One of the more difficult aspects of influencer marketing for brands is measuring ROI. After all, it’s easy to pay an influencer for something and know what those costs are. However, it can be difficult to know how much value you are getting for your money. Some metrics are easy to pin down, while others are much harder to quantify. This guide will help you navigate this task and do influencer marketing ROI measurement right.
Why you need to measure influencer marketing ROI
It almost seems obvious, but it’s important to measure your ROI, even with influencer marketing. As marketers, we’re used to doing this with other marketing modalities, such as PPC or Paid Social. However, those costs are more predictable and the impact is often easier to track. With influencer marketing, you can have a lot of different line item influencer marketing costs. In addition, with variable payment rates that depends on each individual influencer, it isn’t always easy to know what a campaign is really costing your company. Nonetheless, we have to know how cost effective a campaign has been. Here’s why.
Keep the bean counters happy
Accounting does a lot more than just keep track of what’s being spent. Your finance department (if not your management) is going to ask what the company is getting in return for that spend. This kind of situation becomes important, not just for taxes, but also for business planning. Generally speaking, management is going to expect that the money spent on influencer marketing really counts. And, there’s a special situation where ROI counts even more: bankruptcy. One of the factors that determined which JC Penney locations closed in the most recent bankruptcy was the return received on rental investment: when the rent is too high, they can’t make money. In the times we live in today, being agile with spend and understanding what is giving what return becomes more important than ever.
It demonstrates results
One of the great things about properly calculated ROI is that it helps you show clients (or management) how effective a campaign has been. If you can say, “we pay out X to earn approximately Y,” it’s easy to see that a marketing method is effective. This is especially true when the goal isn’t immediate sales, but something like brand awareness. Even positive exposure has a dollar value. Your results with influencer marketing will vary, but having this mindset is critical as it will help you find ways to demonstrate the varied results you will undoubtedly achieve.
You can adjust your approach accordingly
When you find that a particular influencer marketing campaign or strategy has a very high return on investment, it is a reason for you to continue in that vein. Likewise, an unprofitable campaign should be either adjusted or discontinued. For short campaigns, it’s an issue of doing it again (or not). Ongoing campaigns can sometimes be adjusted in progress. Either way, having effective ROI numbers allows you to make more money over time once you apply A/B testing and PDCA (Plan-Do-Check-Action) as part of a data-driven approach to influencer marketing.
What is the objective of your influencer marketing strategy?
Your first step in properly calculating the ROI of a given campaign is determining your objectives. Often, we define these in term of KPIs, or Key Performance Indicators. Various KPIs can be measured in different ways. Likewise, the return on investment can be measured in the context of campaign goals. It is critical at this stage that you architect your influencer marketing initiatives around a goal and then measurable metrics, very similar to my PDCA approach to social media strategy that hopefully you remember from reading Maximize Your Social.
If you’ve seen me present on influencer marketing, you know that there are a whole host of objectives you might have for your influencer marketing program. I like to say that social media replaces nothing yet complements everything, and I think you can say the same thing about influencer marketing: It can help complement any marketing objective you might have.
That being said, let’s focus on the three most common types of influencer marketing objectives that many businesses have:
Goals related to immediate sales increases
Arguably, it’s relatively easy to measure increased sales as a result of an influencer marketing campaigns. For instance, if you use special links or coupon codes to encourage purchases, then you can directly correlate the money earned with money spent. However, this isn’t the only way to measure sales-related ROI. At least in some cases, you can track the increased sales through surveys that ask people where they heard of you. Or, customers might ask about a specific product that an influencer recommended. Your customer service personnel can make notes about this sort of comment resulting in sales. For B2B companies this might come from a lead that came from an influencer-generated link promoting a webinar that he or she did together with your company. So long as you launch a campaign with measurement in mind, you can accurately measure the influence (pun intended) that an influencer might have on your sales.
Goals related to positive exposure
Especially if you’re trying to recover from PR disasters or successfully release a new product, positive exposure is a valuable commodity. In fact, appearing to be a friendly company increases sales. While placing a number on this sort of effort is more difficult in the immediate term, you can look at metrics such as social sharing to get an idea of how well you’re doing on the PR front. Social listening is really important for this kind of ROI measure. Maybe your business is facing a boycott from people on one side of a political debate. By effectively leveraging influencer techniques, you might see the anger die down and people return to your brand. This is measurable and valuable.
A more immediate way of thinking about this is what I refer to as inciting word-of-mouth marketing. If people aren’t talking about you in social media, you are an invisible entity. Leveraging influencers armed with your product to incite word-of-mouth is another influencer marketing strategy tied to the goal of increasing brand awareness.
Goals related to more effective marketing
I like to look at marketing in the language of Excel: Whatever you do should help you increase sales or decrease expenses. Everybody focuses on revenue increases, but finding more effective methods of marketing will help you both decrease your marketing budget or get more sales for the same amount of expenses. Influencer marketing can help make your marketing more effective in optimizing marketing spend in two areas: Content and paid media.
Content creation is not. a cheap initiative: Content Marketing Institute reported that successful B2B marketers spent 40% of their marketing budget on content marketing. B2C companies spend money on content as well doing photoshoots and video shoots to create compelling creative assets. Using influencer-generated content, in which you collaborate with influencers around content creation, might actually save you money AND produce more compelling content for your brand.
Paid media is another area in which we can compare influencer campaigns with our Facebook/Instagram Ad campaigns or any form of paid media. For the same amount of money spent, what were the results? If you find influence marketing to be more effective, shifting more and more budget into it will naturally result in a higher marketing ROI.
What metrics can you track?
