You think satisfaction rate is all you need to measure the success of your event? Let me confess you a tip: do you know what ROI is? ROI or return on investment is the new must-have of the event sector.
The main benefit of this method is that you can calculate the impact of each step of your event management process. In this article, I unveil to you everything about return on investment.
What is return on investment?
Return on investment is financial indicator expressed as a percentage. It’s calculated thanks to the ratio benefits / cost of the investment.
Finally, the return of investment replies to the question: is my event profitable?
You can use this method to take the best decisions for your business: what actions can increase your return on investment, meaning to reduce costs, to increase benefits or both?
You can choose to:
- Stay focused on costs: a traditional vision, generally adopted by the board of directors.
- Consider the global value of your event: tickets sold, the number of participants, notoriety, image of partnerships, opportunities created, evolution of turnover…
The impact of the event goes beyond the revenue generated and you can prove it to your hierarchy. ?
Why to calculate the event’s return on investment?
To measure its efficiency
An event is always integrated in a global enterprise strategy and it responds to a strategic objective. For instance, if the objective of your event is the increasing of 30% of your product selling in the next 6 months, the cost of your event do not have to exceed the incremental sales turnover. To know this, you need to measure the return on investment: cost of the event / incremental turnover generated. Find out how to set the objectives of your events in our article.
To justify your expenses
Excepted if your are at the head of a corporation (and yet, you may have investors), you have to be accountable to your hierarchy. If you want to organize an event even crazier the next year, and so to obtain more budget, you must prove by A+B that the event of this year has been successful.
There is nothing more efficient that the return on investment in this case!
To take the right decisions
If you succeed to identify the return on investment of each step of the event management process, you could:
- Determine the most efficient invitation’s channels
- Identify which expenditure items to optimize
- Choose the most profitable project
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How to calculate the event’s return on investment?
The consistency between all the stakeholders
An event is an enterprise’s action integrated in a global strategy. The keyword is so the CONSISTENCY. If the experience of your participants has to be fluent, the calculation of your ROI will be the same way too.
The definition of return on investment of your event has to be the same for the whole of the stakeholders. First of all, ask yourself what is the aim objective: improve adhesion, reinforce motivation, secure the loyalty, incite to the purchase… Your actions must be integrated in this collective vision, and do not only fit with your personal objectives.
The calculation formula of the return on investment
Return on investment = (benefit of the investment – cost of investment) / cost of the investment.
The benefit can be :
- The average basket after a customer event
- The incremental sales after a commercial seminar
- The sales of tickets for a festival
If an investment costs 1000 euros and generates 1500 euros, the return on investment will be equal to : (1500-1000)/1000, equals to 50%.
Return on investment analysis
If the ROI:
- Is inferior at 1, the company knew a loss.
- Is equal at 1, the result is neutral.
Thanks to the tools of today, you can now evaluate each step of you event management process. Indeed, it is so much easier to gather the right information to measure an accurate return on investment. Find out our article about the indicators to follow in the event sector.
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