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How to get your boss over the kiosk hurdle

ROI remains key, but there may be a new formula. Lief Larson explains.

March 29, 2005

Alex Richardson, managing director of Karter Capital Advisors, a family advisory firm that specializes in venture capital for emerging technology firms, is one of the world's foremost authorities on kiosk technology. Alex has 20 years of experience in building value in enterprise, high-growth and start-up technology companies, including in his former role as founder and CEO of Netkey Inc. He pioneered the development of a new enterprise software market for the management of self-service kiosks. If anyone can help you to overcome the hurdles in getting your kiosk project off the ground, it is Alex. For this month's Informer article, we called upon Alex to share his expertise to help you overcome the skepticism within the upper echelons of management.

Recently Alex said that one of the most asked questions by business managers is, "If self-service is everywhere we go, why does my CFO keep asking me for the ROI of my kiosk project?" Undoubtedly, addressing the question of ROI and other roadblocks to launching a kiosk program can be the difference between a good idea with potential, and a good idea that goes nowhere. And how does one determine return on investment? Alex pointed out that the more traditional model looks something like this:

The problem with this type of model, when convincing the powers who be about the potential of kiosk technology, is that it does not account for enhancements to the consumer experience, enhancements to long-term customer loyalty, the quality of technology, or your company's long-term sustainable competitive advantage. Having worked with literally hundreds of companies over the years in the process of due diligence on a kiosk program, Richardson has been able to develop his own formula for clearing the project hurdles.

Says Richardson: "The best ROI calculations can be computed on the back of a napkin." He pointed out that cost reduction should be replaced with cost reduction through quality self-service. Revenue increase should be replaced with revenue increase through improved customer knowledge. Total cost of ownership should be replaced with low total cost through affordable, rapid, industry standard solutions. This, says Richardson, is the new ROI equation for moving a kiosk program forward.

Beyond the mathematical equation for return on investment are the specific barriers to self-service expansion that you may encounter at your organization. The barriers to adoption that are commonly feared are really blessings in disguise, since they also help the kiosk program manager to prepare to embark on the project. Richardson has developed a list of nine barriers that need to be addressed to advance the project:

1. Initial costs for implementation
2. Lack of awareness of solution providers (the buy-or-build conundrum)
3. Lack of understanding of what is possible
4. Convincing senior management
5. Lack of confidence/trust in small solution provider
6. Measuring effectiveness and ROI
7. Time to create suitable content for the application
8. Ongoing costs of managing the new system
9. Availability of affordable high-speed bandwidth

After addressing the barriers it is necessary to understand how you will compute the success of the kiosk project. To help you visualize a worksheet for increasing revenue, while decreasing cost, Richardson has provided a sample of a retail regional bank and how it might approach ROI:

Increased Revenues

• Objective--Convert bank consumers to e-banking channel
•  Applications started on line 
•  Actual online applications 
•  Number of weeks for actual applications 
•  Annual value to bank of each new e-banking customer 
•  Type of branch 
•  Actual average kiosks in place 
•  Actual conversions YTD, projected out for full year 
• Annual value to bank of all new e-banking customers/branch
  

 Decreased Costs

• Actual users of kiosks total/week
• Actual users per kiosk/week
• Actual average minutes spent on kiosk per day/ per week 
• Value of CSR time per minute per year/per minute/per day 
• Value of kiosk per year  
• Value of deployment in saved time 
•  Reduced customer service representatives  
•  Original CSR/branch 
•  Resulting CSR/branch expected savings=Cost/CSR/branch/year 
•  Annual savings/year/kiosk  
•  Annual savings per year of phase

Richardson points out that success from one kiosk project to the next can differ. The critical part of understanding success is to know your definition of success, and what your success metrics will be. For example, if your success is defined as net incremental sales over the previous year, you'll be able to accurately measure the difference. But also keep in mind that many things need to be taken into consideration to measure hard and soft success. Alex has some example metrics for a retail business:

1. Retail sales, measured against prior year and control stores
2. Individual kiosk sales, click stream analysis and customer survey activity 
3. Catalog referrals, measured against prior year and control stores
4. Internet sales, measured against prior year and control stores 
5. Catalog sales, measured against prior year and control stores 
6. Changes in customer satisfaction rating 
7. Customers introduced and migrated to the retail-store.com 
8. Customer use/ acceptance rates 
9. Increase in special orders

Don't forget the customer

Next, at the heart of the kiosk program should always rest the customer. Understanding the customer and their need for a kiosk program can be answered by asking the question, "What problem do they want to solve at that particular moment of time, in that space?" Once you know that the kiosk solution will have value to the customer, than you can look at ways to get something back from the kiosk. Interestingly, customers will often share information with you at a kiosk that you'd never be able to obtain otherwise. A good set of questions to ask that will help you to know your customer are:

1. Will the solution capture my customers' preferences? 
2.  Will the solution leverage all marketing channels, e.g. email? 
3. Does the solution allow for continuous customer feedback?

Finally, what will the customer see at the kiosk? This interface investment contributes greatly to the overall success of the kiosk project and is probably the most important part of the project.

"The visual experience matters since it often drives the consumer experience and improves ROI and long-term sustainable competitive advantage," said Richardson. The options the customer has at the screen dictates not only what they'll do at the kiosk, but in many cases if they'll even use it at all.

"It very hard for people doing kiosk projects to put themselves in the mindset of the customer, but there is value to your kiosk by simply adding to the customer experience," concludes Richardson.

Measuring ROI must be done on a project-to-project basis. You must first define what success means to you, understand how you will define your success, and account for intangible enhancements. The best ROI calculations can be computed on the back of a napkin. Focus on the solution from the customer outward; it's not a technology showcase, it's a customer showcase. ROI is about using the self-service channel to gain competitive advantage and to improve the customer experience.