Calculating and Communicating ROI
By Shari Steinbach, MS RDN, RDBA Contributing Editor
It is vital for retail dietitians to communicate the value of the work they do by showing a positive return on investment (ROI). For some programs, ROI simply means measuring the financial gain or lost relative to costs such as labor or materials. However, with some projects or programs the ROI may be more difficult to calculate as non-quantifiable data such as number of attendees or customer loyalty can be hard to define in monetary terms. Here are a few common areas of retail practice and suggested steps for tracking ROI:
Educational or promotional programs – From demos to product signage programs and consultations, you will need to show how these efforts drive sales and profits for your company. An ROI analysis for such initiative can vary in the amount of data included but the basic ROI formula is three steps:
- Estimate the Cost: Hard costs are anything that comes with a receipt, such as food, equipment and printed materials. Soft costs include the number of hours spent on preparing, attending, and following-up after the event.
- Estimate the Return: Consider any direct income such as that from vendor sponsorships, consultation fees and increased product sales. You may also be looking at how your efforts decreased costs for the company. For example, less prepared food waste due to a training program, or a reduction in insurance costs for employees who participated in a wellness program.
- Compute ROI: Calculate ROI by dividing the activity return by its cost. ROI = (Gain from investment – Cost of investment) / (Cost of investment)
Media segments/social media – Tracking ROI for media, either traditional or social, can be tricky but you need to understand if the time is worth the cost.
- Gather impression data from the station. Include the average number of viewers during your time slot and the number of views from the station’s website or social outreach.
- Work with internal teams. Advertising/PR can provide an estimated media value. Sponsored or free media segments can be valuable if the station, time of day, day of the week and the viewership are in line.
- ROI example: If the estimated value of a media segment is $40,500 (broadcast and online elements) and the total investment (what the retailer pays) is $20,100, then the retailer is getting a +49% in media value for this sponsorship which is a positive ROI.
Additional staffing - If more staff is needed for your department you must be able to communicate the ROI a new position(s) will bring. Your presentation should include:
- The Customer Perspective - Highlight the enhancements you expect customers will experience as a result of your staffing plan. (Examples - better response time or personalized services).
- Staffing Perspective - Indicate the favorable impacts you anticipate for team members. (Examples – less employee burn out, better customer support, reaching currently missed markets).
- Business Perspective – What are the benefits you anticipate for the business. This is the ROI. (Examples: Additional income opportunities, more pharmacy customers, increased private brand sales).