HOW TO CALCULATE THE RETURN ON INFLUENCER MARKETING SPEND

HOW TO CALCULATE THE RETURN ON INFLUENCER MARKETING SPEND

Optimising how to work with influencers also includes knowing how to calculate the Return on Influencer Marketing Spend. 

Let me offer you an example:

Mary is a popular Instagram influencer with 300.000 followers

She states that her average engagement rate is: 6% (This means, on average 6% of her followers either make a “like”, a “share” or comment on her post)

She charges $300 per post.

The price of the product you want Mary to promote is: $150

and your profit margin per unit (after all associated costs and expenses) is: $37.5 (25% of the price )

Straight up you know you will have to sell at least 8 units ($300/$37.5) to cover the cost of her post.

Now if she has 300k followers with an average engagement rate of 6%; this means, your product will be likely to be seen by 18k of her followers who may want your product or not.

At this stage, there are no guarantees her followers who will see the post will actually love your product and buy it from you.

Let’s say out of those 18k people who become aware of your product via her nice post, 5% of them want to find out more about your product.

This means 900 of her followers got interested and visited your website or your Instagram page.

That seems cool. but we have not finished.

Now, let’s make an optimistic assumption and say that 3% of those 900 will buy your product.

Viola! you got 27 people who bought your product.

Final result:

• Initial investment: you have paid $300 to Mary
• Income generated: you got 27 units sold (assuming each person bought only 1 unit) = $4050 ($150×27)
• Final profit: $1012.5 ($37.5 x 27)

Your ROIMS Calculation

ROIMS = ((Final profit – Initial investment ) / Initial investment)

ROIMS = ($1012.5 – $300)/ $300

ROIMS = 2.3

You may be asking, what does that mean?

Anything above ROIMS of 1 you are making a profit.

Anything below ROIMS of 1 (you are losing your hard earn money)

Tip: I would only pay for influencer marketing if there is a likelihood of a ROIMS of at least 4

Why?

Because a ROIMS of 4 will give you enough cushion to cover for any over-inflated/fake followers reach/engagement rates.

Based on all the assumptions above, the optimal Initial investment to offer Mary so you are more likely to hit a ROIMS of 4 will be $200 per post.

Defining your target ROIMS will give you a good indication of your Initial investment dollars to offer to Mary.

In this case, if Mary’s post delivers:

• Less than ROIMS 1: You are losing money. Stop the campaign or keep running just for brand awareness or preference objectives.
• Between ROIMS 1-2: You are making a profit. Work with Mary to improve the next post.
• Between ROIMS 3-5: Continue working with Mary and keep testing and improving campaigns.
• ROIMS 6 or above: Mary is your Influencer champ! Keep rewarding her with more investment.