Digital Signage Pricing & Business Models
Many shops have, or can easily obtain, the skills required to compete in the low-end and mid-range of the digital signage market.
It has been speculated that with its ability to allow for more rapid information change, digital signage will impact the printed signage and graphics market. Of course some segments, such as billboards, are already seeing this impact in a big way. In some of InfoTrends recent research, smaller wide-format print service providers generally reported that they are not yet feeling the effects of digital signage on their business, and indeed many see digital signage as a new revenue opportunity.
From the print buyers’ standpoint, printed signage has an easily quantifiable cost. These applications, produced for a retailer or other B2B account, would sell for a few dollars per sq. foot or an established discount price depending on volume ordered. Shops that would charge $60 for a single 30x40-inch poster would produce 50 posters for less than $25 per poster. The cost of signage and graphics on this type of transactional basis is fairly easily recognized and the impact of a signage and graphics campaign can be measured by comparing the sales of certain products and services before and after the signage was installed. In other signage applications, such as vehicle wraps, which are designed not to drive direct transactional activity but to raise awareness and recognition of a particular product or service, measurement can be established through comparing web sites hits, number of telephone calls fielded, or even through a brand recognition survey. Advertisers can then develop metrics such as cost per impression, cost per new contact or cost per new web site hit that helps quantify the return on investment in a signage campaign. If we call these sales activities, inquiries, or brand recognition improvements “interactions” then calculating ROI is fairly straightforward; Net change in interactions/cost = ROI. There are also soft costs related to the management of print that are harder to quantify, these costs include shipping, installation, storage, and disposal.
This is the same kind of metric that can be applied to digital signage systems. There are multiple studies that show the strong ROI of digital signage systems as well as identify the tools that help quantify that ROI. Digital signage systems reduce some of those soft costs, such as shipping, changeover/installation and storage, but introduce other soft costs such as network management, content development, and maintenance.
Since many signage and graphics shops are becoming increasingly IT-oriented, develop content as a matter of serving their customers, and are configured to provide maintenance, it is natural that many are considering how they can play a role the in the growing digital signage business. For signage and graphics providers that are interested in entering the digital signage business, it is important to develop a clear picture of the economics of implementing and operating a digital signage system.
At the minimum, a digital signage system includes a screen and a content delivery mechanism. The small iterations of digital signage systems include a DVD player or hard drive that sends messages to a screen. Typically these systems are rented out on a monthly basis, and using a quick search InfoTrends found the cost to average less than $50 per month per screen. Larger implementations use network/IP addresses to send messages to individual locations, systems like that are typically offered for around $100 per month. Still larger iterations use broadcast messaging delivered via satellite. The pricing of that type of system is more complex and often very similar to the printed billboard market because pricing frequently depends on location and display frequency. The cost of displaying a billboard in Times Square is and should be more than a billboard off the highway in rural Tennessee because many more people will see it. Some of the companies such as CBS Outdoor that operate billboard-sized digital display systems have a pricing model that is very similar to how billboards are priced, based on location, but also factoring in duration and frequency.
Clearly, the smaller a digital signage system is in terms of scope, the less complex the configuration would be. As such, the sheer number of implementations of small signage systems is vastly larger than the high-end broadcast version, of which there are tens of thousands of sites.
InfoTrends believes that many signage and graphics establishments have, or can fairly easily obtain the networking skills required to compete in the low-end and mid-range of the digital signage market.
For shops that want to offer digital signage systems there are at least two different revenue models that have developed, homogenous and mixed use.
The mixed use revenue model of digital signage systems presents one of the challenges to straightforward economic analysis, partly because some of the benefits of digital signage include “soft”, but very real benefits such as more dynamic messaging, higher levels of interactivity and perceived reduction in wait time. These systems are, in effect, just like billboards, which are controlled by “outdoor advertising” companies but are rented out by the day, week, month, or year. Digital signage systems are “rented out” to advertisers based on very short time blocks, usually 3o seconds at a time. A complexity arose in this model because the store owners, mall owners, and airport operators would share in the advertising revenue derived from these systems. They don’t “own” the system; they simply hosted or allowed the screen to be displayed in their environment. This was the revenue model that many digital signage implementations were originally based on, and many still are, but wider-scale adoption required additional business models.
In the homogenous model, the messages displayed on a digital signage system are tightly controlled by a single company that wants to present information and promote products within a specific environment. An example of this is model is a digital signage system found in fast food stores that serve as digital menu boards that advertise and promote only the products the company is selling at a particular time. The signage system may present other information, such as news scrolls and weather forecasts, but the primary messages are advertising products being sold within that store or environment. In this case, the costs of installing and deploying a digital signage system would fall entirely on the institution that would host the system. In some cases, such as in a department store, the store may charge a company whose products they promote on their system, or they could work digital signage advertising into negotiated pricing.
Interactivity and Signage
Interactivity is an important dynamic that needs to be mentioned in the discussion of print vs. digital signage. Since one of the reasons advertisers invest in digital signage systems and advertising is to heighten the engagement they create with their customers, interactivity is seen as a great way to accomplish that goal. In some of InfoTrends’ recent research, wide format print buyers were asked if they use or have ever used QR codes or some other interactive media element in their wide format graphics. The percentage of shops that have used these interactive media elements has more than doubled from 2011 to 2013. Furthermore, the research found that in both cases over 90% of those that have included some interactive elements reported that they would do it again.
The point of all of that is that interactivity is an important trend in the signage and graphics market, and digital signage amplifies the opportunity to include interactivity because one of the ultimate advantages of digital signage systems is that it is dynamic, so messages can be changed much more easily than with static signage. The ultimate goal is to connect a digital signage system with audience measurement tools, such as EFI’s SmartSign Analytics tool, to create a dynamic set of content that would draw the attention of the viewers based on real-time measurement of the viewers.
Just as some believe that digital signage represents the next phase in the signage market, there are those that believe that mobile advertising will usurp digital signage systems. Not only does mobile advertising offer the dynamic element that digital signage systems offer, a great content strategy in the mobile market can be personalized based on location, preferences, travel patterns and more. InfoTrends envisions a combination of digitally printed signage, digital signage, AND mobile advertising to offer the highest rates of response which is what advertisers are really after.
Digital signage is a growth market already and many technologies and tools that will contribute to future growth are still emerging. There is an important similarity between the printed signage and graphics market for sign shops, and that is the strategic importance of a consultative selling approach on the one side, and a rigorous attention to operational detail on the other. In the digital signage business, the result of that highly consultative sales approach should manifest in a great content strategy which is the key to ongoing revenue streams. Digital signage is another channel that some advertisers will want to consider, and smart signage and graphics service providers will work to leverage their signage expertise, service capabilities, and content development experience to grow their business.
