A review on KPI's and ROI's in the European events industry
Several marketers in Europe tend to complain that events are problematic to measure, this review begs to differ. As you read along it is designed to show you that with a little prior planning, events measurement is not only possible, it’s categorically simple because events are the most powerful marketing channel there is. However, the impact of this channel has traditionally been the hardest to measure but in this piece you will find out that secret therein lies in setting measurable objectives in advance and choosing a proper KPI.
When choosing KPIs, one needs to ask; what are some of the objectives that make sense for event planners? They vary all over the marketing plot, from generating sales leads, to strengthening bonds with customers, to building community relations. For business marketers, event objectives normally fall into one or more of these classifications: Achieving ROIs, Building awareness, closing sales, signing contracts, generating returns, conducting market research, entering a new market, or introducing a new product amongst a few others.
Basic KPI (Key Performance Indicator) Definition
A key performance indicator is a computable measure a firm uses to conclude how well it meets a set operational and strategic goal. This indicates that different businesses have different KPIs subject to their respective performance criteria or significances, these indicators frequently follow industry-wide principles.
There is a delicate variance between key performance indicators and marketing metrics. A significant fact to reminisce is that KPIs are marketing metrics but not all marketing metrics are KPIs. A corporate body must know how to decide which marketing metrics qualify as their key performance indicators. Proper KPIs are characterised by a set of attributes, they must be Quantitative, Practical, Directional and Actionable.
A key performance indicator must be constructed upon legitimate data and deliver framework that echoes corporate goals. They must be demarcated in a way that is beyond the control of the firm, where the firm cannot interfere with their accomplishment.
Examples of Key Performance Indicators
An organization’s KPI is not the same as its goal. For example, an event may be aimed towards the sales of a particular product but use the rate at which its targeted clients refuse to purchase that product as a KPI to determine its position. On the other hand, a business may use the percentage of income generated from the event to the targeted group as its KPI. Examples of KPIs for events include:
- New clients’ influx
- Demographic analysis of individuals (potential customers) applying to become customers, and the levels of approval and rejections.
- Position of present customers
- Return on investments (turnover brought about by events, meetings and seminars)
- Customer attrition
- Turnover (i.e., revenue) generated by segments of the customer population
- Profitability of customers
Now let us talk about the most common KPI used in in the European events industry, the “ROI or Return on Investment” but before I go on, we need to know the difference between KPI and ROI.
ROI vs. KPI
To gauge the performance of any event, a sound methodical strategy should be employed to measure the impact of a determined Key Performance Indicator (KPI) on that event which thereby indicates the Return on Investment (ROI). Both are benchmark metrics to gauge the health of any event and its objectives. To begin, every event should have a plan, which includes clearly stated objectives to be achieved during or after the event while the KPI that will indicate the event is on track toward achieving an acceptable if not exceptional ROI. For example, when planning an event for a certain business, only the KPIs that influence business outcomes to bring high ROIs should be monitored. To be effective KPIs must be Relevant, Specific, Quantifiable and Timely.
KPIs need to provide instantaneous response of the event so business owners and planners can readily see any issues as these advances and intercede swiftly before it affects their ROIs. If the bulk of one’s ROI that is tied to holiday events and pre-holiday events are lagging, intervention in the form of probably another promotional event or advertisement pointing towards the already held event may be implemented to ensure that revenues are not further negatively impacted.
In effect there is a subtle difference between KPIs and ROIs, in that KPIs are principal methods used to achieve ROIs whether in event planning or in businesses in general. They work hand in hand and an ROI can hardly exist without the methods employed to come about it using an effective KPI.
After a detailed explanation on the difference between KPI and ROI, we need to define ROI in simple text and also in mathematical terms and explain why it is generally acceptable for event success measurements in Europe.
Return on Investment (ROI) =
(Sales Growth – Marketing Cost) x 100 / Marketing Investment
Return on Marketing Investment Definition
The Return on Investment KPI measures how much revenue a marketing campaign (e.g. events, seminars etc.) is generating compared to the cost of running that campaign. Effective marketers are driven to connect their time, energy and advertisements to achieving results that contribute to the targeted growth of the product in which the event was organised for. This KPI answers the question, “Are we earning the time and money we spent developing and executing our marketing campaigns?”
Let’s say we have a company that averages 4% sales growth and they run an €11,000 event to campaign for products sales in a month, if the sales growth for that month is €18,000. The calculation goes:
Return on Investment = [(€18,000 - €11,000) / €11,000)] x 100
There are various ways to benchmark your events Return on Investment to narrow down the metric to align with your objectives. Here are some expert advice and rules of thumb:
Marketers should measure Return on Investment against the following benchmarks: industry, campaign spending, the same month from the previous year, and what your boss or clients expects.
In measuring ROIs in events with the above method so as to reduce the possibility of not listing out some of the activities carried out to plan the event, an event planner has start by assessing the first step is which is to calculate the total cost to execute an event (TOCE). You have to know how much the venue costs or the booth sponsorship so you’ve got all bases covered however there is one thing event planners often forget to take account of which is the time and opportunity cost. To do this, you start by segmenting the event based on the level of effort and time required to organise it.
After doing that add the Impact in terms of monetary returns since these are quantifiable elements, like revenue generated, new customers acquired, deals won, etc. These elements are combined to produce an objective score using the method above.
As we all know, the planning of an event is an art on its own which can further enhance your organisations standing by bringing in positive unplanned virtues like brand recognition, networking, improving customer relationships which are valuable parts of events, but then these are harder to measure with the ROI formula in place so it is better measured by the monetary returns it brings about which is clearly well indicated in the above formula.
The Return on Investment KPI is the most accepted method of measuring events successes in Europe because it is short, precise and easy to calculate.
In conclusion this model has impacted many event marketing budget and the decision-making process of many events team. You are at liberty to make use of this prototype to fashion your own model.
My valedictory words – If you can quantify your event, you can improve it and achieve 100% success through it.