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How to run ROI (Return On Investment) analysis?

What is ROI

Libraries accessing their analytics are often seeking to use this information to run ROI (or Return on Investment) analysis for reporting purposes. ROI is a popular metric due to its simplicity and ability to provide a gauge of the efficiency of library investment. Essentially ROI accounts for both the cost and value of resources to calculate how much value was gained from each dollar spent.

Kanopy provides all of the tools via the analytics dashboard to run various ROI analyses to great depth.

How to Calculate your ROI

The most common method employed by libraries running a ROI analysis of their PDA / PPU program:

Step 1 Understand cost:

You can get a perspective on how much you have spent with Kanopy on your Orders tab, which lists all your active invoices

Step 2 Download historical usage:

Using the Analytics tab, you can simply export the historical usage data for any set timeframe. Most libraries will use "plays" as the most reliable and true metric for value delivered to an end user.

Step 3 Calculate total usage:

If you are on subscription or the PPU program, this total plays figure will be an accurate metric to use for your ROI calculation.

However, if you on the PDA program, it is important to note that you should account for additional usage on existing licenses in play (not just historical usage). If you have had your PDA program running for a year, just taking the amount you spent for the year and dividing by the plays on films over the year does not account for the fact that the films triggered over the course of the year have licenses running that will continue into the next year and beyond.

This is particularly important when comparing to subscription databases. If I pay for 1 year of subscription to a database, I can divide cost by the plays that happened in that year to get my ROI. When dealing with PDA, we also need to account for the additional plays beyond the year in question on the triggered licenses to ensure we are comparing "apples to apples" because ultimately, if we were to discontinue the PDA program at the end of the year, we would still have many film licenses running into the future continuing to provide value for the investment we made into the program.

The simplest way to account for this is to look at the films licensed on the "Licensed Tab", take the average days remaining on those licenses, calculate the average plays on those films to date, and forecast the additional usage to happen on those films over the remaining days on the licenses by pro-rata-ing the average plays to date.

This (forecasted additional plays + Past historical plays) = Total plays for the purchases made and paid for to date.

Step 4 Calculate ROI:

You then simply need to divide Total cost paid / Total plays to get your ROI. This can then be compared to other databases.

Word of warning

Two words of warning when using ROI analysis:

1) When comparing ROI across resources it is important to recognize the difference in how resources are consumed. For example, one eBook or Journal access is quite reliably one person - generally only one person reads a book at a time - whereas one video play may as likely be a group viewing session in an auditorium with 100 people in attendance as it may be one person watching at home.

For academic libraries, many faculty suggest they regularly show films in class - and we should account for this in comparing ROI and usage across resources. One play benefiting the viewing of 100 students would typically be considered more "valuable" than one play benefiting one person.

2) Whilst usage (access, plays, etc) is a useful metric and indicator of "value", it is important to note that the engagement analytics and direct user feedback should be used in conjunction with this to build a total picture of the true value of the resource. Usage analytics and ROI are very valuable metrics, but so too is subjective information on the value of the resource.

 

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