Return On Investment For Brands
Why Bigger Influencers Aren't Necessarily Better
It’s nothing new when major brands nowadays use ‘influencers’ to promote and advertise their products. These influencers are selected based on their connection with their targeted audience and perhaps specific niches. But when companies pay these people to advertise their products, what exactly is the return on investment (ROI), and how is it measured? The influencer marketing space exploded with such velocity that arguably it was a question that couldn’t be answered immediately. Here’s a recent summary report by Fashion and Beauty Monitor, which I came across sharing their insight.
While many ‘new’ influencers emerge and trying to establish themselves they command far less the way of fees, it’s not unheard of for a top tier influencer could charge from $1K up to $100K for a single Instagram post. Many of them, if not all, have at least 100K+ followers on their account to help justify why these brands should invest such an amount.
Surely, initially it was a game of numbers, with brands being most focused on reach and the number of followers, but nowadays marketers are recognizing the myriad factors that come into play when determining the success and ROI of an influencer-marketing program.
For example, a recent study by Markedly analyzing over 800K Instagram users, went some way towards proving that size isn’t necessarily everything when it comes to working with influencers, demonstrating that as follower total rises, the rate of engagement (likes and comments) with followers decreases, resulting in diminishing returns in terms of influence and engagement.
Within the study, those with less than 1K followers generally receive an 8% rate of engagement, while users with more than 10M demonstrated a 1.6% rate of engagement, showering a clear downward correlation between follower size and post likes. Moreover, in this year’s Marketing Week Live, one of the largest marketing events held annually in London, the buzzword was micro-influencers with discussions centering on the ‘sweet spot for engagement’ that micro-influencers bring to marketers with their truly engaged audience of 3K – 100K followers.
As the influencer marketing industry reaches the next stage of maturity this year, and as new social talent and trends emerge, it’s critical that brands have the ability to measure the ROI of each collaboration and have a clear visibility on who’s having the most impact on the sales funnel.
There’s little doubt that tracking ROI on influencer marketing is still in its infancy and some way from reaching a standardized industry framework. Considering the broader picture for a moment, social media marketing alone has created significant issues when it comes to measurement and ROI, and according to a recent survey by the Internet Advertising Bureau (IAB) of over 100 agencies, it was revealed that 50% of them “make no attempt to measure the financial return”, while a further 33% said they did not believe it was important to measure ROI at all.
To consider the influencer perspective, within The Voice Of The Influencer Report published by Fashion and Beauty Monitor in October 2016, 57% of influencer respondents said that being judged on their number of followers, over and above context and content, was their greatest challenge. A further 30% admitted that measuring the ROI of an initiative was a significant problem.
So what benchmarks are currently available to measure ROI? Quite frankly, it is still fairly scarce, but a recent study by influencer marketing agency BillionDollarBoy.com attempted to benchmark the ROI of influencer marketing compared to paid advertising, through its proprietary software. Within the findings, YouTube stood at around $75 to $100 cost per thousand views (CPM) for paid advertising and fell $62 to $68 CPM for influencer marketing. Facebook saw a similar drop with the average CPM of paid at around $37 to $50, falling to $12 to $19 CPM with influencers.
Instagram comparisons were much closer, with CPM for paid advertising costing around $10 to $19 CPM, falling down to $9 to $18 CPM for influencer marketing.
Ed East, CEO of BillionDollarBoy.com, writing for MarketingTech explains some of the rationale for the differences the study uncovered. “The truth is, production costs are lowering. In fact, the influencer is largely replacing the role of the model and photoshoot for product campaigns. Influencers have become so advanced in their production skills that brands no longer need to hire professional photographers, models and locations to create beautiful content for their brand as they would with a traditional advertorial shoot. Influencers include all production costs with their fees, which are impressively lower than a traditional production. This is coupled with the fact that average CPMS are falling across the board. There are figures all over the Internet looking at specifics but on average social media advertising is three times more expensive than influencer marketing.”
Reach and engagement remain critical metrics in determining ROI. However one of the biggest challenges that many brands face when running an influencer marketing program is trying to differentiate between the influencers they work with, as while a high number of followers may seem attractive, it does not necessarily guarantee the best results.
Furthermore, reach can be particularly tricky to measure through Facebook owing to its newsfeed algorithm. From Amy Jackson at Lipsy: “You could have two influencers of the same caliber posting at different times on different days. One of them in another situation might get a better reach than the other, but it’s the timing of our collaboration that becomes a big factor on Facebook. So it’s hard to determine when one has 20% more organic reach, whether that’s purely dependent on the time of posting”.
Due to these limitations, it is important brands focus on the reactions that an influencer receives during collaboration, as the true gauge of success.
Fashion chain Mango has its own way of calculating the engagement of an influencer post. It adds up the number of likes it has together with the number of comments divides that by the total number of followers. For example, a girl with 100 followers who has 10 likes and 10 comments equals to 20 out of 100, so the engagement rate is 20%. “It isn’t scientific, but it’s a ratio to see if you’re going up or down’ we can see that anything with a #Mangogirls hashtag has a big engagement rate. It means we’re doing the right thing,” explains Guillermo Corominas, communications director at Mango, speaking in an interview with Vogue.
Ultimately, most marketers want to know whether their marketing efforts are driving leads, sales, or other conversions. But is this the point of influencer marketing, and should this be the focus of ROI measurement? Despite industry consensus that influencer marketing works, there’s no guarantee it will show revenue-based results instantly, and opinions are dispersed over whether it’s a form of marketing that should be focused on conversions. While sale results may be achieved, not all brands agree that this is the priority.
Fashion and Beauty Monitor: The Rise Of Influencer Report
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