Published November 2008
For Digital Signage
By Andy Whitehead
Making money in the evolving digital signage market.
Digital signage is the single most exciting market opportunity available to AV integrators today. By making it easier than ever to display the right content to the right people at the right time, new signage technologies offer all kinds of businesses—from the largest multi-site retailer to the local diner—a variety of highly compelling value propositions.
This market is a potentially lucrative one; however, it also poses significant challenges for today’s AV professional. These challenges include:
• The ascendancy of IT. Many large organizations no longer maintain a true AV department. Instead, the responsibility for digital signage now rests with IT departments, which have their own way of approaching technology acquisition and operations.
• Cost pressures. Although companies are more than willing to invest in signage systems that will yield worthwhile returns, nonetheless, their capital resources are constrained, and many other investment alternatives are competing for those constrained resources.
• Time pressures. The ability of integrators to capitalize on a growing market is at least in part contingent upon how quickly they can complete one project and move on to the next one. So, it’s essential to streamline the process of specifying, configuring and implementing solutions.
• Ease of ownership. Large and mid-market companies are very concerned about allocation of their limited human resources. Down-market companies may have no skilled resources to commit to content and infrastructure management at all.
Fortunately, AV integrators can address these challenges readily, along with others, by making appropriate adjustments in their go-to-market strategy. These adjustments require some re-thinking of both business models and underlying technology. But they are essential for any integrator seeking to deliver next-generation digital signage solutions.
Here, we’ll define five key success strategies for commercial AV integrators looking to excel in the growing digital signage market. By adopting these strategies, forward-thinking integrators can fully capitalize on a rapidly expanding range of emerging revenue opportunities and ensure their ability to outsell competitors who fail to make similar adjustments.
How Does The
DS Market Look?
Digital signage is a booming market. Advertisers are looking for more effective ways to reach buyers as conventional media becomes less and less cost effective. New applications of digital signage continue to emerge. In fact, analysts predict that systems sales in this market will exceed $4 billion in revenue worldwide by 2011.
Retailers are particularly interested in using digital displays in their stores. According to Arbitron, 29% of retail customers make an unplanned purchase after seeing a product featured on an in-store video display. More than three-quarters say they find the screens helpful. And 81% say they are interested in seeing video programming related to the store where they are shopping.
But retailers of consumer products aren’t the only ones interested in improving communications by using digital displays. Banks, for example, can cost effectively deliver up-to-the-minute information to customers with in-lobby displays. Universities can make sure students know about important events across widely dispersed campuses. Sports arenas, convention centers and hotels can also get important messages to visitors everywhere, no matter how large their individual facilities may be.
This communication capability can do more than just boost sales: It can also reduce costs, improve the customer experience and promote safety.
Out-of-home advertising also represents a significant potential revenue opportunity for all kinds of companies—from major airports to local diners—that have available wall space and a worthwhile demographic. Some of these companies already sell ad space in static print form, of course, but digital displays are more visually compelling, and their content can be much more easily updated. This makes them a much more attractive buy for advertisers, which means greater revenue for the company selling the space.
This type of out-of-home advertising can be run and managed by agencies that rent space from companies in order to provide them with fixed revenue and relieve them of any management hassles. These agencies can then sell time on large numbers of displays based on the number and type of “eyeballs” they reach.
And there is no telling what as-yet-unforeseen types of applications and business models will arise in the future. Undoubtedly, creative businesspeople will come up with entirely new ways to exploit the ability to dynamically deliver virtually any type of content to any digital display or set of displays based on highly flexible business rules. New applications and models are particularly likely to emerge as content and infrastructure become more standardized, and as flat-panel displays continue to become less expensive.
In other words, there are numerous new market opportunities opening up to AV integrators. These range from simple system sales to consultative design of sophisticated multi-location advertising networks. The key for AV integrators is to understand these opportunities, and to ensure that they have the right technology to capitalize on them.
Although the digital signage market is obviously quite lucrative—and will remain so for many years to come—AV integrators nonetheless face a variety of challenges as they seek to take advantage of emerging opportunities. These challenges are closely related to the very factors that are fueling the market’s growth.
