How to budget for influencer marketing

Working with Influencers is a great way to build your brand, reach new audiences and even grow your sales. With so many different influencers out there here are some tips for deciding who to work with and how much to spend.

Who to work with:

Macro influencers have accounts with a following of 100,000 or more. They typically have high engagement and are great if you want to create awareness with a diverse audience.
Micro-influencers have accounts under 100,000 followers. They are way more niche and personal with their content, so they are great if you want to increase your sales, as you piggyback on the trust they’ve built with their community.
With influencer marketing, the people you work with become an extension of your brand — so choosing one that shares your values is essential. And they should share your audience too. Research your niche to understand who is popular with your ideal customer.

How much to spend:

Shopify suggests you choose an influencer who has about the same amount of followers as you. If you choose someone with more, it will likely cost you more.
When it comes to making room in your marketing budget for influencer marketing you can either go with Fixed (when you choose a set amount you want to spend on an Influencer) or Sales-based (when you base your Influencer budget on a sales goal)

Fixed example:

If your quarterly marketing budget is $5,000 you may want to allocate 10% or $500 to influencer marketing. Your influencer marketing budget can be a subcategory in your overall marketing budget. It’s really up to you.

Sales based example:

Determine your revenue Goal = $5,000

Find your Average Order Value= $250

Find your Conversion rate = 2.5%

Calculate how many visitors you will need to your online store to generate your revenue goal:

$5,000/$250 = 20 sales

20 sales/0.025 AOV = 800 visitors

That means you will need 800 visitors to your store. At your conversion rate of 2.5%, 20 of those 800 visitors will likely result in sales. And with your AOV of $250, with 20 sales you will meet your revenue goal of $5,000.

[MUSIC PLAYING] Working with influencers is a great way to build your brand reach new audiences and even grow your sales. With so many different influencers out there, here are some tips for deciding who to work with and how much to spend. Let's get started. Influencers tend to fall into two categories; macro and micro. Macro influencers have accounts with a following of 100,000 or more.

They typically have high engagement and are great if you want to create awareness with a diverse audience. Micro influencers have accounts under 100,000 followers. They are way more niche and personal with their content. So they're great if you want to increase your sales as you piggyback on the trust they've built with their community. With influencer marketing influencers become, in a sense an extension of your brand.

So choosing one that shares your values is essential. And they should share your audience too. Research your niche to understand who is popular with your ideal customer. Be sure to ask to see their media kit to really understand what they stand for and to evaluate the potential return on your investment. You'll also want to check out the engagement of their community. Are people commenting, liking and sharing their content. An influencer that has 5,000 followers and 400 comments on each post from real fans and followers is better for business than an influencer with 150,000 followers but no real community.

As a loose rule at Shopify, we suggest you choose an influencer who has about the same amount of followers as you. If you choose someone with more, it will likely cost you more. When it comes to making room in your marketing budget for influencer marketing, you can either go with fixed or sales based. Fixed is choosing a set amount you want to spend on an influencer. For example, if your quarterly marketing budget is $5,000 you may want to allocate 10% or $500 to influencer marketing.

Your influencer marketing budget can be a subcategory in your overall marketing budget. It's really up to you. If you have a bit more to spend, you can try a sales based budget. This is where you base your influencer budget on a sales goal. Here's how it works. Ask yourself how much revenue you want, what's your average order value and what's your visitor to customer conversion rate. You can see your conversion rate details in your Shopify reports.

So with your existing conversion rate of 2.5% and your average order value of $250, you'll need 800 visitors to your online store to generate 20 sales or $5,000 in revenue. Still with me? Now let's say your product cost on each order is $50 on average. That means for 20 orders or $5,000 in revenue, your cost would be around $1,000.

Leaving you for $4,000 profit. This amount becomes your new budget. So to break even and start to see your profits on your new $4,000 influencer budget, your influencer will need to refer at least 800 visitors to your site. This is just an example. This calculation will be different for every business. Let's fast forward.

You found your influencer and you're ready to go. Be sure to outline the deliverables based on what you're paying them or offering them. For the actual payment you can offer to page 50% to kick off the campaign and the remaining 50 once the campaign finishes. Negotiate and always have all payment terms in a written agreement that you both sign. Influencers have tremendous power.

When you find the ones that check all of the boxes. Influencer marketing can do wonders for your brand and business. Thanks for watching. If you're looking for more business building tips, Shopify Compass has more great tutorials and courses. Bye for now.

Reflect on your marketing budget and determine if influencer marketing makes sense for your next quarter.

Based on your marketing goals, would a fixed or sales based approach make sense? If it’s a sales based approach, crunch the numbers to determine how many visitors your influencer would need to get to your online store to reach your sales goal.