Are you wondering if your investment in a Learning Management System (LMS) delivers the expected results?
- How can you accurately calculate the ROI?
- Are your learners satisfied with the training you provide?
- And what strategies can you use to boost that ROI even further?
You’ll find the answers to these questions and more insights in our latest guide about LMS ROI.
What is ROI in LMS?
LMS ROI shows the financial and non-financial benefits an organization gains from investing in an LMS compared to its costs. Companies worldwide use ROI metrics to see the effectiveness of their training initiatives and justify the ongoing expenses of the LMS.
Let’s maximize your business success!
Why is LMS ROI important for Organizations to Understand?
Knowing the ROI of your Learning Management System means your investment is not just in technology but in real business improvements. This metric shows the effectiveness of the training initiatives and helps with:
Control Costs
When you know the ROI, you can identify areas where the LMS saves money and reduces unnecessary costs.
Optimize Learning Strategies
Calculating LMS ROI helps you determine which training programs are the most effective and which need improvements.
Justify the Investment
Knowing the ROI allows businesses to demonstrate clear benefits. This metric makes it much easier to explain the system’s cost to stakeholders and decision-makers.
Effectiveness of Training Investments
Calculating ROI helps organizations determine whether the LMS is truly improving employee performance, engagement, and retention.
Improve Business Outcomes
Understanding LMS ROI lets organizations link training results to business goals, such as increased sales or better marketing campaigns.
3 Simple Steps to Calculate Financial LMS ROI
Below, we will explain how to calculate ROI using a simple formula.
1st Step: Total Cost of LMS Implementation
The first step is identifying all the costs associated with your LMS implementation. You need to account for every expense related to the LMS. These costs can include:
- Initial setup and licensing fees
- Development costs
- Integration with existing systems
- Content creation or migration of existing materials
- Training expenses and onboarding costs
- Hosting and maintenance costs (including ongoing support)
- Support and upgrades (if using a ready-made LMS)
- Compliance and certification requirements (if your LMS must meet specific industry regulations or standards)
- Ongoing content updates
At this step, your goal is to list all the costs that apply to your implementation and add any additional costs specific to your situation.
The formula will look like this:
Total LMS Costs = Sum of all the expenses related to your LMS implementation
2nd Step: Quantify the Financial Benefits
The next step is determining how to quantify implementing an LMS’s financial benefits. To calculate the total LMS benefits, you should sum up all the factors that measure the positive financial impact the system has on your organization:
- Cost savings on traditional training
- Savings on accommodation costs
- Reduction in training materials
- Time savings for employees and administrators
- Automation of administrative tasks
- Faster onboarding
- Increased learning efficiency
- Higher employee retention rates
- Improved business outcomes and scalability
- Compliance and certification savings (as an LMS can handle certifications more efficiently)
At this step, your goal is to list all the benefits that apply to your situation and add any specific ones to your organization.
The formula will look like this:
Total LMS Benefits = Sum of all the benefits related to your LMS implementation
3rd Step: ROI Formula
Once you have both the total costs and benefits, you can calculate ROI using this simple formula:
ROI = ((Total LMS Benefits – Total LMS Costs) / Total LMS Costs) x 100
This formula will give you the ROI as a percentage:
For example, if your Total LMS Benefits are $200,000 and your Total LMS Costs are $100,000, the formula will look like this:
ROI = (($200,000 – $100,000) / $100,000) x 100 = 100%
This means you’ve gained 100% of your initial investment, or in other words, you’ve doubled the amount you invested.
How to Calculate Non-Monetary Benefits in LMS Solutions?
LMS solutions are one of our main specialties, and we have developed many, including mobile apps, web platforms, and cross-platform systems. Before the development stage, we conduct thorough research and analytics based on each client’s business needs.
We’ve discovered that clients are particularly interested in analytics tools to monitor LMS performance. They often request features like progress bars to track student progress on tasks and the effectiveness of training materials. Every client focuses heavily on specific LMS features that provide gains.
While financial benefits are always significant for CEOs, founders, and other decision-makers, an LMS’s non-monetary impact is also significant.
Let’s see how LMS ROI can help you measure these non-monetary benefits:
Employee Engagement
Measure employee engagement through completion rates, participation in discussions, and interaction with course materials.
For example, you can track the percentage of employees actively participating in training programs, completing courses, and engaging in activities like quizzes or forums.
Higher engagement indicates improved motivation and willingness to learn, while low engagement suggests that the online training program may need improvement.
Knowledge Retention
Assess knowledge retention using post-training assessments or quizzes.
