertising dollars be shifted from direct mail to additional signage at a cost of $1.50 per $100 in sales?

Contact Signarama today and get answers to these tough questions.

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