As you think about how to demonstrate your event ROI, it’s necessary to understand the full range of costs and benefits. Most planners just look at the basics - direct costs and direct revenue, which are straightforward and well understood. But to get a complete picture of ROI, it’s important to go beyond these basics and understand all ROI components - what we call the eight essential drivers of event ROI.
Direct & Indirect Costs
First, let's summarize the costs most readily familiar to event planners, direct costs and indirect costs. Direct costs include food and beverage, venue rental, travel, entertainment, décor, and marketing and promotional costs. These are the invoices you receive after your event, and finance's line items for event costs.
Additionally, indirect costs are the costs of hosting your event. These costs are allocated based on resource assignment. Examples include salaries, allocation of technology expenses, and other shared resources. Planners can calculate these costs by using accounting processes such as activity-based costing. This method assigns attributed costs to products, services, and events. Work with your finance team for help with these calculations.
Also easily understood and easy to calculate is direct revenue. This is money made directly from hosting, or participating in, an event. Direct revenue includes ticket sales or registration fee, sponsorship packages, onsite product sales, hotel commissions, advertising, fundraising and government grants. This revenue would not be collected unless you hosted your event.
Beyond the Basics
Lets start by taking a look at opportunity cost. Opportunity costs don’t show up on a company’s balance sheet, but they happen for every event. Opportunity costs arise from the scarcity of resources and how an organization chooses to deploy those resources, whether it’s people, products or services. Because a company invests in an event, they forgo an investment into a digital marketing or a brand campaign. This alternative source of value represents an opportunity cost.
An example can be helpful. A company allocates 500 hours of time from its planning, sales and marketing teams to plan and execute an event, at a cost of $25,000. The resulting uplift to the company from this investment is $250,000. The organization may be able to deploy these same resources to other activities, such as developing and executing a sales and marketing campaign, for a payoff of $300,000. As a result, the opportunity cost of doing the marketing campaign instead of the event is $50,000 -- $300,000 less $250,000.
Next, we will explore attributed revenue. Organizations market and promote their products through sessions, product showcases, and 1:1 meetings. Product positioning drives benefits over the long term, and as these deals close, they are booked as attributed revenue. Multiple attribution models exist. Work with your internal teams to determine what model makes the most sense for your organization.
Last, and the hardest to calculate, is brand equity, which refers to the brand value of an organization. Brand equity is an intangible benefit, therefore it is not measurable, and offers longer tail rewards. A number of variables feed into this event driver including awareness, quality, image, loyalty and identity. Event attendance leads to customer loyalty, which fuels Customer Lifetime Value, the long-term profit from a customer over the course of their affiliation with the brand.
For more information on the complete set of eight essential drivers of event ROI, please sign up for Cvent’s webinar here.