“ROI” is one of the most talked about and yet the least credible objective typically set for trade show events.  Here’s the reason: unless you have access to gross sales dollar figures resulting from the event, you cannot calculate ROI. Unfortunately, most companies are not successful in tracking leads to sales.

What Is ROI?
ROI (return on investment) is the gain or loss (“return”) from the dollars invested in various efforts that drive sales. Examples of such efforts include research and development (R&D), marketing campaigns (including trade shows) and sales promotions.

Calculating ROI
The calculation for ROI is actually fairly straightforward.  Divide the gross sales dollars resulting from the effort by the cost to execute it. 

Example:
$600,000 gross sales were generated from your trade show event and it cost you $150,000 to produce it.
$600,000 ÷ $150,000 = 4
ROI is also expressed as a ratio.  In this case, it would be 1:4, which means for every dollar invested you got back four.

Bad News/Good News
The bad news is that leads from shows are seldom able to be tracked all the way to a sale, so you won’t have the numbers needed to calculate  actual ROI. 

The good news is that there are ways to estimate ROI from an event such as a trade show.  Here are three ways you can use for your next event.

1. Estimating ROI from collected sales leads
Many sales departments have researched certain aspects of their sales activities that will help an event manager to project potential ROI from trade show and private user events.

For instance, some companies know the average number of qualified leads [note the operative term is “qualified”] it takes to get a specific number of opportunities to present to potential buyers, and how many of these opportunities will end up as a sale.  The numbers of presentations that close in a sale are known as the “close ratio.” Over time, a company will be able to compute an average close ratio. If you have this information, you can use leads generated at a show to estimate potential ROI from that event.

Calculation
Multiply total qualified leads by average percent of leads it takes to get to the presentation stage
Multiply that number by the average percentage of presentations it takes to close a sale.
Multiply that number by the average revenue per sale or product sale to get estimated gross sales
Divide gross sales by cost of the event to get ROI

2. Projecting ROI from distributor recruitment
Projecting ROI from distributor or dealer recruiting objectives involves the same principal as above.  Most sales departments already know the average revenue that a new dealer will generate in a given year. The calculation follows and you can apply this same formula if your event objective is to recruit new sales representatives as well.
Calculation
Number of dealers (or sales reps) recruited x Average annual revenue per dealer (or new sales rep) = Potential gross sales for this objective.
Potential gross sales ÷ Cost of the Event = Estimated ROI

3.  Projecting ROI from Sales Conversions
You can also perform a sales conversion study to calculate projected ROI.  Basically, this is a controlled interview technique that is done generally within two to three weeks of the event.  It is best conducted by telephone or e-mail and by experienced professionals. 

The interview intent is to uncover buying intentions and a purchasing time frame from the pool of qualified leads collected at the event.  From this information, you can project gross sales from the event and in many cases, by sales quarters.
Calculation:
Gross dollar buying intentions ÷ cost of the event & the cost of the survey = Potential ROI

While measuring explicit ROI can often be quite daunting, these techniques are frequently much easier to achieve because the information is more easily accessed from sales groups. And, you can apply these same techniques to direct mail and email campaigns.

Use of projected ROI is a way to strengthen reported results from trade shows and customer events as well as to upgrade credibility to management.  And it is a wonderful way to build working relationships between sales and event management.

About the author
E. Jane Lorimer is managing director of Lorimer Consulting Group in Denver, which focuses on exhibit and event operating efficiencies, measuring and evaluating event results, and client development/retention.  Contact www.lorimerconsulting.com  or call 303-388-9224 in Denver.