Why are marketers increasing their online influencer budgets?

Top influencer Kate La View - Source: twitter.com/katelavie
Sep 22, 2017

Aprajita Jain, A Brand Marketing Evangelist at Google 

Presented here for discussion is an excerpt of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania. Aprajita Jain is a a brand marketing evangelist at Google.

A poll conducted by Tomoson found that 59 percent of marketers are planning to increase their influencer marketing budgets year-over-year. Working with such connected individuals was also found to be the most cost effective and fastest growing online customer acquisition channel, outpacing organic search, paid search and e-mail marketing.

Once the right influencers are identified, the next step is compensation.

The four most common pricing models are:

Pay-per-post or flat-rate pricing: Typically, the influencer is paid a flat fee per piece of sponsored content they create, whether it’s a photo, tweet, pin, video or blog post. Depending on who they work with, prices can range from as little as $50 per piece to as much as $250,000 for top-tier influencers.

Product compensation: Some influencers can be wooed with free products or services. This type of compensation is commonly used by travel brands as influencers can creatively endorse their personal travel stories. This model is ideal for smaller campaigns or for brands looking to establish a brand ambassador group.

Pay-per-click: In this model, influencers are compensated for how well their content performs. The key metric is number of clicks to a brand’s site. Because influencers rely a lot more on audience interaction in this performance-based model, they are motivated to create larger volumes of content.

Pay-per-acquisition: Here, influencers are rewarded for the number of purchases, actions or sign-ups driven by their content. It is the least common payment model because consumers rarely purchase or sign up for something the first time they get introduced to a product or service.

Blush, gold, white… this is a very me outfit. Will link details in my story ✨

A post shared by KATE LA VIE (@kate.lavie) on

Marketers define success in different ways, monitoring different measurement criteria. Half of all marketers see sales increases and lead generation as the top goals of influencer marketing. Forty percent look for brand engagement such as clicks and social shares.

Success can also be correlated with spikes in web traffic or higher conversions in concurrent ad campaigns, or even less tangible metrics, such as overall brand sentiment. It’s important to look at the whole picture and, as with all things in digital marketing, watching for the cross-channel impact of influencer marketing as well.

DISCUSSION QUESTIONS: What’s the best way to compensate influencers in marketing campaigns? How should brands or retailers measure the impact of their efforts?

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11 Comments on "Why are marketers increasing their online influencer budgets?"

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Ralph Jacobson

Compensation can be in whatever form the valuable influencer desires. Keep it that simple. Where the challenge comes in is how to measure their impact on revenue. As we all know there are multiple factors that impact revenue all the time, both internal and external. You need to separate the variables away from the potential product lift you will see from the influencer’s influence.

Phil Masiello

Influencer strategies can be tricky. Finding the correct influencer for your brand and using the correct media channel that can connect with your target is the key.

The compensation model has gotten a bit distorted as demand has increased. We employ a fairly reliable model of paying based upon engagement — 4 cents per view on average is fair. For example, if an influencer gets an average of 100,000 legitimate views on a video they post, that is worth about $4,000. And we can monitor for fraud and other areas. But the real test is whether or not it drives clickthroughs to whatever the objective is. If it is site visits or purchases, we can track it.

But this is not a “set it and forget it” channel. It needs to be monitored and changed to get the desired sales result. Everything should be ultimately measured on sales.

Sky Rota
I don’t think there is any best way to compensate an influencer. The influencer will usually let you know. If you are a lower-level influencer just like any celebrity you will accept a different pay than a top-tier celebrity. Keep in mind influencers are our celebrities today. Influencers are only going to represent a brand that works for them and their fan base. They know that they have word of mouth gold. If they have 500,000 followers/subscribers, in some cases lots of those fans are from completely different demographics. So when they advocate for your product, etc. their fan base trusts them because they have a relationship already established with them. Example: Their fans know if Sky is wearing those sneakers or new watch or staying at a certain hotel, it must be high-end. They will expect to see me representing a high-end product as it will feel natural to them when I show up wearing it or using it in my videos. Companies must figure out what they are looking for from the influencer.… Read more »
Doug Garnett
Doug Garnett
President, Protonik
3 years 8 days ago
I urge considerable caution with this research. All it reflects is perception by marketers today — these marketer perceptions usually do not reflect a known medium with known results. What I think is really happening is this: Influencer marketing works sometimes — depending on the industry, who the influencers are and how you try to use them.; The ability to measure the impact of influencer marketing is exceptionally limited. So choices to continue or stop influencer marketing are only very rarely based on known effect; Influencer marketing is relatively cheap. And it reflects the naive digital claim that marketing can be made cheap and effective. That usually doesn’t happen — you tend to get what you pay for. But in building perceptions, “cheap” is more critical than “effective” or “cost effective.” Yes, sometimes it works. But not nearly as often as implied by perception studies. So look deeply at your specific business and the specific influencers available to you: Is this a serious opportunity that drives known business or is it merely another shiny marketing… Read more »
Dave Bruno