• The ascendancy of IT and Ethernet protocols: As signage goes digital and networked, it is also coming under the aegis of corporate IT organizations, rather than a dedicated AV team. This trend has actually been underway since PowerPoint and laptops became the preferred mode of making corporate presentations. It is continuing unabated, because convergence is also bringing other IT functions such as telecomm management and building automation into the Ethernet-compatible network domain.
This trend presents a challenge to AV integrators, because IT professionals think and speak in different terms than traditional AV professionals. IT buyers want everything to run on standard PC platforms. They want to connect everything to their IP networks. And they’re hesitant to spend money on anything that they don’t believe will integrate seamlessly into their existing enterprise environments.
AV integrators, therefore, must adopt technology and selling strategies that fit into the culture of IT. If they don’t, they will probably have trouble getting to first base with IT decision-makers, and maintaining good working relationships with IT staffs.
• Cost pressures: Although the digital signage market is expanding, the same cannot be said of the broader economy. This is keeping budgets tight and exerting a strong downward pressure on solution pricing.
Constrained spending challenges integrators in several ways. First, it forces them to find less expensive ways to provision signage system infrastructure. Second, it reduces the tolerance of customers for service billings. Third, it compels integrators to find new ways of turning a profit, either by doing a greater volume of low-margin jobs or developing differentiated offerings that preserve operating margins.
The ability to deliver a compelling solution within tight cost constraints is also critical for getting project approvals from IT organizations that have a wide range of conflicting business demands competing for limited budget resources.
Accelerating The Process
• Time pressures: With traditional analog infrastructure, AV integrators historically have had to spend a considerable amount of time calculating cable distances, amplifier placements and other specifications in order to ensure delivery of a quality signal to all endpoints. They have then had to follow these specifications closely when installing signage solutions. This has both slowed solution implementation and limited the volume of work that could be completed in any given period.
A third challenge for AV integrators pursuing an expanding market, therefore, is accelerating the process of specifying and completing signage solutions.
By facilitating this process, integrators can reduce their own costs while accelerating time-to-benefit for their customers. They will also enhance their ability to win large deals and/or those with tight timeframes.
• Ease of ownership: Historically, AV integrators have been able to either sell solutions to corporate AV buyers with their own technical skills, or bundle high-margin services with their solution sales.
The tolerance of business customers for both these models is dwindling. These customers now generally lack internal AV skills, instead focusing almost exclusively on standard IT skills. In addition, few want to be locked into contracts for services that they can’t either competitively bid or perform themselves. And many emerging market targets, such as out-of-home advertising agencies, simply do not want to be overly dependent on any single vendor for the ongoing support of their business-critical infrastructure.
Therefore, AV integrators need to make ownership of the solutions they deliver as easy and transparent as possible for their customers. This generally means moving away from overly proprietary infrastructure and utilizing technologies that don’t require arcane expertise in signaling or device configuration simply to add another display or connect with a new content source.
The bottom line is that AV integrators cannot capitalize on the growing digital signage market by doing business as usual. To capture market share and outsell the competition, they must adopt strategies that align closely with the changing profile of the signage system buyer.
Key Success Strategies
Given the radical changes taking place in the signage market, what specific strategies can AV integrators adopt to ensure both their near- and long-term success? How can they make sure that what they’re selling is what buyers want, and how can they optimize both their growth and their profitability as they pursue emerging opportunities in a digital world?
Although an effective business plan obviously must include many sales, marketing and technology components, here are five key success strategies that every forward-looking AV integrator should consider:
• Success strategy #1: Sell IT what IT can buy: If IT decision-makers are going to evaluate, specify and purchase digital signage solutions for their companies, AV integrators must package those solutions in a form that is acceptable and familiar to those decision-makers.
Typically, this means implementing solutions that can be managed from a PC or laptop, rather than more expensive proprietary media players. IT buyers are also more comfortable with 100% digital connectivity from source to display. In fact, they almost exclusively prefer Ethernet running over Cat5 cable, because this is what the rest of their network looks like. As a digital medium, Ethernet offers the additional advantage of being able to traverse much greater distances without requiring amplification.
