Measuring Influencer Marketing ROI: Key Metrics to Track
While the influencer marketing industry seems like a lot of fun (and it is), it’s important to understand how this strategy will benefit your brand. There is a reason why influencer marketing is one of the fastest-growing strategies and it’s because the return on investment (ROI) is impressive. On average, brands make around $5 for every $1 spent on an influencer marketing campaign. According to Storyclash, those in the top 13% make $20 for every dollar. It’s clear that the ROI is huge, but how do you measure it and what are the key metrics to track?
Looking at Specific ROI Metrics to Analyze
Before we get into how to measure ROI metrics, let’s talk about what you’ll need to have ready when starting to measure. You’ll want to know your number of leads, lead-to-customer rate, average sales price, and your cost/ad spend. These numbers will be useful when calculating ROI.
One simple measure you can look at for ROI measurement is sales growth. Knowing the increase in sales that are directly related to marketing efforts should be factored into your ROI. Marketing efforts would include any campaign spending as well as money spent towards staff salaries for this initiative.
You can also measure through:
Customer Lifetime Value (CLV) which is your brand’s net profit from any specific customer.
Average Gross Margin which refers to the profit margin for each product/service that is sold.
Urchin Tracking Modules (UTM) which are tags added to the end of URLs that track the sources and medium of traffic to the website. This allows for very detailed tracking because the tag will be post-specific.
Customer Acquisition Cost (CAC) refers to the total cost of gaining a new customer
Conversion Rate (CVR) is the percentage of your audience that completes a desired action. After all, a higher CVR can indicate effective marketing strategies, which lowers CAC.
Some other less “technical” ways to measure ROI are through discount codes, affiliate links, and dedicated landing pages.
These are just a few options for measuring ROI, and if none of these interest you, the Foundation provides some more awesome examples.
Ways To Measure Influencer Marketing ROI: Formulas
Now that we’ve talked about the specific metrics to help have a well-rounded understanding of your ROI, let’s get into how to use these metrics. If you’ve decided to have a general overview of your ROI, you would use sales growth. To calculate the ROI, you would determine your sales growth, subtract your marketing costs, and then divide that number by your marketing costs
(Sales Growth - Marketing Cost) / Marketing Cost = Return on Investment (ROI)
This is the simplest way to have a measurement for your brand.
You can also measure through your average gross margin which is calculated by subtracting the total cost of goods by your brand’s revenue. This measurement will just give you a general idea of how your brand is doing and won’t necessarily pinpoint what the cause of the ROI is.
Total Cost of Goods - Brand’s Revenue = Avg. Gross Margin
If you want to target growth over certain periods, CAC is a good option. To find CAC, you would divide all sales by the number of new customers acquired within a specific period. From here, if you want to experiment with new marketing efforts and want to see how those strategies affect your ROI, you should look at CVR. According to Amazon Ads, there is no “sole” conversion rate; in the marketing industry, this is the standard way to measure, with the CVR as a percentage.
All Sales / # of New Customers = Customer Acquisition Cost (CAC)
To calculate CVR, you would divide your conversions by your total audience, then multiply that number by 100 ((C / TA) 100 = CVR). Whether your CVR is higher or lower would determine how well your new strategies are performing.
(# of Conversions / Total Audience) x 100 = Conversion Rate (CVR)
One last formula as recommended by Hubspot is [((number of leads x lead-to-customer rate x average sales price) - cost or ad spend) ÷ cost or ad spend] x 100. This is a general marketing ROI formula that brings together all aspects of your marketing strategy to conclude if there is a solid ROI.
[((# of leads x Lead-To-Customer Rate x Avg. Sale Price) - Cost of Ad Spend)) / Cost of Ad Spend] x 100 = General Marketing ROI
Marketing Strategies that Combine Brand Awareness with Measuring ROI
Diving deeper into discount codes, this method is interesting because it directly combines an influencer marketing strategy with measuring ROI. Providing your influencers discount codes encourages brand awareness, audience engagement, and customer conversion. Now sometimes this strategy doesn’t work for miscellaneous factors such as posting time, off-season for the product, etc., but this is where you can pinpoint if this strategy isn’t working or if it is something else in your marketing plan. With unique discount codes, you can track exactly how many times it was used, by who, and through which channel. The worst-case scenario with this method is it doesn’t increase brand awareness but best case, it increases brand awareness, engagement, and ROI.
Determining Which ROI Measurement Tactics to Use
There are a lot of options in measuring ROI and it can be difficult to decide which ones to use. As suggested by Hubspot, it can be smart to begin with a benchmark ROI that you can refer back to when experimenting with different methods. You can also implement different measurements for various strategies. For example, if you are seeing how successful your email marketing campaign is, you could use the CVR metric. If you’re tracking an influencer’s IG post, you could use the UTM metric. From there, you can decide what is working best for your brand. Keeping a benchmark will ensure that experimenting with different methods is accurate but it will also assist you in creating ROI benchmarks and goals.
Overall, there is no right or wrong way to measure ROI and there are a lot of options for your brand to try out. It is important to make sure the data you’re collecting is accurate so that your business can see if the ROI is positive and so you can project your brand’s future.