For example, pre-training test results can be compared with post-training scores to determine how much knowledge is retained over time.
Time Savings for Learners
Measure how much time employees save by completing training at their own pace compared to traditional in-person training.
For example, you can compare the average time spent on training before and after LMS implementation. You can also use surveys to gather feedback on flexibility and convenience.
Employee Satisfaction
Use surveys to determine how learners feel about your LMS and to rate their satisfaction with the system.
For example, you can conduct regular surveys asking employees to rate their satisfaction with the learning platform and the learning experience it provides.
Compliance and Certification Tracking
Track the completion of compliance-related training and certifications within your customer training LMS.
For example, monitor the percentage of employees who complete required certifications on time. To improve this percentage, you can send automated pop-up notifications as reminders.
These examples illustrate how non-monetary benefits can be measured and provide valuable insights into the overall effectiveness of your LMS investment.
To gain these non-monetary benefits, your LMS must have the right feature set. With the right analytics tools, you’ll gain insights into the overall effectiveness of your LMS solution.
Practical Strategies to Maximize Your LMS ROI
How can you maximize the return on investment from your learning management system? We’ll discuss 4 of the most effective strategies!
№1 Use Automation Features for Efficiency
As mentioned above, the right feature stack can help automate tasks. You can track progress, generate reports, send reminders, collect data — anything you want. When you automate tasks using the right tools, your LMS works more efficiently, and your ROI improves as a result!
№2 Choose the Right LMS Model
The most common LMS options are custom LMS and ready-made LMS. Select the one that best aligns with your business needs:
- Custom LMS
This is an LMS developed specifically for your organization. It includes features, tools, and UI — everything your business needs. It’s a perfect fit for businesses that want to scale in the future.
- Ready-made LMS
As the name suggests, this is a pre-built LMS with built-in tools and features. With this model, you pay for a basic feature set subscription. In some LMS solutions, you can also pay extra for additional features. This LMS is a good starting point for small companies, but it can be limiting if you plan to scale.
Choosing the right LMS will help increase your ROI.
№3 Prioritize Scalability for Growth
A scalable LMS can grow with your organization. You can invite more learners, and since everything is automated, you won’t need extra resources or staff. Scalability ensures you’re ready for the future and helps protect your ROI.
№4 Analytics and Reporting for Better Insights
Analytics and reporting tools are essential for maximizing LMS ROI. With strong reporting tools, you can gather any data you need on learner engagement, course completion, and performance.
With this data, you can easily identify areas that need improvement to boost outcomes and increase ROI.
Key Benefits of Implementing a Learning Management System
High Retention
When students use an LMS, retention rates are higher. Some education systems incorporate gamification tools, such as badges for consistent learning or account freezing for inactivity. And it works — students are motivated to return and continue studying.
Accessibility Worldwide
Learners can access online training courses from anywhere, allowing you to teach students across different time zones. When location is no longer a barrier, you can capture a larger global market share!
Better Engagement
Statistics show that LMS platforms often lead to higher learner engagement through interactive content, gamification, and personalized learning paths. The educational process becomes more engaging, motivating students more effectively than traditional paper-based learning.
Cost-effective
Another key benefit of an LMS is that it provides a very cost-effective solution for organizations. While there is an initial investment, your investment pays off over time. With an LMS, paying for physical classroom space, printed materials, or other expenses like rent is unnecessary.
Reporting
We develop LMS solutions with built-in tools like detailed analytics, progress tracking, and training performance tracking. These features are very helpful because they give you reports with insights into learner performance. You can also customize reporting to gain additional insights, such as identifying which training materials are ineffective.
In-App Storage
An LMS centralizes all learning materials in one location, including training resources, student performance data, subscription details, and payment information — everything you need is in one place.
How We Maximize LMS ROI for Our Clients
At RewiSoft, we’ve built various e-learning solutions, from custom LMS platforms to professional management systems. We carefully analyze each project and finally deploy a great LMS with a high ROI:
Case Study: SecureFlag
We developed an advanced platform to help developers learn secure coding through hands-on labs. SecureFlag’s LMS now supports over 45 technologies and addresses over 150 security vulnerabilities.
Case Study: SmartJen
For this open-source LMS, we developed advanced features and designed a user-friendly interface. It improved the overall learning experience and made SmartJen a popular choice worldwide.
LMS investment is a strategic move. With the right approach and features, you can achieve a high ROI and successful training outcomes. If you’re ready to create your own LMS, contact us for a consultation.
