There is a fantastic article written by Chris Wolski which was just published in Automotive Fleet which talks about Telematics adoption and ROI rates over the past several years (2008-2011). [based on a survey taken by ARI, Donlen, and PHH]
It states that the range of MONTHLY ROI for a telematics initiative in 2011 was $185 – $225 (up significantly from $80-150 in 2008):
GPS Initiative ROI 2008-2011
What the article does NOT mention is service prices, and the fact that the range in monthly ROI is very likely attributable to the overall capabilities of the GPS tracking solution chosen (e.g. bare-bones vs. high-end).
Amortizing the survey’s stated cost of the hardware over 4 years makes a $3.13 monthly difference between low and high-end.
Today’s service prices tend to range between $25 and $33 per month per vehicle and correlate to hardware costs (e.g. higher priced hardware tends to have higher priced service and ultimately higher ABSOLUTE ROI).
I did some basic math in Excel and calculated the PERCENTAGE ROI (vs. the ABSOLUTE ROI of $185-$225 provided in Chris’s article).
I found the percentage ROI was 734% for the low end solution, and 733% for the high end solution. The percentage ROI is the SAME between low and high end solutions!
ROI % for high end and low-end GPS are both ~733%!
Therefore, companies are going to save an EXTRA $70 per month, per vehicle, according to the survey (taken by ARI/Donlen/PHH), by purchasing a higher end gps fleet tracking solution.
Within 2 1/2 months, the extra cost of the better solution has paid off for the incremental $150 in hardware and $3.13 per month.
And over the next 45 1/2 months (assuming a 4 year life on the hardware), an extra $3,185 flows to the bottom line PER VEHICLE.
For 100 vehicles, that’s $318,500. And that’s ON TOP OF THE LOW END ROI — a total ROI of $1,224,000!
Obviously your exact savings will differ, but if you trust ARI, Donlen, and PHH, 3 of the biggest fleet leasing companies in the space, the message is clear:
Buy a higher end GPS Tracking solution and SAVE MORE!
I always use the following analogy when talking about ROI between a low end and high end GPS tracking solution (e.g. one which has more reports, more adaptability, better alerts and maps, and more API’s, etc.):
If you can buy a bar of SILVER for $25, that’s a great deal, and will give you fantastic ROI.
If you can alternately buy a MORE EXPENSIVE bar of GOLD for $40, your ROI is VASTLY more than if you purchased the bar of silver.
Better ROI for paying extra for a bar of gold vs. silver
The bar of gold costs more, but will yield significantly more ROI if you pay the small premium.
We hear this ALL THE TIME — “we went with the lower cost solution.”
Unfortunately it’s not about absolute cost — it’s about the OPPORTUNITY COST of not going with a solution that will really fit your costly business challenges in a way that a higher end (and slightly more costly) solution does. And by the way, those customers usually cancel and go with higher end solutions later on once they determine this for themselves. I hope this article helps companies from making the wrong “penny-wise, pound-foolish” decision.
Thanks again for the great article Chris.
Here is a link to the charts in that article.
Thanks,
Rob.
June 30th, 2012 4:55 pm
Pretty darn impressive figures there Rob. Thanks for laying it out with easy to grasp analogies. Now if only more business owners would bother to actually look at the bottom line advantages of GPS tracking. This is, to me, the number one failing of most businesses … trying to manage by actual ROI rather than what will save ten bucks this month, one time.
I blundered through business without any formal business education. I always thought I would have had a big advantage had I had impressive degrees as most of my clients did.
But noticing over the years how many business leaders still can’t apply basic principles … I sometimes wonder.
Sell (and educate) on my friend, you’re doing a good thing.
July 1st, 2012 10:47 pm
Thanks Dave, appreciate it.