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The Secret to Influencer Marketing ROI
Table of Contents
‘We need to put $1 in and get $2 out.’ This phrase could send a tingle down a growth marketing manager’s spine. As an influencer marketing company, it echoes in our heads too.
There is more pressure than ever to make our influencer marketing dollars work harder and prove our campaigns are performing. How can we unlock those budgets to create long-term campaign success? How can we be sure that our dollars are working hard for us with influencers?
Let’s review how over-emphasizing return on ad spend (ROAS) as a core measure of success causes us to overlook other contributing factors and leads us down a false path. We'll explore some reasons why this is happening and where we should zoom out to see the full picture of success in our influencer marketing investment.
Key Terms for Influencer Marketing Measurement
We’ll be using a lot of these acronyms throughout this guide, so let’s quickly define our marketing measurement ABCs.
CAC: The cost to acquire a customer, or customer acquisition cost. This is a calculation of the total costs spent on marketing, like ad spend and employee salaries, divided by the number of new customers acquired.
CPL: The cost to acquire a lead. This is the dollar amount in clicks it takes to generate a lead, sometimes also referred to as cost per acquisition.
EMV: Estimated monetary value. Expected Monetary Value (EMV) is used in risk management to assess and evaluate the potential outcomes of a decision and assign a monetary value to them.
LTV: Lifetime value of a customer, or CLV, customer lifetime value. This measures how much money a customer will make for your business through their entire relationship with you, helping understand the costs of retaining that customer.
ROI: Return on investment. Return on investment is calculated by dividing the profit earned on an investment, or in this case, our sales, by the cost of that investment. Cost / Sales = Return on Investment.
ROAS: Let's not forget our fave, return on ad spend. Similar to ROI, ROAS calculates the amount of revenue earned against the dollar amount spent on advertising.
This ROI and ROAS equation is fairly straightforward for more traditional digital channels like display and paid ads. But what does this mean for influencer marketing?
In this guide, we'll dig a little deeper into influencer marketing ROI. But first, we need to understand the larger landscape and factors impacting the accuracy of influencer marketing campaign measurement.
In today’s economy, it’s clear why brands are pushing the need to drive sales and conversions to hit revenue targets. However, over-indexing on conversion can have downsides and risks when considering our customers as a whole.
Here are a few things impacting our ability to measure influencer marketing campaign success accurately:
1. The pivot to privacy has broken the way we advertise on mobile.
To oversimplify, tracking your customers’ online behavior is going away. According to a mobile measurement company’s data, Apple’s privacy changes on iPhone have cut the average mobile advertiser’s return on investment by almost 40% and caused them to drop mobile ad spending by 25%.
2. Our shopping behaviors have changed (or were wrongly predicted).
US consumers are reportedly reluctant to shop where they are being inspired and entertained, and platforms are rethinking their commercial strategies and capabilities.
Instagram shut down its affiliate program, removing the shopping tab from its app. TikTok pulled back from its Shopify partnership and live-streaming products. All of this suggests that consumers are not as interested in shopping while being entertained.
Consumers approach these apps and platforms more as vegging on the couch and turning on the TV rather than going to the mall to shop. Users treat them as entertainment platforms meant to provide a break from reality. This doesn't mean customers aren't influenced online, but rather the attribution for online ads affecting in-person shopping decisions is harder to prove.
3. Our attribution models are not telling the full story.
Attribution is difficult when influencers are often the “first click.”
It is incredibly dangerous as marketers that we have let the platforms we are buying advertising from be the ones to tell us how much sales were driven from those platforms. Current attribution models are only looking at that last click; and that last click often gets a hundred percent of the sale. The last click very often does not tell the full story.
How to Calculate ROI for Influencer Marketing
In many cases, influencer marketing sits at the top of the marketing funnel and is the jumping-off point in the consumer's journey.
It starts with getting consumers to stop scrolling and view that sponsored ad or that sponsored content and, most importantly, holding their attention enough to get the message across.
