Influencer Marketing has proven itself. Most marketers use it for all their campaigns, including product launches. Yet, one thorny issue remains: the calculation beforehand of the return on investment (ROI). It’s most often difficult to establish. In the context of a sponsored article, however, there are ways to make a fairly realistic estimation.
The challenge of encryption
According to a study by Linqia (2017), on an influencer campaign, the biggest challenges facing marketers are:
- Determining the ROI of an influencer marketing programme (answer given by 78% of respondents),
- Choosing which service to use (45%),
- Determining how to combine influencer marketing with the marketing mix (41%).
Marketing managers are eager to present the prospect of profitability in order to obtain the corresponding budget. That task is particularly difficult in influencer marketing which, fundamentally, is not really a question of numbers.
The basis for calculating
You need to determine some factors before you can start any calculation of a potential ROI:
Your budget. You must have a clear idea of how much you want to or can spend. It’s on this amount that you’ll calculate the ROI.
Your objective. Set an objective to achieve, from where your campaign will be considered a success. Be ambitious, influencer marketing is usually the most profitable segment
Your key performance indicators (KPIs). Traffic? Engagement? Conversions? Of course, the ROI can only be calculated if the KPI can be expressed in hard cash. In this way, if your goal is traffic, you need to express what the value of that traffic is for your business. If your objective is to increase sales, the calculation is greatly facilitated because this data is already expressed in monetary terms.
You want to spend X, you expect to achieve performance Y, your ROI is the ratio Y / X (multiplied by 100 for a percentage). OK, that sounds a bit simplistic, so let’s put a bit of flesh on it. The real challenge is to estimate that sought after Y in advance!
The ROI of a sponsored article
Let’s get to the heart of the matter, with the specific case of a sponsored article. What will be the performance of that article? Here are the elements to consider and how to proceed.
The relevant blog traffic
Knowing the blog traffic is one thing you need. You can rely on the numbers provided by the blogger and crosscheck with Alexa or SimilarWeb.
A blog’s audience is international. For a blog in French, for example, a significant part of the traffic can come from Belgium, Canada or Africa. Maybe you’re not interested in those markets (for example if you only deliver your product in France). In that case, the relevant blog traffic will correspond exclusively to the one coming from the desired geographical area.
The click rate
We’re at the heart of the challenge: the extent to which regular visitors to the blog, and readers of the sponsored article, will click on the link to your homepage or product page. The rate can vary between 1 and 30%. In short, it alone can make your campaign a clear failure or a brilliant success. Here are some tips:
- It’s probably not the blogger’s first sponsored article. Perhaps you can get an estimate from them, which he will base on the performance already observed (for sponsored articles from them for other brands, ideally in the same sector).
- You may have used sponsored articles on other blogs. The estimate is not as reliable as the previous point, but it has the merit of providing an order of magnitude.
The conversion rate
What is the conversion rate observed on your site? That you should know! Note that the conversion rate of this new traffic will necessarily be higher than your average rate, because these readers already know a lot about your product, so if they’ve clicked, they’re really interested and very likely to proceed to checkout! In fact, the conversion rate of such sponsored traffic should be close to that of targeted emailing.
Now the maths! (example)
Here is the magic formula:
Article traffic x click rate x conversion rate = number of buyers
With a traffic of 5000 readers, and click and conversion rates of respectively 20 and 12%, we obtain this number of buyers:
5000 x 20% x 12% = 120
Now we just need to convert those kind buyers into effective turnover:
Number of buyers x average basket = revenue
Therefore (with an average basket of €100 per customer on your site):
120 x 100 € = 1200 €
As part of a sponsored article invoiced €400, we can count on an ROI of 1200/400 = 3 or 300%. Not bad is it ?
Revenue Generated per article / article Cost x 100 = article ROI
If this is your first order of a sponsored article, you don’t have access to past performance data, making it difficult to determine potential profitability. We can only say one thing: get started! You’ll learn by doing, and achieving ROIs of the order of 700% (or more) will become quite realistic. Remember, native advertising works!