Return on Investment: The value of events

The events industry has long sought a means to evaluate the return on investment (RoI) of events. As with every other form of marketing and business expenditure, the event budget is continually under scrutiny and pressure to demonstrate its value to an organisation.

I recently attended a master class run by the European Event RoI Institute which suggested a methodology I will outline in this article, as I believe it has real credence. But before I do so, I would like to put RoI into everyday context.

Gaining a return on investment is something we look to do in many more situations than one would first imagine. The issue, however, is how do we measure it? What are the measurement criteria and how do we use different measurement techniques in different situations? Then, what do we do with the information once we have it?

Suppose we invested our hard earned cash in a piece of modern art from an up-and-coming artist. On one level we would look to derive a return from this investment in terms of the enjoyment we get from looking at it, as well as the satisfaction that comes from owning a piece by that particular artist. However, on another level we would be considering what its value might be in three to five years time, when we wish to sell it.

Likewise, when it comes to building a home extension, we would factor in the enjoyment of the additional space, but would also think about how much value it will add to our property. We may even consult an estate agent or do some research on neighbouring properties. We would evaluate this in relation to the cost of the extension and the cost of borrowing the money. If we had the money, we may look at the return we could expect elsewhere before making our investment decision.

Pharmaceutical companies are charged with delivering an RoI to their stakeholders. Day in, day out, decisions are made about whether to license a new product, deploy new software, invest more in R&D or even about whether to buy another company.

Again, a whole set of criteria will be applied in each instance to inform those charged with making the final decision. In some cases the decision will be an easy one; in others hours of debate will be required, along with analysis of future trends, to arrive at a decision which, at the end of the day, is largely judgement based.

Expenditure on events is a major investment for many companies in the sector and some will have arrived at their own set of criteria to justify and support this investment. Others will see it as something they have to do. Companies should question why they are having a particular event and whether having delegates attend adds any value to the organisation.

In most cases the predominant focus will be on finding ways to reduce the costs.

All businesses, not least those in the events industry, could do with a methodology that helps to demonstrate the potential RoI achievable from an event or a series of events. The Phillips RoI model offers just such a means to measure the RoI on any type of event, from sales conferences and team-building events, to product launches and congresses. The degree to which one can evaluate the event is flexible, with different levels available to suit and satisfy the individual stakeholderís requirements.

As with all forms of research, the fundamental question is: What am I going to do with the information and what actions will I take as a result of knowing it? If this question is not asked, the very cost of the exercise and investment therein must be called into question.

A great strength of the Phillips RoI model is that it avoids the need for complex and often expensive forms of analytical techniques such as econometric modelling and regression analysis. In a nutshell, it works by breaking the RoI of an event down into the following five levels:

 Level 1: Satisfaction and perceived value ñ this addresses issues such as the venue, the speakers, the event as a whole and the usefulness of the event

 Level 2: Learning ñ this measures the changes in knowledge, skills and attitude of the delegates. It is the basis of any event and should be measured pre-event, at the conclusion of the event and at designated periods after the event

 Level 3: Application ñ this measures changes in on-the-job behaviour and is measured at a given period post-event. Clearly learnings are important, but it is even more important that they are applied to the business

 Level 4: Business impact ñ this measures the impact on the business resulting from changes in the delegates' behaviour in monetary terms

 Level 5: RoI ñ this is always expressed as a percentage and is the net financial benefit deriving from the event as a percentage of the event costs.

At the outset this may seem simplistic but, as with so many things, the simpler the better. Being able to calculate the effect of the event in isolation from the effect of other forms of communication, marketing and business activity is important. To do this, one generally had to look for a robust control model, eg, a large enough sample of those who were not able to attend the event and for whom the data is available for comparison with those that did. If this is not in existence then, as in many forms of effectiveness evaluation, one resorts to the world of the data analyst.

The Phillips model offers a practical and pragmatic alternative to this by asking key managers to use their judgement and attribute a percentage to the monetary value of the event versus other factors. It then asks the same individuals to attribute a confidence level expressed as a percentage. The monetary value and the two percentages are then multiplied together to give an adjusted figure.

The final RoI is this adjusted figure, less the cost of the event, divided by the cost of the event and multiplied by 100 to give the RoI percentage.

This model works particularly well when the objectives for the event can be set out in accordance with each of the five levels above. This demands some effort and time but it immediately promotes the concept of running events to obtain returns from the outset. It also becomes an invaluable tool for the event management company when creating the programme and planning the event in its entirety. It means every facet of the event is working towards achieving a very detailed set of objectives. This in itself will bring about a more effective result.

The construction of the post-event evaluation forms should also be set out in accordance with each of the five levels. This puts further scrutiny on every aspect of the event, which puts pressure on those organising it to ensure delivery on every front.

What is deemed an acceptable RoI for an event will vary from organisation to organisation and will depend on the type of event, but 20 per cent is commonly felt to be a figure to aim for.

The feedback received from levels 1ñ3 should not be under-estimated, for this data in itself could be enough to convince many stakeholders of the value of the event. If delegates depart armed with changes in knowledge, skills and attitudes and if subsequent feedback reveals that they have changed their behaviour in the workplace as a result of this, then most people will not need any further convincing.

For the majority of external pharma events this may well be as far as the evaluation is taken because the available data is insufficient to analyse what portion of monetary value can be attributed to the event.

Analysis of the data in 1ñ3 could be beneficial in planning future events and setting benchmark targets. When used correctly, this feedback could lead to continuous improvement. Everyone would be more accountable, which can only lead to better results.

Many event agencies and clients are drawing their own natural conclusion on RoI, or using some form of methodology to do so without necessarily evaluating it to the nth degree.

The Phillips model sets out the context for planning the event. This ensures that every component is considered from the perspective of how it will deliver against its objectives. When combined with the evaluation, this ensures that clients get an event which makes their budget work very hard for them, with very real returns to their business.

So going back to the event I attended as a delegate ñ I learned something that I am applying to our business and that will create a positive impact to our offering and the events we run for our clients. We will gain a commercial return and so will our clients. Will I measure the RoI? No. You don't always need to and one should never forget that there is a cost in doing so. Measuring RoI should only be done when, in itself, it will lead to an RoI.

As a final thought, in today's ever changing world, events should ideally also be planned to minimise their impact on the environment and put something back into the community in which they are taking place. The former can be measured fairly easily and the latter, if done correctly, can have a profound and immeasurable effect on your delegates.

Mark Saxby is sales and marketing director of WorldEvents (mark.saxby@worldevents.com)