Influencer marketing is easily one of the quickest growing marketing methods.
One of the most challenging issues that brands face when strategizing around these types of campaigns is how to measure influencer marketing ROI.
These are valid concerns, but there are also a host of myths out there when it comes to working out influencer marketing ROI.
These can often prevent companies from adopting the influencer marketing strategy completely. Successful influencer marketing strategies require companies to allocate a budget.
Social media influencers charge a rate for partnering with a brand when it comes to a sponsored post.
Both sides are going to negotiate the cost of this partnership based on a number of factors, including the social reach of the influencer, the kind of sponsored content they are going to produce, and how long they are going to promote the brand for.
So, how can marketers measure their influencer marketing ROI when it comes to their campaigns?
Marketers need to think critically about all the costs that are associated with influencer marketing before they set the right budget.
Of course, just like anything, there are going to be hidden costs that impact return on investment as well as sponsorship fees.
In this article, we’re going to talk about those potential hidden costs that are going to impact your Influencer marketing ROI, so that you can decide exactly how to allocate the right budget for your next influencer marketing campaign in 2024.
The Formula for Influencer Marketing ROI
Here’s a really easy formula to calculate influencer marketing ROI.
Return on investment is generally seen as a percentage.
As an example, a company spends $10,000 for an influencer marketing campaign, and this continues on to generate $20,000 in revenue.
This will result in a 200% ROI.
Of course, this means that this influencer campaign generated a positive return on investment and can be seen as a serious success.
However, calculating influencer marketing ROI is easier said than done, and this example is deceptively simple.
Direct Response or Brand Awareness?
One of the most important steps you can take when launching the right influencer marketing campaign for your brand is to work out your goals.
Your goals are going to obviously determine how you measure your results. Campaign results are an essential part of measuring the return of your return on investment.
The KPIs for your influencer marketing strategy are going to be determined by your general goal. Generally speaking, influencer marketing goals fall into two main categories: direct response and brand awareness.
Brand awareness is how recognizable your company is to customers. It can be more challenging to measure than a direct response campaign.
This is because company sentiment and company lift are difficult to quantify. There are a lot of companies out there that require expensive branding surveys and agencies to work out brand awareness.
There are a number of factors that can be used to measure brand awareness, from social reach to engagement and website traffic.
Social reach is going to consist of the subscribers and followers that you have on your social media channels.
If an influencer is going to share your sponsored post on their YouTube and Instagram channels, then you need to add up their YouTube subscribers and Instagram followers to work out the total following.
Impressions on social media are defined as the number of followers who have looked at the social post. Impressions are an important metric for working out the reach of our campaign, and the preferred way to work out social reach compared to following.
You are going to be able to look at impressions using authentic analytics platforms for each respective social media channel. As an example, you can look at Instagram insights.
Of course, engagement rate is going to measure the audience’s interactivity when relating to the social media post. This tells you how well an audience receives your content.
The KPIs that are tracked for social media engagement are likes, dislikes, comments, and shares. They can also include things like follower growth, mentions and hashtags, and direct messages.
Direct response is a specific action that a user has taken in response to your influencer marketing campaign. When it comes to influencer marketing, your sponsored post is going to contain a clear call to action that encourages the user to take that action.
As a result, your KPIs might be things including signups, downloads, or sales, depending on the service or product.
Of course, how many people purchase your product after seeing the social media ad is the gold standard when it comes to measuring return.
You can analyze product sales very specifically, and you can look at things like average order value, revenue, and cost per acquisition.
A sign-up is when somebody submits their information to create a profile, become a member, or subscribe to your newsletter.
Your click-through rate is the number of times that people click on a link that has been suggested in the promotional post. This click is going to lead the user to a URL, where they’re going to be encouraged to sign up for something, or even purchase your product.
Of course, downloads are relevant if you are offering a service that requires somebody to download the service to their phone or their desktop.
The Cost of Influencer Marketing
In order to successfully calculate your influencer marketing ROI, you’ll need to work out the costs that go into your influencer marketing campaign.
