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Social media dramatically influences our lives and our decision-making process, which has made it a great asset for marketers to introduce and advertise their products and services efficiently across a massive audience.
Out of all the social media marketing techniques, influencer marketing has proved to be one of the most effective ways for brands to market their products and services online. It has also made it simple for the companies to connect with the netizens by collaborating with the influencers.
Influencers play a major part in the success of a product and services. Through these influencers, companies have increased their reach to a much wider audience than before.
Before we get into the ins and outs of ROI from influencer marketing, let us dive into the concept of influencer marketing in the contemporary world.
What Is Influencer Marketing?
Influencer marketing is when a brand or a business collaborates with a person who owns an active online community and can influence his/her followers to try out new things because of the trust, knowledge, and direct relationship they have with the person.
Nowadays, it has become common for influencers to recommend a particular product or service to their ever-growing online follower base. Influencers get paid to promote products and services by using their popularity and helping brands reach an enormous audience. The fact that these suggestions are taken seriously by the community members and the followers makes influencer marketing so effective and impactful.
Influencer marketing practice is expected to become an $8 billion sector by 2020.
You can see the impact of social media influencers mainly on the following four social media channels –
Each of these social media works differently and has different demographics. Also, each has its own way of promoting things and offering content.
For instance, on Youtube, you can publish videos of longer duration. On the other hand, Instagram gives you the freedom of posting images, a short video in the form of Reels, long videos in the form of IGTV videos, and Gifs. TikTok is also a video platform, but you cannot post a video longer than 15 seconds.
Each of these social media works differently and has different demographics. Also, each has its own way of promoting things and offering content.
For instance, on Youtube, you can publish videos of longer duration. On the other hand, Instagram gives you the freedom of posting images, a short video in the form of Reels, long videos in the form of IGTV videos, and Gifs. TikTok is also a video platform, but you cannot post a video longer than 15 seconds.
Since brands are spending their money on influencers, they need to know whether their investment is fruitful or not. Thus, tracking the return on investment (ROI) becomes mandatory and determines whether the influencer campaigns are estimated to be profitable or not.
What does ROI or return on investment mean?
ROI, or return on investment, is a concept that aims to figure out the gains on your investment by studying your past campaigns and the rate of success. The profits from such campaigns should be more than the amount of money invested.
Though we always expect a positive return on investment, it is not still the case. Some brands also measure their ROI in terms of public awareness and engagement gained through the content created and shared by the influencers under their brand name.
For example, you have recently entered into the market and want maximum visibility; therefore, your focus is not to make money by generating sales but to reach out to the audience and create public awareness regarding your brand, product, and services.
To put it briefly, ROI helps in determining your campaign performance and figuring out if the campaign is beneficial or not. If the ROI looks OK, congratulations, you have nailed it, but if it is negative, don’t lose hope just yet; all you need is to try again with a different approach!
How to Calculate Your Influencer Marketing ROI
Influencer marketing undoubtedly is one of the most effective social media marketing techniques. However, many businesses struggle to calculate the exact ROI on their investment in influencer marketing.
With a proper tracking system in place, you can comfortably measure the return on your investment for every campaign. This system will help you identify and quantify the conversions and help you understand the ROI to configure campaigns’ value.
Here are five easy steps to create a stable tracking system –
1. Set Campaign Goals
Launching an influencer marketing campaign without setting a goal is nothing but a waste of money. Hence you should define your objectives and set campaign goals that will help you to calculate your ROI.
While setting up a campaign, ask yourself what you want from the campaign.
Your campaign goals can be anything from the following –
- You want more visibility to create brand awareness, or
- You want more engagement on your posts such as likes, comments, and shares, or
- You want people to participate and create brand associate content, or
- You want to boost your sales, or
- You are introducing a new product in the market and boosting awareness regarding your product or service.
Having a goal will help you track whether your campaign moves in the right direction and figure out if it performs as per your expectations.
2. Define Your Metrics and KPI’s
Metrics and KPIs play a crucial role in accomplishing your campaign goals. It keeps you aware of the performance and stats of the campaign.
Set your metrics and KPI according to the goal you want to achieve. Remember, metrics and KPIs differ according to the campaign requirement. For instance, you are working with two influencers for brand awareness and the other for sales. Thus, you will have to set two separate campaign metrics.
You can define your metrics on points like –
- Impression on the post, for example, Likes, Shares, and Comments.
- Clicks on the landing page. You can create a unique URL of the landing page and give each to track clicks.
- Engagement rates
- Number of new customers
- Return on ad spends with user-generated content.
- Overall earnings
Explain the metrics and KPI’s to your influencers and how you are going to measure the performance. This will help the influencers stay on track and alignment with their content creation efforts.
3. Add Up Your Cost
The main motto behind calculating the ROI is to find out whether your investment in the campaign is worthwhile or not, and the easiest way to deduce this is to figure out how much it costs you.
Depending on your campaign, you can measure things like
- The time you spend looking for the influencers and managing the campaign, the higher the time, the higher the cost.
- Cost of product samples or, in netizen’s terms, “freebies” provided to influencers.
- Influencer fees for the said contract
Track these costs side by side as you run your campaigns; this way, it will be easy to calculate a precise amount.
4. Calculating Returns
Now it is time to calculate your returns. Following are the methods to calculate return depending on your goals.
Brand Awareness ROI
You can easily calculate your brand awareness ROI through impressions, views, and shares. Suppose the average cost of each impression on your post is $0.025 per impression, then you can calculate the total amount by multiplying 0.025 to the total number of impressions at the end of the campaign.
Engagement ROI
You can measure your engagement ROI through comments, clicks, and other interactions on your post. Assuming an average cost of engagement is $0.20 per engagement, multiply it by the total number of impressions at the end of the campaign.
Return on Ad Spends ROI.
If you are using Facebook and Google for setting up an ad campaign, you can calculate the return on ad spend ROI by measuring cost per acquisition, cost per click, and other metrics provided in the platform.
Direct Sales ROI
Using google analytics, you can comfortably calculate the ROI of sales by using metrics like revenue, average order value, and cost per acquisition.
5. Analyzing The Results
Calculating the ROI and analyzing the success of campaigns requires a little math.
(Return / Cost) X 100 = ROI
The above formula will give you the ROI of Influence Marketing.
For example,
If you spent $1000 on influencer marketing and generated $2000 in profit, therefore using the above formula and putting the value in place will look like
($2000 / $1000) X 100 = 200% ROI
Simple right?
In Conclusion
New social media campaigns are making their way into our lives with each passing year. Influencer marketing has a great scope, and if you are going to invest in it, you must know how to calculate ROI to estimate your campaigns’ success.
The tips and formulas given in this article will help you reach your goals without overspending as you make your way into the world of influencer marketing.