Ultimately as brands, the main desire is to have consumers click through and continue down that purchase funnel. But if we zoom in a step further and look at the true purchasing path, it will tell a different story.
Consider your purchasing behaviors
Let’s not forget the marketing Rule of 7. Your customer needs to see or hear about you seven times before coming to a decision.
It’s helpful to think about this in terms of our own user behavior, so here's a good example:
Let’s say you’re commuting to work scrolling on your phone, and you see an Instagram story from a beauty influencer you follow, who posted about a new moisturizer they love and are obsessed with.
You have heard this story before and are interested in the product. Naturally, you click through via the Story link and land on the company website.
However, maybe you found yourself in the wild world of the company website with numerous products to browse, and countless reviews to compare against. An ad pops up on the screen for a one-time sale. Then the enable cookies browser pops up on the screen. Suddenly, your train arrives, your attention is diverted, and you close out of the app.
Days later, you see another skincare influencer you follow posting about the exact same moisturizer, which re-engages your interest. Maybe you saved or bookmarked the post and finally decided to purchase when you found a $50 sale on the site.
In the end, the final sale is unlikely to be attributed to the first beauty influencer’s original Instagram story or even the second skincare influencer's post. Instead, it will likely be attributed to the last touchpoint, the paid ad.
The moral of the story? One tactic to increase influencer marketing ROI and value in influencer marketing campaigns is to focus on initial audience touch points such as views, clicks, and other metrics that you can attribute to consumer purchase intent.
Ultimately, by focusing only on conversion we set influencers up to fail. Brands that misunderstand the true path to purchase could be setting unrealistic benchmarks for influencers to hit.
Key Metrics to Measure Influencer Marketing Success
Now that we see the true path to purchase, let's look at metrics we're able to measure for our influencer marketing campaigns.
At Fohr, we are seeing a renewed focus on bottom-of-the-funnel conversion and performance being the key metric many of our clients are looking at and feeling pressure to deliver on. Essentially, this is a request to measure success in our influencer world like you would with a paid Facebook ad.
2. Target Audiences: Existing Customers vs. Future Customers
Once you've figured out what KPIs you'd like to focus on, now the question is who? Should you target existing customers, or future ones?
Your brand's customers range from existing customers at the bottom of the inverted pyramid to future customers at the top. In this inverted pyramid, the higher up we go, the less likely this person is to buy from us.
Advertising to our existing customers at the bottom of the funnel is the most expensive. For example, AdWords retargeting is the most expensive ads to buy whereas top-of-the-funnel prospecting is less expensive.
The drawback to less cost is less effective ways to measure. This often causes pressure on the brand side to drive more revenue and prove ROI.
Brand marketers and growth marketing managers will often focus on the cost to acquire a customer (CAC) versus the lifetime value of a customer (LTV).
What we often see is brands with too narrow of a focus on conversion and spending their budgets on bottom-of-the-funnel advertising find immediate, short-term success, but unsustainable long-term growth.
The problem with only focusing on the bottom of the funnel is that this targeted audience of immediate prospects or existing customers remains small, limiting your opportunity for growth.
Eventually, your cost evaluation of CAC will increase. A target audience of existing demand is infinitesimally small when compared to the potential customers that we could sell to.
"Community-based marketing is about building loyalty with customers instead of targeting random people with ads they may never engage with. That means ‘focusing on creating content that would encourage active engagement and active interaction with your target audience so that they feel like they’re co-creating the brand with you.’” - Erifili Gounari, founder of The Z Link, for MorningBrew.
Google Ads increased in price by 35% last year and is expected to increase another 40% this year. With every brand having a renewed focus on conversion and the bottom of the funnel, there is even more competition for this existing demand.
Are you fishing in the wrong pond?
Let's say you go fishing every weekend but aren't catching much. You want to increase the amount of fish you catch, so you buy a new pole, watch YouTube videos to improve your casting technique, and even purchase a radar.
These efforts are aimed at helping you catch more fish from the same pond. However, there's a possibility that another pond up the hill has a lot more fish. You could be fishing in the wrong pond and limiting yourself to a narrow pool.