Staffing and Time
Doing the proper research and vetting potential influencers that you might want to collaborate with can take a lot of time.
You will also need to take stock of influencer contact information, write out your campaign brief, and then reach out to potential influencers.
Because there are a lot of influencers out there that get bogged down with brand requests your message needs to be concise and carefully polished so that it stands out.
After this, there are things like coordination and negotiation with influencers which requires additional time. All of these steps take a lot of time and require individuals to manage them successfully.
Depending on how big your influencer marketing campaign is, this could mean investing in a training program, or creating a specific role for influencer management.
There is specialized influencer marketing software out there where brands can easily manage their campaigns. An influencer platform is software where companies can look for influencers across multiple social media channels.
These platforms offer a huge amount of data when it comes to influencers, but it is a two-way street; influencers can also join the platform if they are looking for a brand to work with.
These platforms are going to cost you a monthly fee, but a lot of the time, these platforms will charge a flat fee, or a percentage fee based on your complete campaign budget.
Marketing Agency Costs
A well-established influencer marketing agency that executes a campaign from beginning to end is going to charge a fee for their service.
A lot of the time, marketing agencies require a larger investment, but they are able to reduce costs in some areas. Let’s take a look at some of the advantages of working with an influencer marketing agency.
Outsourcing the task of finding an influencer and then working with them can save you a huge amount of time. It greatly reduces your brand’s need for having people on the ground running your successful influencer campaign.
Lower Influencer Rates
Once you really begin to work with influencers through a marketing agency on a long-term basis, you can lower those influencer fees, and not pay them as much.
Influencer marketing agencies have established long-term relationships with influencers, which is why they are easily able to negotiate influencer fees so that you don’t end up paying as much.
Marketing agencies are able to apply data from past campaign performances so that they can inform influencer selection.
This can help you as a brand work out which influencer is going to benefit your product the most, and which is likely to offer you the best return on investment.
This can help you avoid wasting money on influencers who aren’t going to help you with your company goals. Additionally, agencies only work with influencers who are professional, so the metrics that they achieve are reliable.
Influencers are going to charge companies payment in exchange for creating a sponsored post. This payment is nearly always in cash form.
Influencers that aren’t quite there yet are sometimes willing to create sponsored content in exchange for high-quality products, or even travel accommodation.
However, trade agreements aren’t as common as they used to be, as the influencer marketing industry grows, and creators have more opportunities to leverage their following.
When it comes to professional influencers, creating content that is branded is of course their full-time job, which means that it is their main source of income.
Nano influencers charge a few hundred dollars per sponsored post, while macro influencers can charge tens of thousands of dollars per sponsored post.
What Influencers Set Their Fees on
The first thing that influencers base their fees on is popularity. Of course, this is the number of followers that they have on all of their social media channels.
The next is engagement, which is how many likes and comments they get on their content, production quality, niche skills, like baking or crafting, past performance of campaigns, and the ‘It’ factor.
Of course, this last factor is difficult to pin down, and not everybody has it. Sometimes, you just come across an influencer that has the intangible ‘X’ Factor, which makes them hugely desirable when it comes to being an ambassador for brands.
If your company sells a product, then you’ll need to share your product with your creator through a product sample. If your brand sells an experience or a service, then the influencer is going to need to try it out before they created their sponsored post.
Production costs like editing and photographing content is almost always included in the fee of the influencer. This means that a brand might be responsible for production costs if the campaign is big, and requires things like a makeup artist, travel, or a hairstylist.
Your company can opt to boost a post once the influencer has shared it on their feed, which means that you can use paid marketing to get even more impressions on the post.
Developing influencer contracts around ownership, terms, licensing, and disclosure has to be factored into your budget as well. Whether you have a contract lawyer or attorney that works for your full-time, legal fees can be expensive.
However, it is essential that you use a foolproof influencer contract, as well as adhere to FTC guidelines when it comes to sponsored posts so that you can protect yourself from any legal issues down the line.
Tracking and Measurement
Of course, once you have sent your influencer marketing campaign out there, you’ve got to track results. This is an essential component of working out influencer marketing return on investment.
