If you’ve partnered with renowned brands, you might have come across the term Return On Investment, popularly known as ROI. But if the word sounds foreign, it’s high time you learned what it is. Return on investment and influencer marketing go hand in hand. Most brands partner with influencers having an incredible ROI report.
Not only will understanding ROI in influencer marketing help you land fantastic brand partnerships, but it’ll also determine the impact of your marketing campaigns. A deeper understanding of ROI is crucial to improve your marketing results, optimize your campaigns, and better advertise yourself to high-end brands.
So, without further ado, let’s learn what ROI means and how you can calculate it.
What Does ROI Mean?
As mentioned above, ROI stands for Return On Investment. And as the phrase implies, it is the return or result you receive from your investment in marketing activities. ROI is the perks you get from your campaign. Understanding ROI also helps identify the marketing activities that generate the most value. Ideally, the return should outweigh the investment in running an ad campaign.
Remember, the results of a positive ROI aren’t always tangible. Even brands may not always hire you for actual results, such as an increase in sales, though higher sales could be an indirect goal. Brands often collaborate with influencers to build brand awareness, tap into the newer audience, and increase credibility. And these are some essential intangible forms of ROI.
And if your influencer marketing ROI calculator shows a negative result, it isn’t the end of the world! Specific tweaks in your marketing strategy will soon bring you back on track, helping you succeed as an influencer.
Coming to measuring influencer marketing ROI, here’s the basic ROI formula:
Marketing ROI = (Value achieved – investment made) / investment made X 100
When you’re above zero ROI, you’ve gained profit and are generating more or at least equal money than what you invested. But when the ROI calculator shows a negative figure, you’ve invested more money than you received. In other words, you lost money.
How To Measure Influencer Marketing ROI: 4 ROI Formulas
There’s no easy way to calculate a campaign’s ROI since campaigns have many objectives. The typical campaign objectives you can calculate the influencer marketing ROI for include:
- Raising brand awareness
- Increasing engagement year-over-year (YOY)
- Boosting conversions
- Increasing customer lifetime value (LTV)
Marketing ROI Formula #1: How To Measure Basic ROI
Contrary to what you may think, calculating ROI is extremely simple. The basic ROI formula is:
ROI = ((Total revenue – total COGS – marketing investment) / marketing investment) x100
COGS in the formula stands for the cost of goods sold. Not adding COGS is your biggest mistake while calculating the influencer marketing ROI. Companies and influencers subtract marketing costs from the total revenue to measure the ROI. They overlook the cost of manufacturing the product/service they’re trying to sell. Consequently, their ROI results aren’t accurate, leading to many failed campaigns.
To get a more accurate idea about your influencer marketing ROI, consider the costs to produce the product and subtract it from the gross revenue. Another workaround to get a precise result is calculating ROI based on the product’s gross profit instead of the gross income.
To improve your influencer marketing average ROI, invest time in thoroughly understanding your audience. Only when you know your audience’s demographics, preferences, and interests will you be able to create content that resonates with them and get a good response. Don’t forget to identify the age group of your community, as it will help you understand their social media behaviors. Creating content based on this knowledge will bring positive results, and brands would be happy to collaborate with you!
Marketing ROI Formula #2: How To Calculate Year-Over-Year (YOY) Growth
Monthly metrics never give the whole picture — you can perform well in a month but not get good results elsewhere. They aren’t accurate performance measurement metrics and could also be misleading.
However, YOY growth is the best way to evaluate success on a longer time scale, as it also factors in the seasonal fluctuations. It is a crucial metric that measures your personal brand’s growth across two comparable periods. It is usually an annualized metric; hence, the name. YOY growth also reveals which social platforms are the most effective in helping you reach your goals. Therefore, you cannot overlook the YOY growth ROI.
The YOY growth formula is:
YOY Growth = ((Previous year total – current year total) / current year total) x 100
If your YOY growth shows a downward trend, you should check if your offer is easy to say yes to. Growth will happen more seamlessly when your offering is relevant and helpful for your followers. Your social media efforts should highlight that your primary motive is the audience’s best interests. Ask brands you’ve partnered with to give the audience a discount. This way, your offer will capture more people who will appreciate that you’re ready to sacrifice profit.
