How to Calculate and Plan Your Influencer Marketing Budget

June 3, 2024
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11 Min
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Peter Nettesheim
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How to Calculate and Plan Your Influencer Marketing Budget

Influencer marketing has become a cornerstone of modern marketing strategies, with companies allocating significant portions of their budgets to this channel. In fact, a recent survey revealed that 63% of marketers plan to increase their influencer marketing budget in the coming year. During another global 2024 survey among marketing agencies and brands, 26% of respondents devoted more than 40% of their marketing budget on influencer marketing.

Source: Statista

However, diving into influencer marketing without a well-thought-out budget can lead to overspending, unexpected cash flow problems and affect your business operationally due to the impact on inventory management and supply chain.

To ensure your campaigns are effective and efficient and don’t cause unexpected operational issues. it's crucial to plan your influencer marketing budget. This article will guide you through the essential steps and considerations for budgeting, helping you make the most of your investment.

By understanding how influencer marketing will impact your business operationally, cash flow wise and having a clear overview of all the costs involved and strategically allocating your resources, you can set realistic goals, measure your success, and optimize your influencer partnerships. So, let's explore how to plan your influencer marketing budget to achieve the best results for your brand.

What is an Influencer Marketing budget plan

An influencer marketing budget plan is a financial forecast on how much your influencer marketing program will cost to execute. It requires detailed planning in knowing the numbers so you can forecast what budget you need in order to successfully implement your influencer program.

Why it is important to plan your Influencer Marketing budget

Planning your influencer marketing budget is crucial for several reasons:

Allocate resources efficiently

Without a clear budget, you risk overspending on influencers who may not deliver the desired results, or underspending and failing to achieve your campaign goals. A well-planned budget ensures that every dollar spent contributes to your overall marketing strategy.

Moreover, having a budget allows you to set realistic expectations and measure your campaign's performance. By linking your spending to specific goals, you can track metrics such as engagement rates, conversions, and return on investment (ROI). This data-driven approach helps you understand what works and what doesn't, enabling you to optimize future campaigns.

Managing cash flow and inventory management

Especially for physical product businesses an effective influencer program will impact your cash flow and supply chain. By being able to forecast and budget this correctly you avoid unexpected problems and will allow you to plan ahead. 

An influencer marketing budget is also often required for your internal finance team. You should come up with a forecast on how much the marketing activity will cost in order to get the approval for the budget from finance. If you are competing internally for resources a good and detailed influencer marketing budget shows your finance team that you have thought everything through which can increase the chance of an increased budget for your marketing team. 

In summary, planning your influencer marketing budget is essential for planning your inventory, cash flow, maximizing efficiency, setting measurable goals, managing risks, and fostering strong partnerships. By doing so, you can ensure that your influencer marketing efforts are both effective and sustainable.

The Cost of Influencer Marketing: An Overview

Understanding the various costs associated with influencer marketing is essential for planning your budget effectively. Below is an overview of each of the cost you should budget for when building up an influencer program.

Influencer compensation

There are typically two different ways to compensate influencers. 

Fixed payments

This is when you offer an influencer a fixed payment for a certain number of posts.

Affiliate payments

This is when you offer an influencer a commission on the sales they generate. 

Product cost

When working with influencers you often send out products to the influencers which they can use to share with their audience and promote. 

Shipping cost

When sending out products to influencers there will be shipping cost involved.

Management cost

Employee cost to manage the influencer program.

How to budget your influencer program

First determine how many influencers you want to work with in a quarter or on a monthly basis. The number of influencers will allow you to plan the following cost. 

Product cost

To budget the total cost of a product multiply the number of influencers you want to work with by your cost of goods sold (COGS). You might focus your influencer program on your hero product or on a new product which you just launched. Keep in mind however that sometimes influencers might ask for a different product and you might want to offer additional products if you need to negotiate with a high potential influencer.

For example if you want to focus on a product which has COGS of $35 and you want to work with 30 influencers per month you should budget for: 

$35 * 30 = $1,050 in COGS / month. 

We recommend then to build in a buffer so you can offer additional products in case you need to negotiate. For example a 30% buffer in product shipments would increase the budget to:

$1,365 in COGS / month ($1,050 + 30% * $1,050) 

Shipping cost

Let’s say that the average shipping cost of the product you want to advertise is $5 your total shipping cost to budget for would be the shipping cost multiplied by the number of influencers you want to work with. In the above example this would be:

$5 * 30 Influencers = $150 / month 

It is also good to build in a buffer in this case as shipping costs can fluctuate. You might need to ship some products out with express if you are late on your campaign etc. Add another 10 - 20% buffer to make sure to budget accordingly.

