In recent years, the influencer marketing industry has seen a steady rise, and it continues to grow every second. In fact, the industry has grown to an impressive $21.2 billion in 2023. Businesses of different scales and across different industries are actively incorporating influencer marketing as a viable strategy to enhance brand awareness, improve sales, and create more credible connections with their target consumers.
A major cause of success behind the rise of influencer marketing is its ability to offer great ROI or return on investment. However, calculating the ROI of influencer marketing can be difficult for individual brands and small businesses. This is mostly due to the fact that influencer marketing extends across different short and long-term objectives. Moreover, it is majorly focused on things like growing brand awareness, which, is hard to measure.
To make the process easier, here’s a step-by-step guide on calculating ROI for influencers.
A 5-Step Process of Calculating ROI
Calculating ROI is not just punching in some numbers and metrics. The process goes way back, right from planning a campaign to the final outcome. Here are five steps you need to take that will help the calculation process and also in achieving better results.
Step 1: Have a Clear Campaign Goal
The first and most important step of an influencer marketing campaign is having a clear goal. These goals can include better brand visibility, better engagement, content creation, or direct revenue generation. Your campaign goal needs to complement your bigger marketing objectives. Every aspect needs to be cohesive for the best outcomes.
Step 2: Understand and Set KPIs
KPIs are Key Performance Indicators that offer measurable numbers that can be used to evaluate the success of a campaign. For Eg, if the objective was to enhance brand awareness, relevant KPIs can be reached and impressions on the page or profile. If the objective is more leads, then KPIs should include website traffic, subscribers, and click-through rates on any page link.
Step 3: Choosing the Influencer
The importance of choosing the right influencer for your campaign cannot be stated enough. This is what can make or break the entire campaign. For this, you need to assess the size of your target audience, compare costs of micro vs nano influencers, assess their niche and work pattern, and also how well their aesthetics match your own vision.
Step 4: Picking the Right Strategy
Influencer marketing campaigns can differ based on the brand and the influencer’s mode of work. It can be a giveaway, a promo code offer, or maybe a specifically curated hashtag. It can be a combination of more than one strategy as well.
Ensure that both you and the influencer are clear on what deliverables are expected, including the cost and the deadlines. Ask them to share accurate analytics reports from the posts, as this will help in the calculation process.
Step 5: Calculating the Influencer Marketing ROI
The first important step in calculating your ROI is to know what your initial investment is. For this, noting each expense of the steps in the previous segment is needed. Consider the cost of any analytics software, influencer agency fee, influencer fee, product costs, etc. Investment does not always mean only monetary exchange. It includes the value of any product or service sent, time, and resources spent.
A simple formula to calculate the ROI of your influencer is:
Profit Return/ Total Investment x 100
Ancillary Factors to Consider
The process of calculating ROI is a bit more difficult in practice. While sales and profits are measurable metrics, these are not the only determinants of the success of an influencer campaign. A few more points to be considered are detailed in the following sections.
Proview Views
For a small business, brand awareness is highly essential for better reach. A viable indicator of better awareness is the number of views of profile impressions. Impressions help understand the ROI of the influencer marketing campaign. It indicates the potential of generating more engagement, gaining more followers, and, as a consequence, more customers.
Nowadays, most social media platforms have inbuilt analytics sections where you can see the impressions on the platform you are promoting.
Checking Engagement
Engagement is a big factor in calculating ROI. This includes the number of likes, shares, and customer comments and saves on a post. This can also be tracked using the profile insights section of the platform.
Moreover, you can check the analytics report you receive from the influencer on the sponsored posts. It will help understand how successful the post is and whether the paid post or sponsorship was a worthy investment.
Follower Count
The more followers your brand profile gets, the more credibility your brand achieves. When planning a campaign, ensure that your goal is to have long-lasting followers, not ones who follow only for the purpose of a giveaway or a promo code. Having followers who stay for long is what actually helps build credible connections and lasting customer relationships.
When you choose an influencer, check how well their followers engage with their posts and how fluctuating their follower count is. A steady growth or an engaged follower base will offer you the same.
Time of the Campaign
When you compare costs of micro vs nano influencers, it is important to see what time of the year it is. During holidays and occasions, usually considered peak seasons, the costs are higher since most brands take to influencer marketing to promote holiday offers and limited edition launches.
Owing to the large number of posts, chances of gaining visibility and exclusivity are low, and as a result, your ROI will also be low. It is, therefore, always better to plan for longer and year-round campaigns and not just focus on peak seasons.
Type of Product and its Pricing
It is important to understand that different services and products have different results. A completely new idea or product requires more detailed videos to show its offerings, uses, and benefits. This helps convince viewers about its credibility.
A piece of jewelry can get engagement based on an attractive post or a story. Allot budgets and revenue targets based on the type of product and the purchase behavior of your customers.
Final Words
With small businesses understanding the value of influencer marketing, the industry is predicted to grow even further. However, it is always necessary to have clear goals and set a target to achieve the best ROI. Undertake the steps mentioned above and gain a clear picture of how much you are getting back. Remember, money is not always a parameter. Consider all factors, from follower counts to engagement, to have a well-rounded assessment. Make necessary changes based on the results and take a step towards even better ROI.
