Oct 5, 2023
2 MIN READ
Return on Investment (ROI) is a crucial factor businesses consider while evaluating any marketing strategy. And it's the same with Influencer marketing.
Influencer marketing may not have had a standardized way of measuring its ROI in the past. However, with the increasing popularity and success, businesses are now looking for ways to measure the ROI of influencer marketing accurately.
What we focus on here is to give you an overview of how ROI works in influencer marketing, the metrics to keep track and tips on how to calculate the ROI of your influencer marketing campaigns.
Let's get started.
What is ROI in Influencer Marketing?
ROI is a measure of the profitability or success of an investment relative to its cost. It helps businesses determine whether their investments are generating positive returns or not. In influencer marketing, ROI is no different - it measures the return you get from investing in influencers.
Challenges of Measuring ROI in Influencer Marketing
But measuring the ROI of influencer marketing is trickier than regular marketing due to:
Pinpointing sales to a specific influencer campaign is tough, especially with multiple campaigns running. It's hard to determine which marketing message led to a purchase since consumers see many influencer content daily.
The rise of fake followers and engagement on social media complicates the true measurement of an influencer's impact.
No Set Standard:
There isn't a universal method to calculate influencer marketing ROI. This makes it challenging to compare different campaigns or against other marketing methods.
While influencer marketing can boost brand awareness and loyalty, these long-term advantages are hard to quantify directly.
Before we jump into calculating ROI, let's first understand the qualitative and quantitative ROI of influencer marketing.
Here’s something to help you identify fake influencers and select the right one for your campaign.
Qualitative and Quantitative ROI of Influencer Marketing
Qualitative ROI of Influencer Marketing
Qualitative ROI pertains to the intangible benefits that influencer marketing brings to your brand. These factors may not translate directly into financial gains but significantly contribute to the brand's strengthening.
For instance, an increase in brand awareness and reputation can be a qualitative ROI.
Let's say you partner with a popular lifestyle influencer who mentions your health product in their posts. Your brand name reaches thousands of followers, thereby increasing brand visibility.
Although it's difficult to track exact conversions from this action, the expansion of brand awareness is undeniable.
Quantitative ROI of Influencer Marketing
Quantitative ROI, on the other hand, involves concrete, measurable metrics. These typically include clicks, conversions, sales, or any other KPIs that directly tie to revenue.
For example, suppose you're a fashion brand collaborating with an influencer. The influencer posts an affiliate link or a unique discount code for their followers.
By tracking the number of clicks and purchases made through this link or with the code, you can directly measure the campaign's effectiveness in terms of sales generated. This data provides a clear picture of your quantitative ROI.
Now, let's see how you can measure the ROI of your influencer marketing campaign.
How do you Calculate the ROI of an Influencer Marketing Campaign?
What you need to understand here is that there is no fixed way of calculating the ROI in influencer marketing. This means that calculating the ROI depends on the end goal of your campaign. Since metrics change with goals, so does the way we should measure ROI.
Let's discuss how you should consider calculating ROI for each campaign Objective.
Brand Awareness is gauged by the surge in engagement, followers, and mentions of your brand experiences after a campaign. It signifies the extent to which your brand's visibility has improved amongst your target audience.
In this case, your main KPIs should focus on metrics that demonstrate reach and engagement. These could include:
Impressions: The total number of times your content was displayed to users.
Reach: The number of unique users who saw your content.
Engagement: Total interactions with your content, such as likes, comments, and shares.
Follower Growth: The increase in your brand's followers after the influencer campaign.
To calculate ROI for brand awareness, it's less about immediate monetary return and more about the value of the visibility your brand received.
For example, you can assign a dollar value to each impression or engagement based on industry benchmarks. Then, multiply the total number of impressions or engagements by their respective values to find the total value generated.
To get the ROI, subtract the total cost of the campaign from the total value generated and then divide it by the total cost of the campaign. This figure is your ROI for brand awareness in influencer marketing.
However, remember that brand awareness is just as much about long-term gains as it is about quick returns. Though difficult to quantify, the value of increased brand recognition and loyalty can far outweigh the immediate ROI.
Brand engagement refers to the interactions, such as likes, comments, and followers, that your brand receives on the influencer's content.
Shifting the focus to this objective of an influencer marketing campaign, we need to consider a different set of KPIs. The primary KPIs for this objective are:
Engagement Rate: This measures the level of interaction content receives from an audience. This is calculated by the total engagement (likes, comments, shares) divided by total followers, multiplied by 100.
Comments: The number of comments on a post can indicate the level of conversation and engagement around a specific piece of content.
Shares or Reposts: The number of times content is shared or reposted across social media platforms can give an indicator of how much the content resonates with the audience.
To calculate ROI for brand engagement from influencer marketing, you could assign a monetary value to each of these engagement metrics.
