The world is dynamically changing and so are the trends in influencer marketing. Where once the fan following determined the fate of the influencer, the tolling numbers reflected their efforts, and the blue-tick inked their names in contracts, now it’s all about authenticity, quality, and engagement. The stereotype of BIG influencers is now breaking and paving the way for micro-influencers to make their debut. The trend is changing and the shark brands are already embracing it!
Micro-influencers are influencers with a following that ranges between 10,000 to 100,000 followers. They haven’t made their way to millions yet but have tons to offer to brands. They preach authenticity, know how to connect with their audience, and have scoring engagement rates. Due to their close affiliation with their niche followers, brands are rapidly partnering up with them to directly reach their target audience.
But as a brand, how do you figure out that you’ve got the right micro-influencer on board? How to determine whether your star micro-influencer is actually bringing in some sales? These questions, and other similar ones, can be answered by measuring return on investment (ROI). But how do you calculate ROI? What are its metrics? What kind of challenges stand in the way? Well, you’re in luck because this blog answers it all! From understanding ROI to knowing its hacks, we’ll cover it all. So let’s get started!
Understanding ROI in Micro-Influencer Marketing
To truly decipher the significance of ROI it is important to get to the root first - what actually is ROI. ROI stands for return on investment and it means exactly that. It is used to determine the possible profitability of any investment as opposed to the cost. Some key factors related to ROI are listed below:
- It assesses the profitability of any investment
- It assists in evaluating marketing campaigns
- It helps in formulating business plans
- It helps to understand the significance of an investment in a business
- It can be applied to any industry, as long as you’re doing some kind of monetary investment
ROI can be determined with the help of a simple formula. This formula is given below:
ROI = (Net Profit / Investment) x 100
What is ROI in Micro-Influencing?
ROI in micro-influencing works the same as ROI in every other industry. But if we take a closer look into influencer marketing, the story is somewhat different. The general perception was that the multi-million-following influencers had a higher chance of generating a bigger percentage of ROI since they had a large audience. But the reality states otherwise. It's actually not the number, but rather the engagement of the audience that generates sales and nobody has better engagement other than micro-influencers.
Although micro-influencers have a relatively smaller number of followers, but their connection with each of their followers is 100% pure and authentic. This is because micro-influencers aim to build a deep association with their followers. They personally engage with their comments and concerns, they reply to their DMs, and they always take feedback from their followers and incorporate it into their content. In this way, they win the loyalty of their followers. Once the fan following notices the spotlight the influencer is giving them, they tend to rely on the influencer as a messiah, especially in terms of purchasing products. This is where brands swoop in, teaming up the micro-influencer to directly click with the audience and thus generating sales as an outcome of follower-influencer loyalty.
Key Metrics to Measure Micro-Influencer ROI
Undoubtedly it’s an established fact that micro-influencers are the key ingredient for skyrocketing sales for a niche audience. But that doesn't mean we should turn a blind eye after getting them on board. We need to evaluate their performance to determine if they are the right fit for the campaigns. The correlation between micro-influencers and their performance is measured by examining ROI. There are 2 dimensions through which ROI is analyzed - quantitative and qualitative. Let's take a look at both of them.
Quantitative Metrics
The quantitative metrics help to measure the ROI in terms of numbers and figures. Following are the general metrics that are evaluated for determining the micro-influencers ROI:
1. Sales Conversion Rates
The prime method for measuring the performance of any influencer is by checking their sales conversion rates. This refers to the number of sales directed by the influencer towards the brand. Usually, influencers prompt these sales by offering the following:
- Exclusive discount codes
- Affiliate links
- UTM parameters (helps to track the source of sales by analyzing the URL)
The greater the number of sales directed by the micro-influencer, the more worthy they are for the campaign.
2. Cost Per Acquistion (CPA)
The CPA number determines how much cost was invested for the said influencer and how many customer conversions they got from their investment. It is a direct reflection of how the influencer’s efforts are contributing towards paying customers. A simple formula for figuring out the CPA for any micro-influencer is provided below:
CPA = Total Campaign Cost / Number of Conversions
After determining the CPA for any micro-influencer, the brands then conduct a comparative analysis with other marketing channels to determine which one was most fruitful.