Integrators that persist in trying to sell IT buyers proprietary devices, analog last-mile infrastructure and/or coaxial cabling will arouse objections that wind up killing deals, extending sales cycles and ceding advantage to competitors that are more IT-friendly.
• Success strategy #2: Change the economics of infrastructure: Proprietary, analog infrastructure drives up the cost of signage solutions in many ways. It takes more time to spec and plan. Its individual components are more expensive. And it requires more of those components to extend signals to distant displays.
Integrators can reduce these costs significantly by using standard Ethernet to provision fully digital last-mile connectivity. In fact, by combining digital Ethernet cabling with digital receivers that also act as switches, multiple displays simply can be “daisy-chained” from one to another. This drives cost out of both planning and deployment, while also providing customers with much more flexibility when it comes to adding or relocating displays.
• Success strategy #3: Use “source-neutral” infrastructure: Customers need options, not restrictions, when it comes to content. They may need to be able to draw content from partners and suppliers, as well as their own marketing departments. They may need to start with a low-end content source and then upgrade to a more sophisticated one as their signage strategy evolves. Or, conversely, they may need to use devices that are more economical if they decide to roll out systems to a large number of remote locations.
Customers won’t have this essential flexibility if their last-mile infrastructure is tied to a specific type of source. AV integrators, therefore, should utilize infrastructure that is fully “source-neutral,” and emphasize this flexibility to customers who may be considering systems that do not offer them the same ability to respond to changing business requirements.
• Success strategy #4: Give customers full control over content delivery: The appeal of digital signage is that it provides an effective means of communicating with people at a given time and place. The value of this communications capability, therefore, is largely contingent upon the ability of the sign operator to deliver content appropriate to that time and place.
In addition to giving customers flexibility in content creation, integrators also have to focus on giving customers easy, point-and-click control over what content appears on each individual display at any given time. The best way to do this is with intuitive PC-based display management software. Such software empowers customers to leverage their investments in signage infrastructure fully, without requiring them to buy or learn to operate expensive proprietary media systems.
• Success strategy #5: Develop markets instead of just following them: The one potential downside associated with using standardized components for infrastructure is that it reduces margins on sales of the components themselves. This is unavoidable, because standardized infrastructure is an absolute requirement for success in the evolving digital signage market.
However, integrators can more than compensate for these reduced hardware margins by becoming true solution sellers, and by using the flexibility digital infrastructure enables to develop sales opportunities proactively. Many companies have no idea what next-generation signage can do for their business. They don’t know how easily they can turn video clips, PowerPoint files or other materials into eye-catching, action-motivating displays in their lobbies and showrooms.
They may not be aware of how they can sell space on those displays to local and national advertisers.
This is where AV integrators come in. Integrators must educate potential customers who may not even know that they’re potential customers. They have to supplement their expertise in technology with expertise in how that technology can benefit businesses and institutions. In other words, integrators have to become true signage consultancies that add value by offering ideas and insights, as well as the ability to transform those ideas and insights into professionally implemented solutions.
These five strategies are essential for AV integrators who want to be successful in a signage market that is both expanding and evolving. Integrators adopting these strategies will realize a wide range of benefits, including the ability to
• sell to and effectively serve the IT organizations that will control an increasing percentage of total signage expenditures.
• price digital signage solutions competitively across all market segments.
• deliver more solutions to more customers within existing staff constraints.
• meet customers’ most demanding project timelines.
• deliver solutions that fully empower customers to get maximum business value out of their signage investments.
• penetrate and proactively develop new markets more effectively than competitors
still using conventional last-mile technologies.
These are exciting times for AV integrators. But exciting times also tend to be demanding times. And one of the demands of the evolving digital signage market is a transition to PC and Ethernet last-mile delivery infrastructure. Integrators who make this transition will be well positioned for both near- and long-term success. Those who do not likely will wind up observing the market’s growth, instead of participating in it.
Andy Whitehead is president of Southern Vision Systems, Inc. Founded in 2003, SVSi leverages more than two decades of experience in digital image processing, electrical, software and optical engineering. Visit http://easysignage.net for more information about the company.