This is the same idea if you focus solely on conversion. Focusing on only your existing customers leaves you at the bottom of this hill fishing in ponds that have been picked over and don't have as much opportunity in them, spending more money on ads.
3. Understand Attribution & Costs You Can Control
As marketers, we must emphasize the importance of evaluating metrics beyond reach and considering factors such as audience relationship and influence.
As we move further down the purchase funnel, one reality is that we begin to see a decrease in control over what a consumer does or doesn't do. We live in an attention economy. It's critical to understand how powerful it is to grab and sustain someone's attention. This is the power that influencers wield over brands -- the trust and attention of their audience.
Understand where attention is going
Our attention is a finite resource. Despite the abundance of information available, consumers are spending more time on their devices, and this is the way the world is shifting. Therefore, we must continue to adapt in ways that help us connect with consumers.
Consider ad blockers. It makes sense that ad blockers have become more popular over the last decade, and this trend is unlikely to die down in the near future. As a result, we can begin to transition more into the role that influencers play in driving value for your brand.
And some of those things are initial audience touchpoints like views, clicks, and other metrics that reflect a consumer's purchase intent.
Recruit the right influencers for your brand
One of the reasons why people are hating traditional advertising so much right now is that many ads are essentially irrelevant to them. Relevancy is incredibly important when selecting which influencers you want to partner with for a campaign.
Consider these questions when recruiting influencers: Do they have a relationship with their audience? Does that audience feel like they know that person? Do they listen to them? Do they have influence over their purchasing decisions, are they just entertaining them?
You want to find influencers that make sense for your brand. It's good to take the time to dig into an influencer's audience to get a sense of why people are following them. On Fohr's Discovery platform, you can better evaluate this audience sentiment through tools like Testimonials.
It's important not to choose a celebrity or trendy person just for the sake of their fame or cultural relevance. Even if their popularity is at an all-time high, it can still harm your brand if they are not the right fit.
4. The Right Way to Measure Influencer Marketing Success
It is important to select influencers that make sense for your brand according to your values, and those that reach a relevant audience. Additionally, optimizing for reach rather than follower count can lead to more people entering the top of your funnel for the same cost.
1. Evaluate reach rather than engagement to lower costs
Engagement rate is not the only factor for determining an influencer's success. One way to measure invisible influence is through reach.
If we consider a campaign with five influencers [left diagram], each having a hundred thousand followers and costing $10,000, and assuming a 50% reach, you can expect to reach about 75,000 people, with a CPM of $133.
In the diagram on the right, the moving pieces remain the same, with the same number of influencers, followers, and campaign cost. However, the significant difference is that you have chosen to work only with individuals who have a reach of 65% or more, which will help you reach more people, and ultimately lowers your overall CPM per influencer.
When you consider influencer selection and reach, you will begin to see how you can still drive value while spending less of your influencer marketing budget.
2. Multi-touch attribution is the way of the future
At Fohr, we are investing in ways to track the customer journey beyond that first click as a part of a linear purchase. If we think back to our non-linear purchasing journey, which involved multiple social posts, a Story link, the brand website, and a discount code, the discount code would get 100% of the sales attribution.
We are looking more holistically at all of the touch-points along a buyer's journey to more accurately measure the impact and paint a better picture.
3. Invest in the right tools
The most valuable resource in choosing the right influencers for your campaigns is using the right tools to monitor & optimize. You can view more metrics like reach, engagement, follower growth, audience demographics, follower testimonials, and more through Fohr's Discovery platform. Book a demo here.
To sum things up...
We hope this guide provided some valuable advice on how to measure influencer marketing ROI.
The best way to make the most of your influencer marketing budget is to select the right influencers for your brand, evaluate metrics beyond reach, and to truly understand your customers purchasing behaviors -- which may not happen at the starting line of the purchasing journey.
If you want to learn more from us on making the most of your influencer marketing budget and running efficient campaigns, reach out to us here.