How does influencer marketing ROI work?

influencer marketing

If you’ve begun using influencer marketing or are interested in it, you’ve definitely heard some new terminology like cost-per-acquisition and segment management funnel. We’re going to discuss the important acronym ROI today.

What is ROI?

A common financial statistic for determining an investment’s success is return on investment (ROI). By comparing the cost of an investment to the return, ROI assesses efficiency.

The most typical way to assess it is by dividing net revenue by the investment’s initial capital cost.

The higher the ratio, the greater the benefit earned.ROI is helpful for comparing the returns from various investments and assessing the possible return from a stand-alone venture.

What’s considered good influencer marketing ROI?

In the end, there is no accepted benchmark or important industry metric for calculating the ROI of an influencer marketing campaign.

However, as a point of contrast, the Influencer Marketing Hub’s 2020 study shows that, on average, you can expect to receive $5.78 in earned media value for every dollar spent on influencer marketing, with the maximum earning potential being $18.

Without taking into account the increase in revenue, sponsored blog articles alone have demonstrated up to an 11x greater ROI than traditional banner advertisements.

Data for 2021 demonstrates the continuation of the upward trends, and influencer marketing initiatives’ return on investment is rising. According to Tomoson’s research, companies receive an average return of $6.50 for every dollar spent on influencer marketing, with the top 13% earning $20 or more.

How to Calculate ROI in Influencer Marketing

Divide the amount you earned from an investment (often referred to as the net profit, or the cost of the investment minus its current value) by the cost of the investment, and multiply the result by 100 to determine return on investment. A percentage should be used to show the outcome. These are the two applications of 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 investment would provide a 30% return if you worked with Y. Although this example is straightforward, the actual calculation of influencer marketing ROI is more challenging.

It appears that we shouldn’t be concentrating on ROI when evaluating 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 moment, it makes sense to assess the effectiveness and decide whether the expenditure was justified. But in terms of foresight, there is just no way to foresee with any degree of accuracy what the return on your marketing investments will be. Both traditional advertising and digital marketing have never offered the opportunity to accomplish that.

ROI forecasting is similar to weather forecasting in that we can make some good educated estimates, but we truly won’t know for sure until it really happens.

To determine the genuine effect influencer marketing platform has on your brand, use the following steps:

Set campaign goals

What principles guide your brand? What do you want to gain from working with your influencer?

This could be:

Are you interested in brand awareness? Favorable brand affinities?

Engagement: Do you require website traffic or social media post shares?

Do you require extra fantastic content for your website or social media platforms?

Direct revenue: Do you actually require filling your coffers? Using influencer marketing to generate income is not wrong.

Define your metrics

Without KPIs, you can’t start an influencer campaign and get results like “brand awareness.”

Brand Awareness Metrics: KPIs for Influencer Marketing

Social Reach: Impressions, Subscribers, and Followers

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