by Sarah Shewey, CEO of Happily & Dustin Varty, Happily Braintrust

Originally published on TechCrunch

Events have increasingly become an important channel in the marketing mix, despite how notoriously “impossible” it is to measure the ROI, or return on investment.

When people show up to your event, they are willingly giving you their attention for hours on end - not trying to avoid attention-grabbing ads.

A well produced experience provides a great way to reach outside of your existing networks, build a pipeline of new customers, transform existing customers into superfans, and position your brand as a thought leader. In 2017, only 7% of marketers said that events were their most important marketing channel. Last year, that number rose to 41% according to a survey done by Bizzabo.

As the founder of Happily, the largest network of event producers in the United States, I’ve had backstage access to thousands of events - some wildly successful like TED and others that didn’t ever get traction in building an engaged community.

What has defined the successful ones?

The experiential marketing industry has long struggled to measure success in a meaningful way. They propose all the same KPIs (key performance indicators), but rarely do those KPIs provide a benchmark to determine if an event is successful or give marketers the ability to tell what worked and what didn’t. They especially fall down when customers aren’t won until months after an event.

While increasingly important, events require a lot of time, resources, and exhausting weekly meetings to do them well. The per person cost for a modest conference with lots of donated services will cost around $350 and an upscale conference experience costs about $1,500. For one day. Per Person. So how do you know when putting on an event is worth the effort?

I started kicking around this question with one of the members of Happily’s network of executives called the Braintrust. Dustin Varty, who led experiential marketing campaigns at Impossible Foods and Samsung. Together, we came up with an ROI calculator to help you determine the efficacy of launching an event marketing campaign. Read on to step through our top line thinking behind the numbers.

Start with LTV

Events engage customers, creating an environment to build a relationship that can last for years.

How many people do you know who have met a co-founder, employee, or even life partner at events? Now, how many of those have you met through an ad? Probably very, very few.

So we start to quantify the value of events by measuring the lifetime value (LTV) of a customer.

A simple way to calculate this is take the average purchase size and multiply that by both the frequency rate of purchase and customer lifespan.

So, if your customer usually spends an average of $1,000 once a month on your product and stays loyal for 6 months, your LTV will be $6,000.

Convert your NPS score

The Net Promoter Score (NPS) is historically the most accurate measure of a consumer's perception of an experiential event. A high NPS score of 10 means that a customer is extremely likely to recommend your experience to someone else, increasing network efforts that contribute to organic growth and reduce your cost of acquiring new customers.

NPS measures customer experience and predicts business growth in a very effective way, but what it doesn’t do is take into account your event’s performance relative to cost.

For a successful event where your average NPS score is 10, we know from industry research that 85% of people are likely to purchase your product.

Let’s take a conservative estimate that actually only 10% of these people will spend the LTV we calculated above:

$6,000 LTV x 10% conversion x 1,000 attendees = $600,000

This suggests that your well-received event would yield $600,000 in increased revenues in the future.

Sum up your expenses

When calculating expenses, we add up these costs:

• Production costs like venue fees, catering invoices, services and goods.
• Marketing costs such as paid ads, social media content creation, PR fees.
• Employee time being spent on the event.

Most people don’t take this third factor into consideration, but we caution against that. One of the most expensive parts of an event is the time to plan. At Happily we’ll see an average of 100+ hours of planning time for every 1 hour of event time.

Bringing it all together

To calculate the final ROI, you’ll divide the net profit from the total expenses.

1. Net Profit = Total Revenue - Total Expenses
2. ROI = Net Profit / Total Expenses

So for example if you made $600,000 in revenue and spend $350,000 on production, marketing, and staff hours then your net profit would equal $250,000. Your ROI would then be $250,000 / $350,000 = 71.4%

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We’ve created a free Event ROI calculator online for you to make things a bit easier for yourself at happily.io/roi.

The simple calculations above are also supplemented with logic around any social and PR media impressions earned as well as weighted by the duration of your event. Try it out and let us know your feedback!