Most importantly, analyze how social media users perceive you. Remember, our brain is wired for social influence. And our brain’s reward center activates when others’ opinions are similar to our perspectives. So, understand the views of your audience and align with them. Knowing you have a similar mindset and beliefs will foster feelings of inclusion and belonging in your audience. Consequently, people will be more open to following your call to action (CTA), increasing your YOY growth over time.
Marketing ROI Formula #3: How To Calculate Your Conversion Rate
Conversion rate is the most spoken-about topic amongst brands. Therefore, you can’t be ignorant about it. As influencers, you must keep your conversion rate at par and help the brands improve their conversion rates.
But to increase the conversion rate, you must first determine what conversion is — it could have different meanings based on the campaign objectives. Conversion could be an eBook download, product purchase, or newsletter sign-up. In simplest terms, conversion is the action you want your users to take. Measuring conversion rates helps determine how well your campaigns performed, which impacts your influencer marketing ROI. Moreover, understanding how many users are completing the goals that drive sales also reveals areas that need improvement.
Calculate your conversion rate using the following formula:
Basic conversion rate = (Total goal completions / total visits) x 100
If you’re not performing well, you need to make specific changes. One thing you could do is to include social proof. When approaching brands, let them know your previous successful campaigns and brands you’ve worked with. This will convince the brands that you have the experience and expertise to get the desired results. Include testimonials, influencer marketing ROI statistics, and reviews from your past clients to put brands at ease. And when helping brands improve their conversion rate, ask them to add social proof to their landing pages to build trust and drive sales.
Secondly, whenever convincing followers to take a particular action, avoid distracting them from your offer. Don’t give them too many options, but create social media posts emphasizing the offer. And ask brands to make clear, concise, and easy-to-navigate landing pages for a higher ROI.
Lastly, make your initial steps easy. For instance, if you’re increasing a brand’s newsletter sign-ups, include a direct link to the sign-up landing page in your stories and posts. Don’t make customers visit the main website and find the sign-up page. Make the initial steps as streamlined as possible, as customers are often occupied.
Marketing ROI Formula #4: How To Calculate Customer Lifetime Value (LTV)
Customer lifetime value (CLV, LTV, or CLTV) is a marketing metric that brands often use to quantify customer relationships. It measures the total amount spent by a single customer on a brand’s products or services over their lifespan. It helps businesses predict how much they’ll earn from an average customer throughout their relationship. LTV encompasses customer retention and satisfaction and is an essential metric that helps create accurate marketing plans.
Calculating LTV is imperative to make more precise financial predictions and well-informed marketing strategy decisions. You’d have more clarity on your customer acquisition costs when you know how much profit they will bring to your business.
The formula to measure LTV is:
LTV = Customer Value x Customer’s Average Lifespan
The best way to improve your LTV as a social media influencer is to feature fans in your content. Repost the content your followers have shared about you and put them in the spotlight. This will show that you appreciate them. Besides, this interchange will ensure they stick with you for longer and get many more people to follow you.
Additionally, take your followers’ advice on essential matters and credit them for it. Leaving room for fans’ suggestions highlights that you respect their opinions. You can even create polls to learn your audience’s views. To top it off, run giveaways and give incentives to people participating in the elections to boost engagement and retain followers. Lastly, don’t forget to be accessible. Respond to people’s comments, answer their DMs, and conduct IG Lives. This will make you more approachable, helping you create a tight-knit social media community.
Show Off Your High Influencer Marketing ROI In 2022 And Get High-Paying Partnerships!
A positive ROI report will help you land top-notch brand collaborations. And if you already have an incredible ROI, reach out to brands using our AI-based influencer marketing platform, Atisfyre. Atisfyre connects influencers with brands actively looking for influencers in specific niches. It is the most effortless way to propel your influencer career and work with high-end brands.
Sign-up for FREE!