Influencer compensation

To forecast your influencer compensation cost it is important to think how you will be compensating your influencers. 

Fixed payments

If you are working with a fixed budget it would be good to calculate backwards depending on how much on average you want to pay each of the influencers. In the next section in this article we will explain in detail which factors determine the cost of influencers. For now let's assume that you are budgeting against an average of $700 per influencer you work with. If you are planning to work with 30 influencers per month you total cost would be: 

$700 * 30 influencers = 21,000 in fixed payments 

You could then allocate the budgets accordingly. Some influencers will probably be more expensive than others but by budgeting on an average basis you can add a larger budget for some influencers while reducing it for others to stay within the planned budget. Just make sure to always negotiate as you will otherwise overpay. Access our step by step influencer outreach negotiation strategy and templates here.

Affiliate commission

If you are working with affiliate commission you would have to forecast the expected sales from influencers in order to budget for the approx. affiliate commission you can expect to pay. The best way to do this is based on past performance data. We typically recommend segmenting your influencer program into two separate parts. We often refer to the 2 most important elements of your influencer program which you can read about in details in our article here

New Influencers

New influencers are first time collaborations. In this part of your influencer program you don’t know the performance of the influencers yet. It would be best here to use an average sales per influencer you work with ideally based on past performance data. For example let's assume that you worked with 100 influencers until now. By using affiliate links and personalised discount codes you were able to track 120 orders. Your average sale per new influencer you work with would be:

120 orders / 100 influencers = 1.2 

To calculate the approx. cost in affiliate payments multiply the expected sales by your average order value. Let's assume that your brand has an average order value of $150. The predicted attributed (we will explain this in a bit) sales would be: 

120 orders * $150 = $18,000

Let's assume that you offer a 10% affiliate commission to your influencers. Simply multiply this by your expected sales to get to the expected cost of affiliate commission. 

$18,000 * 10% = 1,800 

What is important to understand is that the 120 orders you tracked using affiliate links and discount codes don’t show the complete picture. When securing your marketing budget and explaining the results make sure to explain about the sales which aren’t attributed. In digital marketing attribution is almost never 100%.

In fact, the industry average attribution rate when using affiliate links and discount codes with influencer marketing for D2C e-commerce brands is around 70%. To calculate the actual sales divide your tracked sales by 70%. In this example:

120 orders / 70% = approx. 171

To calculate the average sale per new influencer you divide this number by the number of influencers: 

171 / 100 = 1.71 orders per influencer.

This is often a central number you can use to plan, forecast and budget. 

Below is an example of how you could budget forecast for new influencers:

It is important to understand that the majority of the revenues are achieved in the next stage once you identify your performing influencers which will be explained in the next step. 

Existing Relationship

The 2nd type of campaigns which are part of an effective influencer program are your existing relationships. In fact these are the campaigns which typically generate the majority of your revenues. These are your brand ambassadors, the influencers which are able to sell a lot of products and with which you build long lasting relationships. Here we often recommend working with fixed budgets. You would essentially need to allocate fixed payments for each influencer so you know how much to budget for. To read more in detail on how to budget for high performing influencers to maximise ROI read our article here

This is how a budget forecast could look like for your existing influencers. In the sheet below we categorised the influencers into three categories based on posting performance. 

  1. HPS = High Performers: > 10 conversions per post 
  2. MPS = Medium Performers 3 - 9 conversions per post 
  3. GPS = Low Performers < 3 conversions per post

You can see from the above example that the majority of the sales comes from HPS, followed by MPS and GPS. In order to budget forecast with these kinds of seasonality campaigns you always forecast based on past performance. In this example we took the average sales per influencer in order to forecast expected sales. Once you are able to forecast your expected sales you can calculate back exactly how much inventory you need and how this will impact your cash flow. 

Impact on cash flow

The reason it is so important to budget forecast your influencer program correctly is because of its impact on cash flow. A significant amount of the sales are typically generated during seasonality campaigns which means that your revenue spikes.

The main difference between influencer marketing and for example Facebook Ads or Amazon businesses, is that the sales fluctuate significantly with influencer marketing. As you need to purchase all the inventory beforehand for both sending to influencers as well as selling to customers you will often need the capital to invest upfront. A good influencer budget model forecasting is needed and required will help to plan ahead and avoid cash flow issues. 

Impact on inventory forecasting

As you need to purchase inventory both for sending to influencers as well as fulfilling customer orders you will need to plan your supply chain ahead. Similar to cash flow as you need to plan ahead you will need to make sure that your operations run smoothly so it can support your influencer program. 

