It should come as no surprise that the influencer marketing industry is booming. And it’s never been more important to know how to calculate the ROI of Influencer Marketing campaigns.
In the past two decades, social media has become an important part of how people communicate, shop, and do business.
Unfortunately, making use of the online presence of any influencer and creating a profitable and effective influencer marketing strategy for a business is not as easy as it might sound. First, you need to plan everything out and put your plan into action. Second, you have to ensure that your influencer marketing campaign has a demonstrable return on investment, also known as ROI.
Do you want to know how to calculate the ROI of Influencer Marketing campaigns? If so, keep reading! Here, you will learn about the challenges that come with calculating influencer marketing ROI, as well as how to do it on your own!
What Is Influencer Marketing?
Source : https://www.ifluenz.com
Let’s start by creating an easy-to-understand definition of influencer marketing. In short, influencer marketing is a form of marketing based on tapping into the popularity of an influencer and using it for marketing purposes.
An influencer is a person who has a large number of followers on a social media platform. Influencers can be divided into four groups – nano-influencers, micro-influencers, macro-influencers, and mega-influencers.
A nano-influencer has between one thousand and ten thousand followers. Having surpassed the ten thousand mark, a nano-influencer becomes a micro-influencer. A micro-influencer, on the other hand, has between ten thousand and one hundred thousand followers.
Other than that, an influencer can be classified as a macro-influencer and a mega-influencer. A macro-influencer has between one hundred thousand and one million followers. On the other hand, a mega-influencer has more than a million followers.
The key to success is to find an influencer that is affordable, reputable, and worth investing in. If you do not know how to do that, do not worry. Having a PR firm take care of it for you is a viable option!
For instance, you can just google “‘PR services + your city” and see what pops up on the search engine results page. Finding a firm that suits both your needs and your budget should not take long!
How Should You Calculate the ROI of Influencer Marketing Campaigns?
Did you know that the global influencer market was valued at a record 13.8 billion dollars in 2021? Nowadays, if an influencer has a few million followers, it is likely that that influencer can earn hundreds of thousands of dollars per sponsored social media post.
Does it pay off? The influencer might be satisfied, but what about the company behind the deal? In order to answer that question, you need to understand how to calculate the return on investment of an influencer marketing campaign. It might not seem like it, but it is relatively easy. You do not have to know how to file taxes with last pay stub to do it!
Start by measuring the campaign’s incremental revenue and calculating the contribution margin of the product/the service that was promoted during the campaign. Next, add up the marketing spending related to the campaign.
Source : https://www.wallpaperflare.com
Having done that, you should multiply the incremental revenue by the contribution margin, subtract the marketing spending, and divide the number that you got by the marketing spending. If you need a clearer explanation, here is a formula!
[incremental revenue related to marketing ($) * contribution margin (%) – marketing spending ($)] / marketing spending ($) = ROI
Now, imagine that a sponsored post that you paid for cost two million dollars. The contribution margin of the promoted product was fifty percent, and the post generated seven million dollars in incremental revenue. Here is how you would calculate the ROI of such a campaign!
[7,000,000$ * 50% – 2,000,000$] / 2,000,000$ = 0.75
In other words, every dollar that you spent on the campaign generated an additional $0.75 on the bottom line of your business. It is up to you to decide what return on investment you are satisfied with! However, a report published by Influencer Marketing Hub shows that you can earn up to $18 for every dollar spent on an influencer marketing campaign.
Influencer Marketing KPIs
Source : https://unsplash.com
If you want to have a full picture of your influencer marketing campaign, you will need to pay attention to a few key performance indicators, including revenue, page views, impressions, engagement on social media posts, and the number of social media followers.
The goal of the majority of influencer marketing campaigns is to increase sales. To be able to track sales, give each influencer that you work with a unique promotional code and a custom URL. Both the code and the URL can be tracked using the Shopify dashboard.
Page Views and Impressions
If the product/the service that you want to promote has just launched, page views and impressions are going to be a great indicator of return on investment. After all, you want what you are promoting to reach as many people as possible!
The insights page of a social media platform can help you determine how and how often people engage with the content that you post. For instance, Facebook will show you the number of likes, comments, click-throughs, and shares, as well as the overall engagement rate.
If you are paying for a promotional post on an influencer’s social media profile, the agreement that both you and the influencer sign should mention that the influencer has to report on the analytics of the promotional post. Otherwise, you will not be able to track the engagement rate of the content that you used in the campaign.
Social Media Followers
It is important that you track how many followers you have earned as a result of your campaign. For instance, if a sponsored post that you bought contained a link to your Twitter profile, you can check how many followers you have gained using Social Blade.
