What is the ultimate goal of your POP display? Is it to increase awareness or to secure a sale? Perhaps you want to use your display to encourage consumers to download your app. In order to accurately determine whether or not your display is worth the investment, you have to have a set of concrete goals in mind.
Once you nail down these goals, you have to be specific. “Increase in sales at retail stores” is not a goal. “Increase sales by 35 percent at retail stores in a certain area code” is a more concrete, specific goal that allows you to easily track your progress. If you don’t have specifics in mind, how will you know if you’re comparing apples to apples, and even more important, how will you determine your ROI?
The basic standard for calculating the profit on your investment is to take the total profit and subtract the cost of the display. However, ROI is a profitability ratio, which calculates your return as a percentage. So your ROI isn’t technically the same as profit, according to Entrepreneur magazine.
There are quite a few formulas for calculating your ROI, most divide your gain from investment, minus the cost of your investment, divided by the cost of investment.
The formula looks like this:
ROI = Gain on investment minus the cost of investment divided by the cost of investment.
We’ll work an example:
Supposed you invested $2,000 on your POP display. You made a total of $2,800 in sales from that display. Therefore, your gain on that would be $800.
You then divide the gain ($800) by the total investment ($2,000) to get 0.4 or a 40 percent return on your investment.
Another popular formula is to take your net profit, ($800) divided by the cost of your investment ($2,000) and multiply it by 100 (40%)
If your marketing campaign is time-sensitive or will only be running for a year or two, it’s important to not only consider your ROI, but to understand when you will get your return on your investment. We believe that a POP display is one of the best ways to make this happen
For example, we worked closely with the The Naked Bee to create an award-winning display. Within one year, they doubled their display orders, achieving timely return on their investment.
It’s also worth noting that unless you change product, campaign or branding, you will not need to replace your McIntyre POP. Our displays are durable and will last throughout the course of your marketing project.
This is another useful formula you can use to calculate ROI. What makes this formula different is that it takes into account your inventory and what it costs you to warehouse that versus what you would gain if that was turned into cash.
According to Retailer Now magazine the GMROI formula is:
Annual sales minus the cost of sales divided by your inventory.
An effective POP display can help you move inventory faster and more efficiently. Compare the performance of a location with a customized POP display to an area without one by demonstrating how much inventory is being turned into sales.
Suppose your business sells candy bars. Your biggest seasons for sales would include Valentine’s Day, Halloween and Christmas. Instead of letting your product become “buried” in the candy aisle of a store, use a colorful themed POP display to your advantage.
If you need any convincing of the possible benefits, consider this: According to the National Retail Association, in 2017 Americans spent a staggering $9 billion in Halloween supplies last year, and Christmas sales for 2018 are predicted to increase 4.3 percent over 2017 for a staggering $720 billion.
You can’t afford to ignore that kind of purchasing power, and a seasonal POP display can easily work to your advantage by helping you rise above the noise of the market place.
This is another useful formula you can use to calculate ROI. The “sell through” is basically a percentage that compare the amount of inventory a retailer receives from the manufacturer versus what is actually sold to the customer. It is usually examined over the period of one month, according to information from Small Business magazine.
The sell through rate is:
Sales divided by your stock on hand times 100.
For example, if your company bought 100 power drills and after a month had sold 20 of them, you would have 80 left in inventory. By using the formula above, (20/100 ) x 100) your result is 20 percent.
Be sure to compare your sell through rate between areas with a customized display versus those with no display to demonstrate how well you’re moving your product.