Other elements which can impact influencer cost:

Influencer Marketing Spend in Different Regions

Influencer marketing budgets can vary significantly depending on the region. For example, in the United States, influencer marketing is a well-established practice, and brands often allocate substantial budgets to collaborate with influencers. 

Globally, the cost of influencer marketing can differ based on local market conditions and social media usage patterns. In regions like Asia, influencer marketing is booming, with platforms like WeChat and TikTok leading the charge.

In Europe, influencer marketing is also gaining traction, but the costs can be more moderate compared to the U.S. This is due to a diverse range of social media platforms and varying levels of market maturity. For instance, brands might find it more cost-effective to work with influencers in countries like Spain or Italy compared to the UK or Germany, where influencer rates are higher.

Understanding these regional differences is crucial for planning your influencer marketing budget effectively. By analyzing costs and market dynamics in different regions, you can allocate your budget more strategically and optimize your campaign's reach and impact.

Cost of influencer marketing according to the type of influencers

The cost of influencer marketing can vary significantly depending on the type of influencer you choose to work with. Influencers are often categorized into different tiers based on their follower count and engagement levels. These tiers include:

  • Nano-influencers (1K-10K followers)
  • Micro-influencers (10K-50K followers)
  • Macro-influencers (50K-500K followers), 
  • Mega-influencers (500K-1M followers)
  • Celebrities (over 1M followers).

Nano and micro-influencers are generally more cost-effective. They often have higher engagement rates and a more loyal, niche audience. This makes them ideal for brands with smaller influencer budgets looking to create authentic connections. You are often able to receive a post in exchange for free products and affiliate. 

Macro and mega-influencers, on the other hand, offer a broader reach but come with a higher price tag. These influencers can charge anywhere from $200 to $20,000 per post, depending on their engagement rates and the platform they use. Mega-influencers and celebrities can charge upwards of $20,000 per post, making them a significant investment for any brand.

Understanding these distinctions can help you allocate your influencer marketing budget more effectively, ensuring you get the best return on your investment.

Cost of influencer marketing based on channel and media

The cost of influencer marketing is highly influenced by the platform where the content is created and shared. Each social media channel has its unique dynamics and audience engagement patterns, which can significantly impact your influencer marketing budget.

For instance, Instagram is one of the most popular platforms for influencer marketing. Costs here can vary depending on the type of content. Stories are generally cheaper. In contrast, feed posts and reels can be more expensive.

YouTube is another powerful platform, especially for long-form content. Here, the costs are generally higher due to the effort and production quality involved. To learn more about rates and how to run an effective Youtube influencer campaigns you can access our Youtube influencer case study here. The evergreen content on Youtube which will also rank in Google SERP to drive continuous traffic and sales can make it a worthwhile investment, offering sustained visibility over time.

Understanding these platform-specific costs and media types is crucial for planning your influencer marketing budget effectively. By aligning your budget with the right platforms and content types, you can maximize your reach and engagement while keeping costs in check.

Link your budget to specific KPIs and goals

When planning your influencer marketing budget, it's essential to tie your spending to specific KPIs and goals. This approach allows you to measure the success of your campaigns more accurately and make data-driven decisions for future initiatives. Key performance indicators (KPIs) such as engagement rates, conversion rates, and return on investment (ROI) should be at the forefront of your planning process.

Start by defining what you want to achieve with your influencer marketing efforts. Are you aiming to increase brand awareness, drive sales, or boost engagement? Each goal will require different metrics to track and different budget allocations. For instance, if your primary goal is to increase brand awareness, you might focus on metrics like reach and impressions. On the other hand, if driving sales is your main objective, conversion rates and ROI will be more relevant.

Additionally, it's important to continuously monitor and adjust your budget based on performance data. This iterative approach ensures that your spending is always aligned with your goals and helps you optimize your influencer marketing budget for maximum impact. By linking your budget to specific KPIs and goals, you can create a more effective and accountable influencer marketing strategy.


Conclusion

In conclusion, planning your influencer marketing budget is essential for optimizing your campaign's effectiveness and ROI. By strategically allocating resources, forecasting costs, and linking your spending to specific KPIs, you can maximize efficiency and measure success accurately.

A well-planned budget not only helps manage cash flow and inventory but also fosters strong influencer partnerships, ensuring your marketing efforts are both impactful and sustainable. With a clear budget plan, you can navigate the complexities of influencer marketing and achieve the best results for your brand.

FAQs
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