Welcome back. This is module six.

Yes, you've made it to the sixth and final week this is where it all comes together,

and by the way,

I'm going to be answering some of the questions that I posed

rhetorically at the beginning of this course but guess what?

You are very close to completing this

and actually putting together

your very own influencer marketing strategy that you can share with others.

So you're ready, ready to rock and roll? Here we go.

In this first lesson,

in this final module,

I want to help you calculate something that nobody thinks you can calculate.

It is the return on your marketing investment.

Now, I chose my words very carefully because there are a lot

of people out there who will ask you to calculate your return on investment ROI,

and I'm using a different term is called ROMI return on marketing investment,

but we covered that if you recall

in the very beginning in the first module of this course.

Understanding how to calculate the return on

marketing investment allows you to do lots of interesting things.

One of the things that you can do

is answer that rhetorical question I asked at the beginning.

Okay. So gummy bear hair paid a half a million dollars,

$500,000, yeah that's a lot of money to Kim Kardashian West to create

this particular Instagram post where she

is chewing provocatively on that gummy bear hair vitamin,

and by the way this is what you got to ask yourself,

is that worth it?

Seriously is that what it takes to sell vitamins these days?

Well, how do we know whether gummy bear hair got their return on marketing investment?

So let's take some of the calculations that we talked about in the first module.

Let's use them here because,

not that I'm trying to cost justify hiring Kim I'm not her agent,

but you want to be able to do these kind of calculations yourself before

you look at any of the investments that you make in influencer marketing.

By being able to do them,

you will have differentiated yourself from the vast majority of

influence marketers who are just hoping that this stuff works.

So here's the calculation.

Again if you recall the formula,

that you want to pay attention to,

is clearly stated here.

Let me just point it out.

You need to look at your incremental revenue attributable to marketing.

That's the first piece of data you need to have.

Fortunately, you have now learned how you can track this.

So, we've learned how to calculate

your economic value and you can

attribute it to your influencer marketing because you've got that tracking leg.

This isn't open for dispute, you've got it numbered down.

The second member you need to know is your contribution margin

or what a lot of companies will call their profit margin.

Now this is harder to know.

This is one of those things that most companies try to keep secret,

but if you work inside the organization you can

basically explain if you want me to do the calculations,

where I can calculate the profit you got to give me a number.

And if they don't give you a number,

they are reluctant to give you a number you need to come up with some kind of

reasonable estimate and we're going to give you a couple here that you can work with.

Then you know the amount of money that you're spending on marketing,

and so you're going to subtract that and then you're going to divide by the amount of

money that you spend on marketing and this is for a quarter.

So for a ninety day period.

Alright? That's the math.

That's the formula and now you know it,

you can use it and here's how we use it with Kim Kardashian West.

She charges brands $500,000 for a single Instagram post.

So we've got one of the data points here we basically have the cost of Kim.

Well, you need to do a little more calculations to find out Sugar Bear Hair,

they're selling vitamins, we heard that.

Well what do those vitamins go for?

They have a variety of pricing levels,

but let's choose the middle one.

Why? It's the Goldilocks principle.

It's not too low, it's not too high.

It's the one in the middle,

so we're going to assume that that's about the right price for this calculation.

The middle one that they have is a three month supply of their vitamins cost $79.99.

So $79.99 roughly $80 for a three month supply of these chewable vitamins.

Got it? Now that's the revenue,

that's what they charge,

there's also a contribution margin.

So what do you think the profit margin is on these kinds of vitamins?

I'm going to pick a number out of thin air that's going to be called 50%, why?

Well, I've been in the industry a long time,

we've worked with a lot of different clients and you know what?

Based on my scientific wild ass guess swag, I'm going to say,

I'll bet you Sugar Bear Hair has a contribution margin of about 50% here.

Just guessing but you got to plug in a number here from somewhere.

Well if you do that,

then here's how you do the math.

Kim's ad needed to generate 25,000 orders at roughly $80 apiece,

to deliver $2,000,000 in

incremental revenue and then

of course you're going to do the division about half of that is profit,

half of that is cost of goods sold,

so it takes something to create

the vitamins and create the packaging and maybe even cover the shipping.

In order for Sugar Bear Hair to basically get a positive return on marketing investment,

in other words, for every dollar they spent on Kim,

half million dollars they would get a dollar not in revenue,

they basically got $2 million in revenue but they get

half a million dollars in profits one for one,

and the formula's right down there at the bottom,

$2,000,000 revenue times 50% margins subtract

the half million they're spending for Kim divide by

the half million that you're spending for Kim to get a number one.

What I will tell you is there's been a lot of data over the years

collected by a variety of consulting firms who find that if you can get an ROMI of one,

or actually the average is 1.1 but close to one,

that you're doing average.

You're getting a normal return on marketing investment.

But that's the deal, that's how you calculate this.

It's not just the incremental revenue you need to know that.

But that incremental revenue is then divided

by you got to pay for producing that product,

you got to focus on profits which will set you apart.

But this is then how when the Chief Financial Officer says, "What's the ROI?"

You can say, "Well actually we've calculated the ROMI,

which is the right formula to use for

an operational expenditure as opposed to a capital expenditure,

and we know the kind of orders that we have to get,

and the kind of revenue we need to generate in order to generate enough profit,