A few years ago, the concept of return on investment (ROI) came to the forefront of the event industry, shrouded in hype. Proving that the hype should be believed, more and more clients and agencies are being asked to measure every event they produce. Even agencies that don't get asked on a regular basis to produce ROI reports realise its importance. "It gives the industry something tangible to show clients, as to why events are important," says Pure Event Management managing director Charlotte Wilson.
The recent downturn in the financial sector is helping to propel ROI back to the top of the event agenda. Because the amount of money available for event marketing budgets is constrained, it leaves clients with no other choice than to provide the holders of the purse strings with a viable event that will generate a positive ROI. With only a few exceptions, the general consensus is that events are organised for the purpose of influencing its guests' perceptions and behaviour in order to increase the value of the product or brand.
"Running an event is no longer just about having a good time," explains European Events CEO Christopher Palmer-Jeffrey. "The success of any major event that focuses on corporate or staff entertaining, or charity work, is all based on forethought and planning, and now it is simply not good enough to splurge a big budget and hope that the event goes off okay."
Palmer-Jeffrey believes there are a number of rules that need to be adhered to, regardless of whether the event is experiential, live or creative. These include understanding the intentions and objectives of the event, establishing a clear baseline that will contain hard-and-fast financial parameters, and establishing timescales for measuring the results. He insists that ROI could include an improved working environment if, for example, the event was an internal staff party or awards celebration, where the financial gains are more long term and not necessarily measured in financial terms. "Return on investment, by definition, needs to be financed and can include increased levels of business, continuity of business and reduced cost of sale," says Palmer-Jeffrey.
Although a lot of agencies in the industry tend to follow their own models, they all seem to stem from the Phillips ROI methodology. An expert in this particular field is European Event ROI Institute managing partner Dr Elling Hamso. Working on the premise that all events have stakeholders, which could be event organisers, sponsors, exhibitors or guests, he believes they all have different objectives. "Overall, there is only one reason why we have events, and that is to influence the people at them," explains Hamso. "The idea is to influence the participants to do something after the event that they would otherwise not have done. We want to change behaviour, and to make them do something that adds value to the stakeholders for the lowest possible cost."
To demonstrate this, Hamso follows what he describes as the ROI pyramid, which is divided into five steps. It starts with satisfaction and planned actions. This can be achieved by asking guests or delegates about the content of the event, and whether they intend to take specific actions as a result of attending. Pure Event Management's Wilson admits to regularly conversing with her clients to gauge levels of satisfaction. "We look at the feedback that we receive from our clients on the events we produce, so that we can assess whether they have been successful and satisfied the objectives," she says.
Another agency that does not regularly get asked to provide event measurement, but for the past five years has developed its own model, is Mask. Seemingly taking inspiration from the ROI pyramid, Mask managing director Arthur Somerset reveals that his model also follows a strict set of rules. "We look to find out the objective of the event and work with the client to measure it," reveals Somerset. "The objective could include a variety of elements, such as attendance, sales, client retention or staff motivation, or whether guests received the message that was intended to be sent, which could be as simple as a 'thank you'."
In a similar vein, European Events's Palmer-Jeffrey believes that ROI is not necessarily a strict financial equation and that an improved working environment will pay dividends in many different ways, which in turn will eventually feed into the bottom line. "Not all entertaining is corporate or for charity," he says. "For many organisations it is about staff morale and motivation."
This in itself leads onto the second stage of the pyramid, which is about learning and is split into four aspects: attitudes, information, skills and relationships. From here the next step is measuring application. "This is where you need to look at what your guests or delegates have learnt from the event," says Hamso. It is here that companies can discover whether or not the planned actions were achieved. "This is about the 'guests doing something afterwards' element, putting into practice the skills, attitudes, relationships and information provided in level two," says Hamso.
Underpinning all of this is the impact that this new knowledge will have on the business or client who has held the event. For example, if a group of people can work better and more efficiently together as a result of team building, or if sales staff apply their new skills and are able to sell more in the future, then the fourth level - the business impact - will have been attained.
When all of the first four levels of the pyramid model have been reached, all that remains is to work out what the ROI is as a profit percentage of the cost of the event. "The ROI calculation itself is very simple once business impact has been converted into money and the costs have been recorded," says Hamso.
Expressing concerns regarding those in the industry who don't yet employ a thorough form of measuring ROI, Hamso says: "Most people only measure satisfaction. Of course the venue, food, entertainment and hotel are important, but they are not the whole story. I think a big problem in the industry is that a lot of people put all their money into only measuring satisfaction, but to have sustainable return on investment you have to work from the bottom up with regard to the pyramid."
Throwing a curve ball into the measurement arena is agency Jack Morton, which uses its own ROI model called nGauge. The company did not want to reveal its inner workings, but what is arguably more intriguing is the fact that Jack Morton also measures return on engagement (ROE) alongside ROI when considering experiential events.
"Experiential marketing delivers cognitive, emotional and sensory engagement, leading those who experience it to want to engage others, and this cannot be measured in a linear way like traditional marketing channels," reveals Jack Morton PR manager Victoria Yates. "ROE is designed to measure the quality of people reached, along with the quality of impact on their thoughts and actions.The nGauge model is designed to assess both of these areas of measurement."
Whatever model or system is being put in place it would appear that measuring events - no matter what category they may fall into - and creating some form of profitable return is becoming more and more essential. "As with all things, the more you put in the more you will get out," says Palmer-Jeffrey. "Forethought and planning, and not just taking it for granted that 'we always run an event so it's okay' is no longer good enough. It's important to remember that running an event is not just about having a good time."
DR ELLING HAMSO, MANAGING PARTNER, EUROPEAN EVENT ROI INSTITUTE
The ROI pyramid:
Stage one - Satisfaction and planned actions
Stage two - Learning: attitudes, skills, information, relationships
Stage three - Application
Stage four - Business impact
Stage five - ROI
CHRISTOPHER PALMER-JEFFERY, CEO, EUROPEAN EVENTS
ROI can include:
1. Increased level of business
2. Continuity of business
3. Reduced cost of sale
4. Joint business ventures
5. Protection from competition
6. More donors and donations
To achieve this you need to:
1. Have clear objectives of the event
2. Set hard financial parameters
3. Establish a clear baseline
4. Set a target for success
5. Have measuring timescales