Despite these confounding factors, business leaders nevertheless consider ROI a crucial tool for understanding the value of technology services. When ROI is straightforward to calculate—given a clean data set—it is frequently used as the chief determiner of a technology project’s success. Retail technology teams can leverage this fact to their advantage in multiple ways. Anticipated ROI can build a concrete business case for a proposed technology solution. ROI calculated with existing business data can put a number on the drawbacks of legacy technologies, strengthening the argument for a replacement, if necessary.
This article outlines the process for making ROI a valuable part of your retail technology leadership toolkit.
1. Establish metrics and goals
The first priority in calculating ROI is to ensure it is calculated from clean and relevant data. While sales or revenue can be a straightforward sign of success alone, they present an incomplete picture. When creating the roadmap for your retail technology implementation, it is crucial to drill down into the metrics that most directly reflect your goals and most closely align with your desired outcomes—higher online customer satisfaction, for example, or improved traffic flow inside the shop. These priority metrics are called key performance indicators (KPIs).
A wide variety of business metrics may double as your KPIs:
- Net Promoter Score (NPS).
- Customer retention or churn rate.
- Customer effort score (CES).
- Customer satisfaction (C-SAT).
- Net sales volume.
- Conversion rate.
- Foot traffic.
KPIs represent your central project goals and will be used to gauge success. They must be concrete and actionable for your employees, and they must be relevant to your strategy. Other metrics can provide context and guidance or even warnings ahead of a setback—but without this core alignment, they cannot be KPIs.
Knowing your retail competitors’ KPIs provides a valuable benchmark for your team. Standard ROI calculations often do not take time into account (more below), but with frequent monitoring, you can gain an ongoing sense of your project’s success.
2. Link retail technology strategy to customer experience (CX)
Technology strategy should directly translate to CX or employee experience (EX) goals. Making this connection clear to all stakeholders, however, requires robust data and creative storytelling. If the project is a mobile point-of-sale (POS) system, for example, you can highlight connections to CX through shorter lines in-store or added capabilities like curbside pickup.
Cost efficiency and revenue are critical for retailers, who often operate on tight margins. Retail technology leaders can generate success in these categories by:
- Optimizing business operations and reducing friction.
- Improving CX measures to boost sales.
However, some ROI gains are less quantifiable, such as customer sentiment or employee morale. These aspects are less crucial to measure precisely but should be part of overall strategy and impact reporting.
3. Monitor and record results
Collecting data over time, notably when you can include metrics from before and after implementation, allows you to track the success of your retail technology project.
Data collection can take place across a variety of technologies:
- Physical movements of RFID tags.
- Geographic intelligence, such as heat mapping.
- Point-of-sale data.
- E-commerce analytics.
- Customer surveys.
- Customer sentiment monitoring tools.
Sales and marketing teams can analyze the data from these sources for consumer insights, and retail technology staff can assist by incorporating AI for more detailed analysis.
4. Surveys and consumer feedback
Business leaders can leverage established customer satisfaction measurement techniques, including NPS, to paint a detailed picture of retail technology’s impact on CX after a new implementation. Feedback forms, including brief surveys or quizzes, can target the KPIs associated with new technology and can be augmented with customer sentiment analysis from social media and AI insights.
Artificial intelligence also has a role in customer support strategies, where it can streamline contact center operations, facilitate customer self-service, and create efficiencies for support agents.
Also read: Transforming the digital workplace with AI
5. Weighing cost and value
Concrete metrics are the key to effectively communicating ROI. While variations abound, the most basic equation for calculating ROI is:
ROI = (Benefit value – cost) / Cost
This equation represents net gains against total cost. The challenge arises in accurately analyzing benefits and costs, as each can include indirect and poorly quantifiable factors. Licensing costs, consultation, implementation, maintenance fees, and software subscriptions contribute to the bare cost of any hardware and infrastructure. Improved CX and EX, greater cost-effectiveness and time-savings, and elimination of losses from legacy technology must all be considered when calculating benefits.
Most ROI calculations do not factor in the effect of time, although some more refined models have added a way to determine ROI over a defined window. In either case, retailers should compare similar times—or time periods—from before and after a retail technology implementation to achieve the most accurate picture.
6. Develop a narrative
Communicating ROI depends on accurate metrics, but translating those metrics into a story of real-world value will ensure that they have the impact you desire
Data can be dry and overwhelming for stakeholders. When information is framed in a narrative context that incorporates reference points and stakeholder concerns, the true impact of technology strategies comes across more clearly.
Consider these tools for framing ROI data:
- Context: A large number alone, such as “40,000 loyalty program participants,” may not mean much to your listener. Saying instead that your loyalty program could fill the Rogers Centre, however, creates a more vivid picture. Better yet, offer more information about the engagement of your most loyal customers, e.g., 82% engage frequently on social media.
- Trends: Demonstrate the progression of ROI data over time. Highlight the cumulative effects of sales growth, cost reduction, and other related metrics that provide ongoing value.
- Milestones: Concrete accomplishments offer a strong argument for success.
- Visualizations: Place numbers in context by creating compelling visual comparisons in charts and graphs.
- Case studies: If available, pointing to examples of success that parallel your strategy offers perhaps the most compelling case for any given retail technology. Choose cases that feature goals and KPIs similar to yours.
OnX Canada is your expert partner in maximizing retail technology returns.
The value of ROI as a metric enhances over time. It offers a checkpoint for retail businesses that facilitates regular reassessment of existing strategies and infrastructure. With ROI as a yardstick, successful retailers can create continuous improvement across revenue and cost, as well as CX and EX. Calculating ROI and communicating it effectively, however, presents a critical challenge.
OnX has deep expertise in retail technology solutions and the experience to make their added value stand out.
Contact us today to learn more about how OnX can help you maximize the returns on your retail technology investments.