Payback ratio is a useful tool to help compare the value at your next event.

Payback ratio is the ratio of the total value of estimated revenue, cost savings and promotion value divided by the event cost. The payback ratio tool is great for conveying the value of your marketing events. This tool serves not only as an indicator of event efficiency, but also a useful way to compare past, current and future events.

To understand payback ratio, let’s discuss the four main categories of value derived from marketing events:

Revenue sales opportunities – Because people are involved in many steps required to close a sale, the sales cycle may take years. It’s possible to estimate probable revenue, using internal assumptions, such as “close ratio” or “average value of sale.” However, the best approach is to discuss with your sales team and define the “next step” expected of people who become leads.

Retention and growth –Retention and growth of current revenue base – Customer Relationship Management (CRM) is critical for all organizations and can impact on retention and profitability. By keeping customers up to date, meeting their needs and thanking them for their business, your company will see great results internal and externally.

Cost Savings/ Avoidance –Substantial cost savings and expense avoidance may be achieved through trade show activity. This element of value is the most tangible and traceable source of ROI on an event. Your event plan should have specific tactics to maximize the time, place and focus opportunity made possible by the event. Reporting, these results in your event measurement report will add credibility and financial justification to increasing sales.

Promotion Value –Promotion value at a marketing event provides real, identifiable value. It may be calculated using “ad equivalency” values, which are derived from what an equivalent advertising cost to accomplish a similar promotional impact would be. Although it’s less popular today, it is still used to report promotion value in terms of total impressions made at events and used for comparing with your competitor.

Using the payback ratio as an index is a great way to convey the value of your marketing events. The payback ratio provides qualitative and quantitative analysis of events and often times helps to more easily facilitate a discussion with executives. Remember to use the payback ratio as a simple measure of success for your event marketing program.

Written by Ed Jones for Gateway

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Ed Jones knows what delivers real return on investment - actions on the part of prospects that lead directly to the order. Or, in the case of your employees, behavioral changes that improve business results. He knows how to elicit that behavior and how to measure it. Ed has nearly thirty years experience crafting prospect, customer and employee communications programs that lead to the improvement of the bottom line of businesses. His approach has turned many large corporate communications programs inside out, with dramatic results. Ed is equal parts finance, marketing, sales and creative.