The question about how many conversions and eventually revenue influencers can generate for your business is a very important question especially if your budgets are limited.
The basic answer to this question is: it depends. Now we still want to share specific numbers and average KPIs which you can expect. Make sure to stick to the end of this chapter to get a good understanding of what performance you can expect with influencer marketing.
The reason it depends is as with any other marketing channel. Certain KPIs such as AOV (Average Order Value), CLTV (Customer Lifetime Value), CR (Conversion Rate) and if the product / brand resonates well with influencers all impact the performance of your influencer marketing program.
Influencer marketing follows the Pareto Principle where the top 20% contribute to 80% of the revenue. If you further analyse this 80/20 is increasingly becoming 90/10 or 99/1 – the principle itself is becoming more pronounced. Read a detailed explanation on Influencer Marketing and the Pareto Principle here.
This essentially means that a small portion of the influencers make up for the majority of your revenue. The reason so many brands do not succeed with influencer marketing is because they often send around 10 products to 10 different influencers and assume that influencer marketing doesn’t work for their brand if they don’t see significant results. There is a certain component of luck involved here whether or not there is a high performing influencer within this initial batch of influencers. The Pareto distribution explains that a small portion will sell high volumes and drive revenue while the majority of the influencers aren’t able to influence their audience to purchase. This is why we usually always recommend to test at least 100 influencers.
We recommend carefully reading Chapter 5: Setting up your influencer marketing program for understanding the unit economics and dynamics involved within scaling your influencer marketing program. In short your influencer marketing program can be divided into two core operational aspects.
1). Influencer Testing Campaigns: first time collaborations to identify influencers which are able to influence their audience to purchase
2). Relationship Management & Affiliate marketing: working with top performing influencers by inviting them to your seasonality campaigns. This is where you really make your money and ROAS of 5-10X are common.
Now let’s be more specific and share some tangible numbers and data. Within the Influencer testing phase which is often described as the engine of your influencer marketing program (as you are identifying the influencers you want to work with long term), high performing influencers can refer >50 conversions with a single story post (24 hours) while low performing influencers usually refer 0-3 conversions per story post. Medium performing influencers refer anything in between. What is important to understand is that in this stage high performing influencers finance the cost of lower performing influencers. To evaluate if your influencer marketing program is profitable in this stage you will need to evaluate the average performance across all influencers in your campaign batch.
There can three scenarios within the influencer testing campaign phase which should usually result in the following
1). Your are profitable in testing: continue to increase your budget allocation and scale
2). You are break even in testing: continue to increase your budget allocation and scale
3). You are unprofitable in testing: carefully monitor your performance and calculate the ROAS within your relationship management & affiliate marketing stage.
3.1). The high ROAS of the performing influencers pays off the negative P&L in testing phase: continue to increase your budget allocation and scale
3.2). The ROAS of the performing influencers does not pay off the negative P&L in testing phase: discuss internally if the other benefits of having an influencer marketing program such as content generations and performance amplifications across channels justifies the negative P&L. Carefully allocate a smaller budget and improve your strategy to increase performance
The biggest ROAS is generated within the relationship management and affiliate marketing stage not in the influencer testing campaign stage.
Other variables which determine how fast you can scale is your gross margin and shipping cost. With influencer marketing your advertising cost consist of three aspects:
1). COGS: Cost of goods you offer the influencer
2). Shipping cost
3). Fixed fee’s & Affiliate commission offered
Read a step by step approach for creating a performance driven influencer marketing program in our Ultimate Influencer Marketing Guide here.
For all full breakdown and tailored spreadsheets to calculate your influencer marketing P&L and cash flow, schedule a demo below and become an influencer hero to access our full onboarding package.