3. Engagement Rate
Engagement rate refers to the rate of interaction between the followers and the influencer. It covers the followers’ comments, likes, shares, reposts, and stories regarding the campaign. Throughout the promotional campaign, brands measure the engagement rate of the followers at two intervals:
- Before teaming up with the micro-influencer
- During the promotional campaign
It helps them to determine how much the engagement of followers is increasing/decreasing after the influence starts promoting the brand. The greater the engagement rate on a campaign, the higher the brand visibility. The formula for measuring the engagement rate is given below:
Engagement Rate = {(Likes + Comments + Shares) / Total Followers } x 100
4. Click Through Rate (CTR)
As the name suggests, the click-through rate measures how many users clicked on the brand link provided by the influencer. It is a great way to directly measure the engagement rate of the influencer. A higher click-through rate means that the followers are more accepting and engaging towards the promotional campaign. To measure the click-through rate of an influencer, there are multiple tools available online such as Google Analytics. You can also use the exclusive tools offered by SocialBook for tracking these clicks.
5. Return on Ad Spend (ROAS)
The return on Ad spend metric works pretty much the same as the CPA metric. The only difference is that ROAS is a bit more specific. While CPA deals with all sorts of costs incurred in the campaign, ROAS pertains only to the cost spent on advertisements. How many sales conversions are carried out through the ads displayed by the influencer is measured in ROAS. The ROAS technique is ideal for e-commerce brands for tracking influencer-directed sales. The formula for ROAS is given below:
ROAS = Revenue Generated / Total Campaign Cost
Qualitative Metrics
Apart from facts and numbers, some qualitative metrics are also used to assess the value of the micro-influencer. These are mentioned below:
1. Brand Awareness
Teaming up with an influencer is useless if they are not able to create brand awareness in their followers. After all, that is the ultimate goal of brands - to get noticed. Brands seek out influencers who can create a buzz about their product/service to the target audience. To determine the scale of brand awareness, brands need to measure reach and impressions which is a reflection of how many people saw the brand-related content. They can track the story mentions and the hashtags of the brand as promoted by the influencer.
2. Audience Sentiment
A brand or a company is nothing without its customers, and to be more specific, happy customers. How the audience perceives a brand is extremely crucial for maintaining its reputation. Besides, knowing what the target market wants from the brand is all that it needs to unlock success. For this purpose, brands also analyze the comments and interactions of the audience with the influencer to determine their overall sentiment.
3. Content Quality
Last but not least comes content quality. Influencers need to generate engaging quality content that not only prompts the followers but also aligns with the brand's values. Success through influencer marketing is only guaranteed if both the influencer and brand are on the same page so understanding the brand’s value and mission is a crucial determinant of an influencer’s performance.
How to Calculate ROI for Micro-Influencer Campaigns?
Now that we know how important ROI is, the next step is figuring out how to calculate ROI, especially for micro-influencer campaigns. Calculating the ROI is no rocket science, and even you can do it! Below are the four simple steps for hacking the ROI calculation:
Step 1: Define Campaign Goals
The first and foremost thing as a brand that you need to do is to chalk out your campaign goals. You need to brainstorm and come up with the goals and expectations that you have from a promotional campaign. Following are some of the goals that usually initiate promotional campaigns:
- Increased sales
- Greater brand awareness
- Driving website traffic
- Boosted website engagement
- Customer conversions
Once you have your campaign goals finalized, you can move toward the next step.
Step 2: Track Campaign Costs
In this step, you need to bring out your notepad and calculator and start estimating. You need to analyze how much cost you are investing in your campaign. To determine this number, you need to evaluate the budget of the following:
- Influencer fee - how much the influencer charges for the campaign
- Product gifting cost
- Content creation tools - the cost of software, trails, etc.
- Ad generation - cost spent on ads
- Affiliate links
And many more factors. You need to continuously monitor your campaign and make sure that all the costs are well within the budget to generate sufficient ROI.
Step 3: Measure Revenue Generated
The next step is to measure all the revenue that is generated from the campaign, specifically from a particular influencer. For this purpose, you need to evaluate the generated revenue from all the possible sale sources - affiliate links, promo codes, tracking pixels, UTM parameters, etc. This step is extremely important as it sets the tone for calculating the ROI.
