With the right combination of content and influencers, companies and brands can reach their target audience quickly and efficiently. But since the industry is changing fast and growing constantly, it can be difficult to negotiate the right prices for a collaboration. Below we explain everything around CPM, CPC, CPA, and CPL and how to master the next contract negotiation.
When it comes to influencer marketing, it’s important to have a comprehensive understanding of the various pricing considerations . Each payment method, whether based on CPM, engagement rate, partnership marketing, buyouts, or non-monetary compensation, has its own benefits and considerations.
By carefully evaluating campaign goals, target audience, and the available budget, brands can determine the most appropriate approach for their influencer marketing campaigns. Choosing the appropriate payment method is critical to ensuring cost-effectiveness and maximizing the impact of influencer collaborations. By aligning pricing strategies with campaign goals and resources, brands can ensure they are investing in the right influencers and effectively reaching their target audience.
CPM is a commonly used metric in influencer marketing. It refers to the costs incurred when a brand wants to reach 1,000 people from a specific target group (= impressions). An impression is registered every time an influencer’s post is displayed or viewed by a user.
The CPM serves as a means of assessing whether the costs of working with influencers are justified. However, the final price is influenced by other factors, such as credibility, influence, engagement, and industry, which may result in actual influencer marketing costs exceeding the CPM.
The CPM is calculated using the following formula:
Content production price / gross reach x 1000 = thousand-contact price.
To calculate the CPM, the total cost of an advertising campaign is divided by the number of impressions generated, and the result is then multiplied by 1,000. For example, if an influencer charges $500 for a sponsored post and the post receives 100,000 impressions, the CPM is $5, meaning the brand pays $5 for every 1,000 impressions. By comparing CPM rates across influencers and platforms, brands can make informed decisions about budget allocation and campaign effectiveness.
While CPM is a valuable metric, it is important to consider several factors that can influence the interpretation of “good” CPM in influencer marketing. The industry, target audience, and campaign goals all play an important role in determining an acceptable CPM rate. Typically, a low CPM indicates a more cost-effective campaign as it means paying less for 1,000 impressions. However, it is important to balance the cost with the quality of the KOL’s target audience and engagement. A higher CPM may be justifiable if the target audience closely matches the target market and generates significant conversions or brand awareness.
CPM can vary widely depending on the social media platform and format. Certain content formats, such as videos, are more time-consuming to produce compared to an Instagram post.
You can break down CPM in different ways, including CPC (cost-per-click), CPA (cost-per-acquisition), and CPL (cost-per-lead).
By breaking down the CPM using these metrics, brands gain a better understanding of the relative cost and effectiveness of their influencer marketing campaigns. The methods help provide a more nuanced view of the cost per interaction, acquisition, or lead and help optimize budget allocation and success measurement.
Of course, CPM is not the only way to calculate the cost of working with influencers. At this point, we also recommend: How do you build an effective influencer partnership?
We have already mentioned affiliate marketing. Here, influencers receive a predetermined commission for each product sold through their advertising. The number of products (or services) sold and the success of the campaign are tracked via a personalized affiliate link. This link is placed directly in the post or in the social media profile of the influencer and is marked as such due to new legal regulations. Affiliate marketing is particularly effective with micro-influencers who have a small but very specific target audience and a strong connection to their community. Deepen your knowledge: The Kolsquare guide to tracking your influencer marketing campaigns.
In a buyout agreement, influencers transfer all rights to the content they create, such as posts, reels, or videos, to a brand in exchange for a predetermined fee. In this way, companies can use the creators’ images and videos for commercial purposes, publish them on their own channels, and thus recycle them cost-effectively. The price of buyouts can vary depending on the timeframe and geographic usage. In general, it is recommended to price it around 100-200% of the original content price.
In addition to fixed amounts and the pricing models explained above, some influencers (mainly micro or nano influencers) also accept non-monetary compensation. This often takes the form of barter deals in which companies send free samples to the KOL, who then present or rate them on their platforms. Ideally, both parties benefit from the exchange of goods and advertising space. However, it is important to note that influencers are only obligated to showcase the products if this has been contractually agreed upon.
Each payment model has its benefits and considerations and brands should carefully evaluate their goals and resources to determine the most appropriate approach for their influencer marketing campaigns.
Influencers invest a lot of time and effort into content creation. From concept development to execution, many hours of work can go into a single post. They have a certain amount of freedom to determine the hourly rate, similar to freelancers. Therefore, marketers need to consider the creative and strategic aspects when planning the campaign, which works best through an open exchange. Transparency and appreciation are two key words you should not forget.
The so-called talent fee covers all costs associated with content creation. This fee covers campaign-related costs and an hourly rate. For example, if an influencer spends four hours editing images in Photoshop, he or she can charge a certain hourly rate, such as 30€. The same goes for hiring a team for video or photo production. Every hour and every resource invested in content production can be charged. Of course, the hourly rate depends on various factors:
Engagement rate is an important marketing metric that shows how quickly and strongly the audience responds to the content. Influencers whose posts are actively responded to signal to brands that they have a strong influence on their audience. Measured interactions include likes, shares, and comments, according to the Kolsquare method. Analytics tools that can show these metrics to determine engagement rate: Instagram engagement rate: definition, calculation and tips.
Reach refers to the number of users who have seen the content and who represent the potential number of people who can be reached by a post.
Finally, the target group is also decisive for the pricing of influencer collaborations. Precise targeting often leads to a higher price per post. For example, a lifestyle influencer with 60,000 followers can charge the same price as a parenting influencer with 10,000 followers since the latter has a more specific target group. The more precise the targeting, the higher the cost per post. This underlines that prices for influencers can depend on factors such as the industry, the reputation of the KOL, and their negotiating position.
CPMs for influencer marketing can vary depending on the platform and type of content. As a result, prices on Instagram and TikTok are usually based on various metrics, such as the number of followers, average views or likes per video, and engagement rate.
Even though platforms give the impression that booking influencers is quick and easy, it’s important to remember that it’s a market and prices can rise when demand exceeds supply. This explains why well-known influencers often deviate from these guidelines and charge fixed prices.
Influencers see themselves as brands, and similar to Apple, Mercedes, or Tiffany, you pay not only for a professional and high-quality result, but also for the value of their testimonials.
One example is Steffi aka @diy.mamis who shares her DIY content on TikTok, Instagram and YouTube with a total of 247.5K followers. Her engagement rate on Instagram is 4.23%, so the cost to collaborate is as follows:
You can get these insights with the Kolsquare complete solution, which you can test for free. Simply request a personal consultation with our experts here and start optimizing your Influencer Marketing campaigns today!
Kolsquare is Europe’s leading Influencer Marketing platform, a data-driven solution that allows brands to scale their KOL Marketing strategies and implement authentic partnerships with KOLs (Key Opinion Leaders). Kolsquare’s technology enables marketing professionals to easily identify the best Content Creators profiles by filtering their content and audience, and to build and manage their campaigns from A to Z, including measuring results and benchmarking performance against competitors. Kolsquare has built the largest community of influencer marketing experts in the world, and offers hundreds of customers (Coca-Cola, Netflix, Sony Music, Publicis, Sézane, Sephora, El Corte Inglés, Lacoste, …) the latest Big Data, AI and Machine Learning technologies to drive inspiring partnerships, tapping into an exhaustive network covering 100% of KOLs with more than 5,000 followers in 180 countries on Instagram, TikTok, Twitter, Facebook and YouTube. As a Benefit Company, Kolsquare has been pioneering Responsible Influence by championing transparency, ethical practices, and meaningful collaborations to inspire change.
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