One of the challenges of calculating ROI is knowing where to look for the numbers. If you know what to track, however, those numbers can be measured effectively. As with many other things, the metrics you choose should be determined by your overall goals. In other words, if you want positive exposure then the direct sales metrics are less relevant, and vice versa. Of course, there is some overlap, both in the metrics and overall results of a campaign.
OK, these can be less than positive, as well. Influencer marketing gives people a chance to talk about a product or service. Comments and other feedback received as a result of the content tells us a lot about effectiveness. There are a lot of ways to measure this one. Besides looking at positive engagement, you can use social listening techniques. Here, you’d be looking for what people say in connection to the content involved. Or, they might be general comments that reflect your message.
Impressions and reach
Here, you’re looking at how far your content got on the internet. It could mean the number of times a YouTube video is watched, or the locations where Instagram posts are visited from. Each impression is a time that human eyeballs are viewing your content. Each of these is an opportunity to sell something, spread your brand message, or increase awareness. Likewise, reach helps identify opportunities, such as new places you can expand to.
Engagement measures are the number of times that people interact with the branded content. The definition varies somewhat based on the social network and content format. For instance, the “like” is something that has a form on most networks, and it just indicates that someone enjoyed the content. For another example, some networks allow for a degree of sharing without leaving the networks. Facebook is one of these: you can click a button to share content directly onto your timeline. Most networks make tracking engagement relatively easy. The drawback though is that not every kind of engagement is easy to measure. You’ll also want to make sure an influencer make sure and influencer doesn’t have fake followers and engagement.
Here, we’re talking about sales that are directly attributable to an influencer marketing campaign. There are three really easy ways to track direct conversions. For instance, Instagram allows for shoppable posts and coupon codes. Both allow the brand to know what people are buying as a result of those posts. Another way is through affiliate links, which are popular on YouTube and blogs. In this case, not only do you get a record of what’s bought, but it can be used as a way to pay the influencer.
What are the costs?
Once you have the metrics nailed down, it’s important to know what it cost you to achieve those results. There’s a lot more to influencer marketing costs than just what you pay the influencer, however. To get a true ROI number, you’ll need to count the cost of all resources expended. Here’s a partial list.
This one is what you think it is: influencer fees are the amount of cash money paid out to your influencer. Depending on your agreement, this can mean affiliate marketing fees, a flat rate, or other forms of cash compensation.
Free product or services
Regardless of your industry, giving an influencer some of your stuff for free is usually advisable. After all, working with your product can make it easier to create great content. For some influencers, especially those just starting out, this is the main compensation. Be sure to account for the cost of providing these freebies. In this case, it’s the production cost of the product, rather than the sale price, that counts.
For simple content, the influencers will probably pay the costs. This is especially true when a simple picture is being taken and edited, and where the location is close to their home. However, some situations require you to spend more money on production costs. One example is where you’re providing some stock footage. However, the biggest example is probably travel-related. If you’re asking the influencer to travel somewhere fancy once coronavirus is past us, you’ll have to pay for at least some of it.
I’m rolling two basic categories of personnel spending into one here. One of them is the cost of outsourcing some of your campaign-related work. For instance, you might pay an agency or consultant to manage all or part of the campaign. Or, you might choose to do most of it in house. When doing things in house, be sure to count the cost of your staff’s time into the equation.
Influencer marketing ROI tools
Once you have calculated the total cost of your campaign, you’ll want to compare this to your goals. Some tools are available that can help you determine how well your campaign has performed.
Social media analytics tools
There are lots of analytics tools available. While some are commercial software, others are native to various websites or apps. For instance, there’s a native analytics capability within each of the social networks that you will need to utilize. Google Analytics analysis of content shared with UTM parameters will also be an invaluable friend in helping you to measure.
Social listening tools
Especially for brand awareness, share of voice and similar KPIs, social listening tools give a lot of the analytic information you need to calculate ROI. Check out our post on the best social listening tools that you should consider.
If you’re running a campaign using an influencer marketing platform or agency, they will be able to give you some analytics information. Some of them actually white label a tool that you might be able to purchase directly. Consider investing in a specialized influencer marketing tool if you want to glean deeper insight here.
Compile the data and calculate your influencer marketing ROI
Once you have identified the value of campaign results and their costs, it’s easy to calculate the ROI. Here, the trick is to reduce your results to the kind of data point that is easy to quantify. Some campaigns, for instance, track the number of impressions. In this case, you’re dividing the cost of a campaign by the number of impressions. You’ll get a number called the “cost per engagement,” or CPE. Often, CPE is used for campaigns that hope to improve brand awareness or a company’s public image.
Another way you can calculate ROI is in terms of how many times people make a purchase as a direct result of the campaign. Here, you’ll divide the cost of your campaign by the number of sales. You can call it a couple different things: cost per customer (CPC), or cost per sale/conversion. No matter what metric you’re choosing, your ROI calculation is determined by the cost of each desirable event.
How to optimize your influencer marketing ROI over time
Any time you want to boost your ROI over time, analytics are your best friend. In short, the best way to increase ROI is to do more of what works (or is more effective), and less of what doesn’t (or is less effective). You can accomplish this several ways.
First, consider doing A/B testing with different influencers. In this case, you’ll want to see how each influencer performs with the same kind of campaign. Use the more effective influencer more often to maximize return.
Another way to do this is by seeing which social networks do a better job for your audience. For instance, it could be that your audience is more enthusiastic on Instagram than they are with YouTube. Similarly, campaign or content types can be more or less effective. In all of these cases, choose what works. In so doing, you’ll make influencer marketing more profitable over time.
Have you been measuring influencer marketing ROI effectively? What is your biggest challenge in measuring it? Would love to hear about your experiences in the comments below.
Photo by Adeolu Eletu on Unsplash