Wednesday, January 29, 2014

Digital Signage Sales 101: The Tech Train is Leaving the Station


When everyone was “day trading” stocks during the hot stock market, back in the late 1990s- I was there. I eventually became a stockbroker but cut my teeth on day trading tech stocks. I was enthralled with emerging technology probably more so than actually the financial technicals of the underlying equity- DSL, communication systems, cellular system evolution and manufacturing the machines that make the machines.


As with any market there was a underground of scallywags who manipulated the penny stock market with false stories and message board posts. A common title might read “The train is ready to leave the station, all aboard!” So foolish investors would rush in to buy, and drive up the price of the penny stock. Then the scallywag sells out, makes a pocketful of loot, the stock price plummets and the late investors get burned. It happened all the time.


But regarding technology, when do you jump on that train? Note that the “technology train” never really leaves the station with you standing on the passenger platform waving goodbye. It’s track is a circle so it leaves the station to the North, just as it’s caboose enters the station to the South. You can’t really miss technology, it just depends when you want to jump on board.


Why would an LED sign end-user not buy today? Why do so many pizza joints and doctor’s offices still stand on the passenger platform in that technology train station and watch the train go by, over and over again.


I think the primary reason is that end-users (and perhaps their sign company) really still fail to see the LED sign as paying for itself with superior, cost-effective advertising, and increased sales revenues. Do you believe it?


Many of you are expecting me to toss that old Small Business Administration (SBA) study that everyone uses down onto the table and quote it verbatim. I could, because it’s correct, but I’ll do my own worse-worse case scenario on revenue generation.


Quoting only one line from that study:


“ Businesses who added an outdoor LED sign enjoyed typical sales increases of 15%-150%.”


Let’s say they only see a 10% increase in their business. Further, another SBA report says that the average sales revenue of a small business (100 employees or less) is $3,000,000. We all know that is very high because so many very small businesses are viable customers. So, let’s divide that number by 10, and say the average sales revenue is only $300,000, per annum.


Math time:


Sales increase of $300,000 x 10% is $30,000.

Assume a margin of 33%, ie- every dollar brought in, 66% is used to cover the cost of goods.


So, about $10,000 of increased income  is coming from those hot ads running on the LED sign.


If a $25,000 LED sign is financed for 4 years at 8% interest, the payment is, about $600 per month or $7,200 per year.


So if you can increase profit by $10,000 for a $7,200 expense, is that a good deal, or what? And, what if this “worst-case” scenario is too conservative?


Think about it. What happens after the 4 year financing period? The display will probably last a lot longer than that assuming the pizza joint doesn’t want to re-visit that technology train early and get a better one. Say it lasts 8 years. Years 5-8 don’t have any payment or interest charges associated with them. “Free Money” so to speak.


My guess is that the sign company either doesn’t show these facts to the pizza joint owner, or the sign company doesn’t believe it. Another possibility is that the sign company estimator is not that used to this simple scenario and could benefit from some role play on improving  his presentation. A simple “fill in the blank” worksheet could help and it’s simple to create.


Somehow you have to convince your customer that now is the time relinquish all fears and  jump on that “Technology Train”. Some manufacturer’s make it easier on the customer by providing professional content and easy-to-use, yet powerful, software.


Remember too that you can overcome customer objections but not excuses. Fear of complex technology is an objection- make it simple for them by doing your homework and finding the manufacturer that is shifting industry paradigms. Professional content and great software is not a promise of the future its out there right now.


Do your due diligence and figure it out!


These comments belong to me, Mike Prongue, and do not reflect the views, opinions, hopes or dreams of anyone else, anywhere else and this includes Vantage LED. I appreciate your constructive opinion which may be sent to me at michael@vantageled.com. 

1 comment:

Craig Rathbun said...

Like your perspective, as a display guy it would amaze me to see people/companies just jumping in, substituting Digital Screens for their old analog menu boards just to keep up with McD's.

Soon they did discover that there is real ROI through the merits of day parting, targeting, theme-ing, up-selling and a host of other weapons that they never used before. The trick is to get it started with a couple of boards and playback appliance.

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