Other Variables to Consider
Source : freepik
When tracking the return on investment on an influencer marketing campaign, you need to think about the variables that might have an impact on the campaign’s success, such as the time of the year, the authenticity of the influencer that you are working with, the type of content that you are using, and the quality of content produced during the campaign.
Time of the Year
From November to January, as well as on other special occasions, such as Mother’s Day, influencer costs increase significantly due to the number of available campaign opportunities and high demand.
On top of that, social media feeds become saturated with sponsored content at that time of the year, which means that the return on investment of an influencer marketing campaign may be skewed lower.
Nature of the Partnership
Is the influencer that you are working with a one-off advertising partner? If so, you might want to think about turning that influencer into an ambassador of your brand. It might seem time-consuming, but it is definitely worth it!
If an influencer keeps on using and recommending your product/your service for months on end, the people that follow that influencer are likely to be more receptive to the idea of purchasing that product/that service.
Type of Content
It is important that you match the type of content that you want to use in an influencer marketing campaign to the type of product/service that you want to promote. For example, it might be difficult for you to sell a mattress using an Instagram story swipe-up.
However, you might be able to sell a mattress if the swipe-up links to a blog post with a review of that mattress. In other words, you need to understand how the potential audience will engage with the product.
Quality of Content
If the influencer that you are working with can create high-quality content, the entire campaign is likely to bring you additional revenue for an extended period of time.
For instance, if you worked with a content creator that specializes in creating long video essays and a video essay that you are mentioned in went viral, the campaign that the partnership was a part of would keep on generating additional revenue for up to a few years!
Influencer Marketing Tips
Source : freepik.com
Create a Trackable URL
If you want to be able to monitor your influencer marketing campaign, you will need to create a trackable URL. To do that, you can use the Google Analytics Campaign URL Builder. For starters, it will ask you to enter the URL of the landing page of the website that you want to direct the traffic to into the correct box.
Other than that, you will be asked to fill in the boxes that describe the campaign source, the campaign medium, and the campaign name. In the campaign source box, you can enter a term like Instagram. In the campaign medium box, you can type in another term, such as influencer.
Lastly, enter the name of the influencer that you are working with in the campaign name box. In just a few moments, the URL Builder will generate an URL for you. With such an URL, tracking your influencer marketing campaign will become much easier!
Use Influencer Marketing Tools
If you want to make managing and tracking an influencer marketing campaign easier, you should start using at least one influencer marketing tool. Upfluence is the most popular one out of the bunch. It comes with an innovative influencer search and discovery engine, which can help you find an influencer that truly fits the influencer marketing campaign that you have in mind.
Moreover, it contains plenty of information related to content creators, such as the country that most of the audience is from, the main topics that the content creator is posting about, the follower count, and an estimation of the authentic engagement of the influencer’s audience. It can really come in handy!
Monitor the Activity of the Influencer
You might not be aware of it yet, but if the influencer that you are working with happens to get canceled, the bottom line of your business is likely to take a huge hit. Because of that, you should monitor the activity of the influencers that you are working with, and if you notice that the influencer is saying things that are insensitive and likely to tarnish the reputation of your business, consider cutting ties with that influencer as soon as possible.
Hire an Influencer Marketing Specialist
If you want to, you can think about hiring an influencer marketing specialist. Such a person will help to keep track of your business’s marketing efforts, which can be particularly useful if you are busy and lack the time and resources to do it on your own.
Hire Nano-Influencers and Micro-Influencers
Lastly, it is worth noting that your influencer marketing campaign does not have to be based on big influencers. Instead, you can reach out to a wide range of nano-influencers and micro-influencers that fit your business’s niche.
To sum up, in order to calculate the return on investment of an influencer marketing campaign, you have to multiply the incremental revenue generated by the campaign by the contribution margin of the product that the campaign was promoting. Having done that, you need to subtract the marketing spending and divide everything by marketing spending.
In addition, in order to get a full picture of the campaign, you need to pay attention to key performance indicators, such as revenue, engagement, the number of social media followers you gained as a result of the campaign, and the number of impressions.
What is more, you need to be aware of the fact that a number of variables, including time of the year, type of content used in the campaign, and the quality of that content, can have a huge impact on the success of the campaign.
You might feel overwhelmed by the entire ordeal. If you feel that way, remember that you can hire an influencer marketing specialist to take care of everything for you.
It might not be as satisfying as creating a successful influencer marketing campaign from scratch with your own hands, but if you do not know much about influencer marketing, it can really help your business thrive!