How can Akeneo PIM increase your bottom line? This final blog post in our three-part series shows how to calculate the return on investment (ROI) of a Product Information Management (PIM) system. Our first blog post focused on the savings associated with reducing product management overhead; the second showed how PIM contributes to higher revenue through lower returns and increased sales. These calculations demonstrate the bottom line value of a PIM.
The table below shows how productivity savings, conversion improvements, reductions in return rates, and increased margin from higher revenue yields a total of $140,629 in gains the first year. Depending on the complexity of your project, you can quickly reach financial breakeven very soon, accelerate market expansion and offers can significantly leverage your Return on investment
Table 3.1 shows the entire ROI equation over the three-year period based on calculations from the two previous posts.
- Productivity savings are shown in PIM ROI Blog post #1
- Sales and conversion data are shown in PIM ROI Blog post #2
- Retail average net profit shown at 3% (see Stern.nye.edu)
|Year 1||Year 2||Year 3|
|Productivity Savings per year||$12,500||$27,917||$43,056|
|Increasing Revenues of a PIM by|
|Increasing the conversion rate||$3,870,968||$3,870,968||$3,870,968|
|Expanding markets and offers||Intangible||Intangible||Intangible|
|Total of additional revenues||$4,270,968||$4,270,968||$4,270,968|
|Average net profit margin||3.00%||3.00%||3.00%|
|Benefits + Savings||$140,629||$156,046||$171,185|
Table 3.1 – Summary of cost savings and revenue increases enabled by the use of PIM at a company with 30,000 SKUs in year one.
As shown in the first two blog posts, an eCommerce business selling 30,000 SKUs could save $12,500 by improving product management productivity with PIM. As the product list and sales channels expand, productivity savings increase in years two and three, as shown in Table 3.1 above. The PIM delivers additional revenue increases by improving on-site conversions and reducing merchandise returns.
“R” is the cumulative gains from productivity savings and increased revenue. The average net profit margin is 3% (see Stern.nye.edu). In year one, the $12,500 in productivity gain, added to the $128,129 in increased margin from higher revenue, yields a total of $140,629 in gains.
While omitted from our calculation due to wide variances across industries, PIM is also able to facilitate revenue growth by simplifying expansions into new market and product offerings.
The Math of PIM ROI
ROI is a number determined by the following formula:
ROI = (Net Profit – Cost of Investment) ÷ Cost of Investment *100
As an example, a Net Profit of $25 on a Cost of investment of $20, yields an ROI of 25%, as shown by the equation: ($25 – $20)/$20 = $5/$20 = 25%
Your return (The “R”) in this case equals your PIM efficiency savings and increased profits from PIM. Your investment (The “I”) is the total cost of ownership of the PIM system.
Akeneo – Smarter Design, Risk-free, Maximum Value, and Seamless Integration:
What makes Akeneo PIM the superior choice? Low total cost of ownership is just the beginning.
Akeneo removes the risk from your PIM decision. With Akeneo PIM, you can try the Akeneo Community Edition as a free proof of concept before investing in the Enterprise Edition. With first-hand system knowledge and experience, you understand how the system works with your product data – the risk simply goes away.
Akeneo is more cost efficient by design. We’re open source. A traditional system is a closed box; you pay expensive licensing fees and must work with what’s inside. With Akeneo PIM, you only invest in functionality that solves your unique challenges.
Akeneo PIM delivers maximum value for your budget at significantly lower costs. We’re open source – so the base cost of Akeneo is zero. With Akeneo PIM, you only pay for what you choose. And that means better ROI and higher growth, year after year.
The Akeneo Enterprise Edition is smart design for seamless integration into current product enrichment workflows. Rather than clumsily trying to build new workflows to match a proprietary PIM tool, Akeneo enables easier adoption, markedly better user satisfaction, and greater efficiencies.
The Akeneo Enterprise Edition includes the standard features of the Akeneo Community Edition plus:
– Advanced rights management
– Validation workflow
– Versioning and publication
– Rules engine
– Product asset manager
– Teamwork Assistant
The Akeneo Enterprise Edition is a customizable PIM system, designed for seamless integration across your merchandizing workflows, to deliver maximum ROI.
Want to see how PIM could decrease costs while increasing revenue for your organization?
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