The business landscape is changing. Recent surveys find that many corporate leaders feel marketers are disconnected from the financial realities of the business. Marketers must better understand how their activities generate quantifiable customer demand and lead to revenue. The rise of technology and online digital channels makes it easy to track customer behavior from interest to purchase. But traditional, offline channels such as events are much more difficult to track from event activity to purchase. There is a huge opportunity for event marketers to understand and track event ROI to meet C-suite expectations.
Cvent’s five-part series on event ROI helps event professionals understand the drivers of ROI and how to measure specifically for events. The series will help event marketers and planners become more confident in the metrics available to get a true read on the success and impact of events on the business.
Return on Investment (ROI) is a financial ratio used to calculate the benefit or return generated on an investment relative to the amount of money invested. It is most often measured as net income divided by the original capital cost of the investment, expressed as either an increase or decrease in the amount invested.
For example, if you purchase a house for $100,000, make $25,000 in renovations and then sell it for $150,000, the cost of your investment is $100,000 plus $25,000 plus $5,000 in marketing and another $7,500 for a realtor’s commission, for a total of $137,500. $150,000 less $137,500 is $12,500, which equates to a ROI of nine percent.
How Event ROI Differs
Determining and calculating ROI for events is more challenging. Some events are specifically designed to generate direct revenue, say through ticket sales, sponsorships or produce sales. Calculating return is pretty basic.
But, most meetings and events are not directly tied to revenue. Events designed to deliver training or provide quality interactions with customers are more challenging to quantify and measure. Similarly, it’s hard to put a price tag on events aimed to build brand awareness. Non-revenue driving events demand a different value standard to determine their benefits.
Tangible vs. Intangible Benefits
Events have tangible and intangible benefits. Tangible benefits include direct revenue, sale of products, attributed revenue and attributed sales pipeline. Intangible benefits are softer metrics such as brand equity, customer loyalty, knowledge exchange and training.
On the cost side, event charges such as travel, hotel, entertainment and venue are direct and fairly straightforward. Event expenses such as staff salaries, shared services contracts and overhead costs are more complicated, all of which are indirect costs. If additional staff is needed to support an event, is this added cost covered by sales, marketing or the event team? How do you gauge event time for these individuals versus costs for their regular day jobs?
Event ROI Formula
Given that events provide benefits that go beyond direct revenue, we replace net income with “Benefits.” We replace investment with “Costs” to capture all costs associated with an event. Benefits divided by costs provide a more accurate formula to calculate event ROI.
Take inventory of the costs and benefits with your own events. More information on calculating event ROI can be found here.