Pulse Fitness Apparel: Influencer Economics
Pulse is a direct-to-consumer fitness apparel brand. It spends £60,000 on a 10-week campaign with 12 micro-influencers. Each influencer gets a unique code; total tracked revenue is £78,000, giving an apparent ROAS of 1.3. The target CAC is £25; the campaign acquired 1,580 first-time customers, implying CAC of £38. Organic social reach has fallen 40% year on year, and paid social CPMs have risen 28%. Pulse's email list is 120,000 with a 19% open rate and a 2.1% click rate. The CEO wants to cut influencer spend entirely and move it to discount promotions, which historically convert at 4.5% but train customers to wait for sales. The Head of Brand argues that influencers build credibility with 25–34-year-old women, Pulse's core segment. Finance notes that 30% of tracked revenue would have occurred anyway, according to a post-purchase survey.
1. Recalculate incremental ROAS and CAC after the 30% baseline adjustment. What conclusions change?
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Tracked ROAS = £78,000 / £60,000 = 1.3. With 30% baseline revenue, incremental revenue = £78,000 × 70% = £54,600. Incremental ROAS = £54,600 / £60,000 = 0.91. If the same 30% baseline applies to customers, incremental new customers = 1,580 × 70% = 1,106. Incremental CAC = £60,000 / 1,106 = £54.25, more than double the £25 target. Even if only revenue is adjusted, the campaign is below break-even on first-order revenue. The apparent £38 CAC is flattered by sales that would have happened anyway. This does not automatically kill influencer marketing: it may create awareness, content and repeat purchases. But the campaign as measured cannot be defended on acquisition efficiency.
2. The CEO wants to move all influencer spend to discount promotions. What budget decision would you recommend, and why?
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Do not move all spend to discount promotions. A 4.5% discount conversion may look strong, but it erodes margin and trains the core segment to wait for sales. Reallocate rather than cut: keep a smaller influencer/affiliate layer with performance terms, unique codes and a CPA ceiling; shift part to email/SMS retention, since the 120,000 list is underused; and fund retargeting of engaged audiences. Set gates: incremental ROAS above 1.5 and CAC below £30 after baseline adjustment. Negotiate flat fee plus commission, require whitelisting and content rights, and use holdout geos. If influencer cannot beat the gates in a six-week test, cut it. This preserves brand credibility while fixing the economics.
3. Design the measurement approach for the next campaign so Pulse can judge true incremental value.
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Measure incrementality with a geo holdout or a pre/post control group. Use post-purchase 'where did you hear about us?' as a diagnostic, not the sole truth. KPIs: incremental revenue, incremental new customers, CAC, 90-day repeat rate, contribution margin after discounts, email capture rate, organic search/social lift, and content reuse. Run a six-week test with a control cell. The decision rule should be based on contribution after repeat, not last-click ROAS.