For instance, if you decide that each engagement is worth $1, and a post receives 5000 engagements, the total value generated from that post is $5000.
Suppose the cost of the influencer marketing campaign was $1000. Subtract this cost from the total engagement value to find the net return, which in this case is $4000. To find the ROI, divide the net return by the total campaign cost and multiply by 100.
Here, $4000 divided by $1000 gives 4, which, when multiplied by 100, results in an ROI of 400% for your brand engagement-focused influencer marketing campaign.
Remember, the value assigned to each engagement is subjective. It should be determined based on your specific business and campaign goals.
When the objective of an influencer marketing campaign shifts to "Generate Leads," different KPIs come into play. The main KPIs for this objective include:
Lead Generation: This measures the number of potential customers who have expressed interest in your product or service after interacting with the influencer's content. You can track this through mechanisms like signup forms, email subscriptions, or content downloads triggered by the campaign.
Click-Through Rate (CTR): This is calculated by dividing the total number of clicks by the total number of impressions, then multiplying by 100. A higher CTR usually signifies higher audience interest and engagement.
Conversion Rate: This metric represents the percentage of leads who take the desired action (like filling out a form) after clicking on the influencer's content.
Calculating the ROI for lead generation from an influencer marketing campaign can involve assigning a monetary value to each lead.
For instance, if you estimate each lead to be worth $10 and the campaign generates 1000 leads, the total value generated is $10,000. If the cost of the influencer marketing campaign was $2000, subtract this from the total lead value to find the net return. In this case, it would be $8000 in this example.
To find the ROI, divide the net return by the total campaign cost and multiply by 100. Thus, $8000 divided by $2000 gives 4, multiplying by 100 results in an ROI of 400% for your lead generation-focused influencer marketing campaign. Remember, the value assigned to each lead depends on your business model and campaign goals.
For an influencer marketing campaign targeted at generating immediate sales, your KPIs should be more transactional. These could include:
Click-Through Rate (CTR): The ratio of users who click on the specific link to the number of total users who view the page, ad, or email. This metric can help you understand how many users moved to the next stage of your sales funnel through the influencer's recommendation.
Conversion Rate: The percentage of users who perform a desired action (such as making a purchase) compared to the total number of users who clicked on the link. This indicates the effectiveness of the influencer's content in driving sales.
Sales Volume: The total number of sales generated through the influencer's referral link or promotional code. This provides a direct measure of the campaign's effectiveness in terms of sales.
Average Order Value (AOV): The average amount spent each time a customer places an order. This can help you understand the financial impact of the campaign.
To calculate ROI for immediate sales from influencer marketing, first, determine the total revenue generated from the campaign. This can be done by multiplying the number of sales by the average order value.
Next, subtract the total campaign cost from the total revenue to find the net profit. Then, divide the net profit by the total campaign cost and multiply by 100 to get the ROI in percentage.
For example, if the total revenue from an influencer campaign is $ 5,000, and the campaign cost is $ 1,000, your net profit will be $ 4,000. To find the ROI, divide $4000 by $1000 to get 4. Multiply this by 100, and you get an ROI of 400%.
This figure represents your ROI for immediate sales through influencer marketing. However, as with other digital marketing strategies, it's important to consider other intangible benefits that can impact your brand's long-term profitability.
Impulze.ai to Calculate the ROI of Your Influencer Campaign
Impulze.ai is one the best influencer marketing tools in the market that helps you easily track and evaluate your campaign effectiveness. With over 250 million influencer databases, the tool enables you to identify the right influencer for your campaign as well.
So how can Impulze.ai help?
We already discussed that there is no one solution to calculate the ROI of the influencer marketing campaign. It depends on your objectives. And depending on your objectives, the KPIs you need to track changes. This is where impulze.ai can help.
Depending on the social media platform you are using, the tool will empower you with adequate and crucial data [KPIs], which further helps you understand the performance of the campaign.
The general KPI metrics include the following -
Apart from the above, impulze.ai offers metrics specific to each social media platform.
For Instagram, data include [on top of the general metrics] -
Implementing a top-notch influencer marketing strategy is essential, but so is calculating the ROI of the campaigns.
Yes, it has its challenges, especially in influencer marketing.
With quantifiable metrics, it will be easy to calculate the ROI of the influencer marketing campaign. But when it comes to qualitative, things really get hard. Therefore, go through the steps we have discussed and learn how you can overcome these challenges.
While not everyone suggests this, it is best to have a robust influencer marketing tool by your side. The tool can help you track all essential metrics and help you evaluate the performance of your campaign.
If you already have one, see if it offers all the necessary metrics to calculate the ROI. If not, then it’s time to find an alternative, impulze.ai.
Try it for free now!