Step 4: Calculate ROI
Once you have determined your total campaign cost and the revenue generated from your campaign, the final settling step is calculating the ROI. The ROI can be calculated using a simple formula given below:
ROI = [(Revenue Generated - Campaign Cost) / Campaign Cost] x 100
This formula gives you the ROI of a micro-influencer. Let’s take an example. Imagine a campaign costs $1000 and generates $3000 through sales. So by this formula, the ROI turns out to be:
ROI = [(3000 - 1000) / 1000] x 100
ROI = 200%
Therefore, the ROI of this micro-influencer is 200% which indicates that the campaign is a success!
Tools to Measure Micro-Influencer ROI
If you’re not good at calculations then no need to worry. We’ve got some easy user-friendly tools that can do the ROI calculation job for you! These tools are listed below:
1. Google Analytics:
Google Analytics is an analytics tool. This simple tool can easily be found as an extension on Google and is entirely free. It helps you to track how many people are visiting your website. Besides website traffic, it also tells you about visitor-to-customer conversion.
2. Social Media Insights:
This tool is also an analytics tool and is usually built into social media platforms such as Instagram, Facebook, and TikTok. It briefs you about engagement rates, how many people are invested in the campaign, and the number of sales made by these platforms.
3. SocialBook Product Launcher:
Among the influencer marketing platforms, SocialBook Product Launcher is the leading tool in the market. SocialBook Product Launcher offers a wide range of features and tools that assist both brands and influencers in making the campaign a success. The tracking feature on SocialBook helps you to keep track of all possible revenue-generation sources and is easy to use as well.
4. UTM Parameters and Discount Codes:
UTM parameters are a great way to determine the source of the traffic, i.e., how the customer got to know about the brand. It specifies how the customer was directed towards the website (either through ads, or through promo codes, or post). These UTM parameters are very beneficial to determine exactly how much traffic is generated from the influencer’s profile. The same goes for promo codes as well. Promo codes reflect how many sales were made by the influencer’s following.
Common Challenges in Measuring ROI
Calculating ROI is not all fun and games, there are certain challenges as well that stand in the way of ROI calculation. These are listed below:
1. Attribution Issues
One dark side of influencer marketing is that not all posts have organic engagement. Many influencers also purchase bots and fake accounts to engage with their post to boost engagement rates. This poses a challenge for the brands to figure out organic sales and distinguish them from fake engagement ones.
2. Long Term Impact
Brands need to highlight those influencers who can ensure brand loyalty because the more they associate with the brand, the greater their loyalty will be. Nowadays influencers are partnering up with multiple brands and hence have representation from different companies on their profiles. This makes it difficult to determine their true brand loyalty.
3. Qualitative Benefits
Measuring qualitative metrics is always a hard task because the qualitative aspect of the influencer is determined through the brand trust and brand awareness that they preach. Figuring out the quality content of these influencers is always a challenge for brands.
Best Practices for Maximizing ROI
If you’re still looking for maximining ROI of your promotional campaigns, the following tips and tricks will greatly help you.
1. Set Clear Goals
Clarity is the key. In order to maximize ROI you first need to set some clearly defined goals that your campaign should strive to achieve. The SMART technique always works great for setting these goals because this technique helps to set specific, measurable, achievable, relevant, and time-bound goals.
2. Choose the Right Influencers
As a brand, you already know that micro-influencers are your go-to for your campaigns. But even in the domain of micro-influencers, you need to carefully select the ideal influencer. Always go for those with high engagement rates and niche audiences.
3. Track Performance Continuously
Once you’ve launched your campaign, you also need to closely and continuously monitor it. Make sure that all your metrics are achieved. This tracking process also helps to devise further strategies for enhancing the campaign.
4. Focus on Long-Term Relationships
The best way to make your campaign a success is to build long-term relationships with the influencers. Once you permanently secure them as a part of your team, they’ll be more emotionally invested in your promotional campaigns as well.
Conclusion
Maximizing ROI is the ultimate goal for any brand or company. But the story just doesn’t end at ROI. As a brand, you need to take full custody of your ROI calculations, and get the best tools in hand, and the perfect influencers on board to make your promotional campaign a true success.
We hope you found this article helpful! Stay tuned for more!
