The single greatest advantage of digital marketing is the potential to measure every piece of the marketing funnel and then strategically optimize for performance. This concept of performance marketing is the data-driven approach that gets us through budget talks and propels us toward new, innovative ways of reaching customers.
But as performance marketing began to replace traditional marketing, many pieces of the mix like ambassador programs began to lack the measurement rigor of other “easier to track and measure” channels. And though relational, there’s no need to assume the value of ambassador marketing is based on a few qualitative factors. Brands can measure the performance of their ambassador programs as precisely as their pay-per-click campaigns.
Let’s take a deeper dive into measuring the ROI of ambassador programs by first examining the types of value created by ambassador programs and then comparing them to the costs.
Ambassador Marketing Value
While there are nearly unlimited qualitative ways to measure ambassador marketing value, to create a “hard ROI” framework for measuring ambassadors we will focus on three types of quantitative value:
1) GOOD: Brand awareness on Social Media
2) BETTER: Purchases made by Ambassadors
3) BEST: Direct sales made by Ambassadors
1. Good: Brand Awareness on Social Media
One of the main functions of a brand ambassador is getting them to share your product with other people. If you have a UGC platform like LoudCrowd, you can track this behavior when it happens on social media. When ambassadors create content about your brand, analyze metrics like Impressions and Engagements. And since these metrics have market prices for influencers and digital ads, LoudCrowd uses these metrics to calculate an Earned Media Value.
Calculating Earned Media Value is the core of measuring brand awareness generated by brand ambassadors on social media. It’s a simple metric to calculate and should be done for every ambassador program.
Tooltip: Most social marketing tools and ambassador management platforms can measure Earned Media Value.
2. Better: Ambassador Spend and LTV
Brands typically want to give their ambassadors discounts or access to certain exclusive products, but for many brands, their ambassadors are also a significant source of revenue.
Calculating how much your ambassadors spend with the brand is straightforward. Either build a segment of your ambassadors in your eCommerce Analytics solution, or CDP, or leverage an ambassador management platform to automatically calculate program revenue.
To uplevel your ambassador LTV analysis, look at how much your brand ambassadors spend after joining the program to isolate the program’s impact and more cleanly calculate ROI.
3. Best: Measure Direct Sales
Measuring social awareness and brand ambassador spend are important first steps to calculating ambassador ROI. But to create a full picture of the value ambassadors are creating, we need to measure direct sales generated. The most effective way to do that is by providing ambassadors with tracking links or referral codes.
Using codes or links, you need to be directly measuring how much revenue is being generated, and we can also incentivize direct sales with commissions since we have clear attribution.
The challenge with measuring direct sales is that affiliate link and referral code usage is inconsistent. To increase the consistency of measurement (and improve the experience), consider using LoudCrowd Shoppable Ambassador pages.
Ambassador Marketing Costs
Compared to measuring the value of a brand ambassador program, calculating the costs is extremely straightforward.
There are really three main layers of ambassador program costs.
1) Cost of perks / gifts / rewards
2) Platform Costs
Cost of perks / gifts / rewards
Being a brand ambassador has to offer some sort of incentive to make the program feel special, exclusive, and engaging. Most brands will offer their ambassadors a combination of discounts, products, and exclusive experiences to increase their engagement.
Costs that are associated with ambassador rewards are the most common and obvious costs associated with ambassador programs. It is typically straightforward to calculate these costs, although brands sometimes have to use judgment when budgeting for discounts, products, and site credits.
For instance, many brands don’t recognize the cost of sending a discount (it’s just considered a promotion). For credits, they will realize the value of credits redeemed OR sent (depending on the accounting system). And finally, for products, most brands will either recognize the MSRP or the wholesale price as a direct cost associated with the program.
While not every brand uses technology to manage ambassador programs, the cost of a specialized ambassador platform can generally be considered a direct cost of the ambassador program.
Most brands do not recognize ancillary platforms (like social listening or email platforms) as a part of their ambassador program since they need those platforms anyway. But incremental costs like SMS volumes can be attributed to the program.
Brands that offer the opportunity to make sales via affiliate links will typically have to add the cost of affiliate commissions into the program cost. Commissions can be easily calculated from an affiliate platform or an ambassador platform, and they should be measured as direct costs.
While there are several other types of ambassador value, 90% of an ambassador ROI’s measurable value can be recognized in these 3 simple value calculations and 3 simple cost calculations. To find the total cost, brands simply need to divide total value by total costs:
Brands should endeavor to have a hard, measurable ROI of at least 2x to justify the existence of their ambassador program. Generally, 2x is a strong return on both capital and marketing time invested in the program. Best-in-class brands can expect returns of up to 50x.
For more information on calculating ambassador ROI or creating an ambassador program strategy – request a demo.