When you are considering purchasing an LED display, the first thing you should focus on is ROI, not the price. It means how much profit you can make after the purchase. This article will guide you on how to calculate ROI, and how to maximize it as much as possible.
What is the ROI of an LED Screen?
ROI stands for Return on Investment. It means how much profit you can gain from the investment of an LED display screen, and how long it will take to recover the cost. The higher the ROI, the higher the profit it generates for you.
The calculation formula is:
For example, if your investment in a screen is $20,000, and you earn $30,000 in one year, then the ROI is (30,000 – 20,000) ÷ 20,000 = 50%.
The ideal ROI is different for LED screens used in different business scenarios. For an advertising LED screen, the ideal ROI is about 30%–100% per year, or even higher; for a rental LED display, this value is over 100%. However, it is worth noting that the specific ideal ROI value varies according to your actual situation.
What Does Your Total Investment Cost Include?
Hardware Cost
The screen is the main cost, making up more than 50% of the total cost. It consists of LED modules, the cabinet, the power supply, and the control system. The better the quality of the light-emitting diodes, the smaller the pixel pitch, and the higher the cost of the screen will be.
Installation Cost
Installation accounts for more than 10% of the total cost. If you plan to put the screen outdoors, the installation cost will be higher. The installation cost includes steel structure, foundation or wall reinforcement, framework, and labor costs.
Shipping and Import Duties
The transportation, insurance, and customs duties also need to be included in the total investment. It accounts for approximately 5% to 10% of the total investment. If the transportation distance is long and the screen size is large, this cost will be higher.
Operating Cost
The operating cost refers to the continuous cost you should pay for the screen after installation. It includes:
- Electricity cost
- Maintenance cost
- Content Production
- Location cost
- Control system and network costs
Operating cost is a very important part of the total cost, especially for long-term investment. When making the purchase, you also need to estimate the cost of this part in advance.
How Does an LED Display Help You Generate Profit?
Advertising Revenue
Playing ads is the main profit model of LED screens. You can charge customers based on the duration of the advertisement during that time. For areas with high foot traffic, such as shopping malls and subway stations, this might yield good profits. This profit model can provide you with a stable cash flow, and its risks are also lower.
Rental Business
You can rent the screen to event organizers for temporary use, such as for stages, exhibitions, pop-up stores, and corporate events. You can set the rental price freely based on screen size and rental period. The rental business model can help you recover your investment quickly. However, this may also bring some additional costs, like shipping, setup, and teardown.
Customer Attraction
If you run a shopping mall, retail store, or restaurant, LED screens can effectively help you attract customers. When the appearance of your screen and the content being played are attractive enough, people passing by are more likely to stop to watch and enter the store. This will enhance the influence of your store and increase your sales revenue.
It is worth noting that the ROI from this method is hard to calculate accurately. You can only estimate it based on the flow of customers and the revenue.
Branding Value
LED screens also have a benefit that is difficult to measure, which is improving your brand image. When you install a large LED screen in your showroom, product launch, or flagship store, it can provide an immersive visual experience for customers. This will undoubtedly increase your customers’ trust and bring a higher brand premium.
The Key Factors Influencing the ROI
Pixel Pitch
The pixel pitch determines the clarity of the screen, thereby influencing the visual effect and advertising value. It can be said that the smaller the pixel pitch, the higher the commercial value of the screen. However, better specifications will increase the screen cost. You need to choose a suitable pixel pitch.
Refresh Rate
Refresh rate is the number of times an LED screen redraws the image per second, and its unit is Hz. For LED screens, a higher refresh rate means a more stable display.
Common refresh rates for LED screens are 1920Hz, 3840Hz, and 7680Hz. If the screen has a lower refresh rate, black lines and flickering may appear when you film it. This may affect the ROI of the screen. Therefore, you should find the best balance between refresh rate and cost.
Brightness
Proper brightness can also effectively improve the ROI of the screen. If the brightness is too high, you will find the screen dazzling; if the brightness is too low, you won’t be able to see the displayed content clearly; both situations may lead to ineffective advertising.
The Location
No matter which profit model you use, the essence of how LED screens generate profits is to attract viewers to browse. The screen’s position and orientation lead to different viewing traffic. If foot traffic is low, your revenue will likely be affected. You should try to install the screen in a location with high foot traffic to increase its ROI.
Content Quality
When all other indicators are the same, the high-quality content will definitely be more effective in enhancing marketing results than low-quality content. The quality of a video depends on several factors, like frame rate, contrast, visual impact, pacing, sound, etc. If you do not have experience in video production, you can outsource it to other teams.
How to Maximize Your ROI?
Choose the Appropriate Profit Solution
It is wise for you to decide on the specific profit model you use before making the purchase. It determines your revenue structure and the upper limit of your ROI.
For example, if you have a place with high foot traffic and vehicle traffic, you can continuously sell the ad space for more profit; If you are operating a shopping mall or retail store, you can play promotional videos or posters to increase sales.
Select Appropriate Indicators
Configuration parameters not only affect cost, but also affect your future revenue. A poor visual experience may damage your brand image. You need to choose the right size, brightness, and refresh rate based on the actual environment. If you are not sure how to make a reasonable decision, we will provide you with the appropriate solutions.
Maximize the Utilization Rate of the Screen
There is no doubt that the longer the screen is used, the more people will be able to see it. This can bring you higher revenue.
If your revenue comes from advertising, you’d better fill all ad slots, and avoid the empty time; If you choose the rental model, try to build long-term relationships with your clients. Also, you can try to extend the screen’s operating time. These methods can effectively increase the screen’s ROI.
Choose a Reliable Supplier
The supplier determines the cost of your screen. On the one hand, the high-quality LED screens can reduce the failure rate. Also, if problems occur, a reliable supplier will provide technical support and long-term after-sales service, making the screen easier to use. You can check their project experience, solution capability, and after-sales service, then estimate if they are reliable.
FAQ
How Long Does It Take for an LED Screen to Pay for Itself?
The time required to recover the investment mainly depends on your profit model. Advertising and rental models recover costs the fastest, which only takes about 10 months on average. Methods that drive traffic, attract customers, or enhance brand value take longer, possibly around 2 years or more.
Is an LED Display a Better Investment Than LCD or Projectors?
Compared to LED screens, LCD screens usually have a shorter lifespan, and they are harder to maintain; the projectors have very low brightness, a more limited lifespan, and longer payback periods. On the whole, the LED screens are the most commercially valuable choice.
Which Has a Higher ROI: Outdoor or Indoor LED Displays?
Outdoor LED screens often require a higher initial investment. However, outdoor locations have high foot traffic and exposure, which can also bring higher commercial value. While indoor LED screens have a lower initial investment. However, its maximum return is lower, and it is a safer choice.
What are the Main Risks of Investing in an LED Display, And How to Reduce Them?
There are many risks when you are investing in LED screens, such as slow cost recovery, poor location, and insufficient conversion rate. To avoid these, you need to carefully evaluate the market and calculate costs when investing, and choose the installation location cautiously.
Final Thoughts
When investing in an LED screen, you need to consider all factors, such as cost, expected ROI, payback period, and profit model. If you plan to purchase an LED display, JINGYLED can tailor a custom solution based on your needs, and enable you to achieve high ROI.
