How does influencer marketing ROI works?

What is ROI?

Return on investment (ROI) is a financial metric widely used to understand the profitability of an investment. ROI evaluates efficiency by comparing how much you paid for an investment to how much you earned.

It is most commonly measured as net income divided by the original capital cost of the investment.

The higher the ratio, the greater the benefit earned.

ROI is useful in evaluating the potential return from a stand-alone investment in comparing returns from several investments.

What’s considered good influencer marketing ROI?

Ultimately, there is no universal standard or key industry number for measuring the ROI of an influencer marketing campaign.

But as one point of comparison, Influencer Marketing Hub’s 2020 report indicates that you can earn up to $18 in earned media value for every dollar spent on influencer marketing, with the average being closer to $5.78 per dollar spent.

Sponsored blog posts alone have proven to yield up to 11x more ROI than standard banner ads counting the increase in revenue.

The 2021 year data shows the continuation of the positive trends, and return on investment is increasing during influencer marketing campaigns. Tomoson’s study shows businesses average $6.50 in return for every $1 spent on influencer marketing, with the top 13% earning $20 or more.

How to Calculate ROI in Influencer Marketing

To calculate return on investment, divide the amount you gained from an investment — often called the net profit, or the cost of the investment minus its present value — by the cost of the investment, and multiply that by 100. The result should be represented as a percentage. Here are two ways to use this formula:

ROI = (Net Profit / Cost of Investment) x 100

ROI = (Present Value – Cost of Investment / Cost of Investment) x 100

Let’s say you invested $6,000 in integration with a blogger Y last year, for example, and sold your shares for $7,500 this month. Here’s how you would calculate your ROI for this investment:

ROI = ($7,500 – $6,000 / $6,000) x 100

Your return on investment in collaboration with Y would be 30%. This example is simple, but calculating influencer marketing ROI gets more complicated in practice.

It seems ROI isn’t the metric we need to be focused on when judging influencer marketing.

It is useful after the advertising campaign because a brand can look at what they spent versus what they got back.

At that point, it makes sense to measure the performance and determine whether it was worth the investment. But in terms of foresight, there’s just no way to accurately predict what the return on your marketing dollars is going to be. There has never been a way to do that with traditional advertising, nor is there a chance to do that with digital marketing.

Predicting ROI is like predicting the weather: we can make some solid educated guesses, but we really never know the truth until it happens.

Try following these steps to calculate the true impact influencer marketing makes on your brand:

Set campaign goals

What are your brand values? What do you want to get out of your influencer’s cooperation?

This might be:

• Visibility: Do you want brand awareness? Positive brand affinity?

• Engagement: Do you need people to visit your blog or share your social posts?

• Content creation: Do you need more awesome content for your website or social media?

• Direct revenue: Do you straight-up need to stuff your coffers? There’s no shame in using influencer marketing to make some cash.

Define your metrics

If you start an influencer campaign without KPIs, you can’t achieve results like “brand awareness.”

Metrics for Measuring Brand Awareness: Influencer Marketing KPIs

Social Reach: Followers, Subscribers, Impressions

Social media following is the tally of followers an influencer has across all their social media channels.

If an influencer shares sponsored posts on their Instagram and YouTube channels, then add up their Instagram followers and YouTube subscribers to calculate the total following.

Social media impressions are defined as the number of users that have viewed a social post. Impressions are a critical metric for determining a campaign’s reach and a preferred way to measure social reach compared to “following.”

– Engagement: Likes, Comments, Sentiment, Shares, Mentions
Engagement speaks to how well an audience receives a post.

A well-liked photo or video not only signifies esteem with users but also factors positively into some social platform’s algorithms, increasing the post’s visibility. For example, the more likes an Instagram photo receives, the more prominently it will be featured on users’ Instagram feeds.

Gauge social media sentiment by reading the actual content of comments.

Signs of positive social sentiment are enthusiasm for your product, especially indications of purchase intent, positive emojis, tagging friends, branded hashtag use, or compliments about the content itself.

Shares help to expose the content to new audiences outside the reach of the original post.

Both hashtags and mentions show a high level of brand affinity and social alignment.

– Press, Media Mentions
Media mentions and links to your website or social media boost brand awareness. You’ll find that increased media coverage produces a “halo effect” around your company, increasing the overall traffic from all sources: organic, referral, social and direct.

Add up your costs

Depending on your campaign, you could see costs like:

• Time: The more time spent vetting influencers and managing your campaign, the higher the cost. Time can even include creating the content yourself versus using creators

• Product samples: Track the number of product samples you give away. Freebies might be free for influencers, but they aren’t those to you

• Influencer fees: Depending on the influencer, you could pay a few hundred to several thousand dollars for a campaign.

• Software: You can streamline the entire process (and often eliminate these other costs) by going for an influencer marketing network. Some platforms, like Trend, minimize your costs in time and influencer fees

Feeling like it is not enough? Try some of the ways Forbes Agency Council members consider successful:

• Using Tracking Codes – track everything that contributes to a sale.

• Determining the desired outcome – is your main focus on brand awareness or action such as increased sales?

• Requesting regular reports from influencers on their engagement

• Implementing Measurable Trigger Points – e.g., UTM tags, unique landing pages or custom offers.

• Utilizing Unique Codes – e.g., giving each influencer something like a coupon code or a special product only available to their followers or subscribers.

• Creating Separate Affiliate Links – you can then track clicks, abandoned carts, email captures or sales for each influencer.

Influencer marketing is here to stay, and if you invest in influencers, you have to know what’s working for you.