When it comes to data measurement, things to take into account cost-wise include analytics platforms or software, the time it’s going to take you to crunch the numbers, and the time it’s going to take you to gather screenshots, and quantify your results.
Influencer Marketing ROI Based on the Social Media Channel
When it comes to return on investment, not all social media channels are created equal. Some social media platforms offer stronger engagement levels, greater capabilities for measuring and achieving return on investment, and extensive analytics.
As an example, YouTube attracts a highly engaged audience, and the fact that they can track the response equals more tangible return on investment.
When working out your campaign, you need to think about the engagement levels on the targeted channel as well as how you want your content to be produced, e.g. whether you want it to be an Instagram story or through the influencer’s Instagram feed.
Then, you need to work out how easy it’s going to be to track the performance of that method.
Instagram stories and YouTube videos provide high levels of engagement, whilst Instagram and feed posts are less likely to bring you your return on investment.
Tools for Tracking Influencer Marketing ROI
Of course, you are going to need to use the best measurement tools out there to help you measure your influencer marketing ROI and the success of your campaign.
Google Analytics is of course going to help you track your website performance, and the best part is that it is free to use and customizable, which means that you’ll be able to track unique visitors, traffic, and others.
Of course, most social media platforms out there already have native analytics that you can make the most of that are going to help you work things out like likes, impressions, views, hashtags, and comments.
Working out your company’s affinity and sentiment is going to require qualitative research. There are analytics tools out there that can use algorithms to look at language used in comments to provide this kind of data.
If your influencer marketing campaign is relatively small, then we suggest a manual approach.
We suggest that you create a unique promotional code when it comes to your influencer campaign that involves a purchase or sign-up.
Promotional codes can offer a percentage discount from a product purchase, or a redemption offer if they sign up for something.
From here, you are going to be able to link conversions to a specific influencer through their promotional code. A discount is going to provide an incentive for audiences to make a purchase that is impulsive as well.
Another way to track influencer marketing ROI is to include a URL in the sponsored post. This can send the client to a dedicated landing page, where they might see a message that has been tailored specifically to that influencer’s audience.
Through the landing page, you can track conversions and visits that have resulted from the branded post.
Analyze Your Results
The first thing that you will need to do when analyzing your results is to add up your expenses. You need to account for hard costs, like agency fees, influencer fees, and production costs.
Then, you will need to work out how to measure tools that you have used for multiple campaigns. You need to add up costs for tools used for multiple campaigns.
From here, you want to look at expenses that are reoccurring, like a subscription to a specific software, and this is a bit more complicated because a lot of the time, this cost is spread across more than one campaign.
The second thing that you’ll need to do is add up your return. You can begin by adding up direct response KPIs like subscribers and purchases.
These kinds of returns are the simplest to quantify. You can work this out through site visits, social media followers, and how many new subscribers you have received on your newsletter.
From here, you can calculate your influencer marketing ROI. You can use the formula that we talked about at the beginning.
How to Achieve a Positive Influencer Marketing ROI
As with any kind of paid media, there is no way that you can guarantee a positive outcome. If you work with an experienced influencer marketing agency, or you hire an influencer manager that is well-versed in the world of influencer marketing, then you definitely increase your chances of success.
Our last tips for you are as follows: focus on one call-to-action for your campaign, because if you ask your audience to do too many things, this is going to either lead to no action, or confusion.
Secondly, limit the talking points when it comes to influencers so that your message is clear. Also, make sure that you do your homework before you choose your influencer so that you don’t end up working with an influencer who has a ton of fake followers.
You also need to allow the influencer to have creative freedom when it comes to your influencer marketing campaign. This is going to make the content better, and help it come across as more authentic.
Keep your campaign interactive, whether it’s sponsoring a giveaway, hosting an event, or offering an exclusive promotion.
We are confident that after reading this article, you will be able to go out there and create the best influencer marketing campaign for your brand that you’ve ever come up with. Good luck with your influencer marketing ROI!