Proceed with caution when compensating influencers! A huge part of their appeal and effectiveness is the perceived authenticity of their commentary. We all know by now the conversion value of authentic, candid content, and if we overreach and compensate influencers too heavily, authenticity (or at minimum the perception of authenticity) is compromised.

Kiri Masters

As the author states, “watching for the cross-channel impact of influencer marketing” is critical.

Influencer marketing should be viewed as more of a branding exercise than direct response marketing which can be accurately tracked and tweaked. As other experts have pointed out, there are metrics that can be used to track engagement, clicks and conversions. But the real value of influencer marketing is the awareness and trust it can bring to a brand that is launching a new product or trying to expand appeal to a new segment. That outcome is very difficult to measure accurately.

Phil Chang
Phil Chang
Retail Influencer, Speaker and Consultant
3 years 8 days ago

Telling a story that fits into the consumer’s story will result in purchases 55% of the time.

It’s about time that marketing budgets shifted to be more nimble, agile and frankly, relevant. Compensation is a topic we talk about a lot — I often encourage brands to chose routes besides giving away free products. This weeds out “arm-chair” influencer enthusiasts who are out for free stuff.

A good influencer is one that understands your brand and safeguards their audience. They should be looking for a fit of your product to their audience as much as you’re looking for the right audience for your products.

I’ve recommended pay per click — generically, this drives the best results. If you have the right audience and the right review, you’ll get the clicks you need to convert.

Dan Raftery

These people are doing this for the money. They certainly need a sample of the product to write about it, but you won’t get their reviews just on the merit of your spectacular gizmo.

Several easy ways to evaluate an influencer’s impact. You need to know when they post the review, then use a resource such as One Click Retail to see the hourly sales on Amazon.

Caution: you don’t want to run out of stock if it works well!

Shep Hyken

There are a number of reasons to use influencers in marketing. First is obvious. The influencer can driver sales. The influencer can create more awareness. And, the affiliation with an influencer who is a recognized thought leader, celebrity, executive, etc. can help with positioning. How they are paid is really up to what the parties agree to. Basically, the influencer becomes a spokesperson. What’s that relationship worth? Is it worth paying for exclusivity? Is it driving more sales and worth paying per lead or sale? The old saying comes to mind: “Beauty is in the eye of the beholder.” The value of the influencer is in the eye of the company.

Ken Morris
Ken Morris
Managing Partner Cambridge Retail Advisors
3 years 8 days ago
Ideally, it would be best to compensate influencers as a percentage of sales that they influenced. However, it can get complicated and the time between influence and purchase may be quite long for some product categories. Measurement and compensation based on influencer driven click-thru to the brand’s website or conversions to “likes” or “follows” on social media is probably more realistic today. Influencer measurement depends on retailers’ objectives for influencer marketing: awareness, engagement or revenue. For measurement of awareness, retailers will focus on the total number of impressions that are driven by influencers. If engagement is the objective, measurement often focuses on cost per engagement (CPE) which is measured by the cost per click-thru or “like.” To measure the revenue impact, retailers may use a combination of affiliate links, promo codes or Google Analytics to track sales spurred by influencer marketing. Clearly influencers work; their compensation needs to eventually be linked to the sales or life time value (LTV) of those they influence. The technology exists to do this and it’s only a matter of… Read more »
Franklin Chu
While there is no best way to compensate influencers, certain approaches can minimize your risk and maximize your return of investment. First of all, define your objective before working with influencers, called key opinion leaders (KOLs) in China. Objectives such as increased brand awareness, user growth or sales growth require different strategies. Secondly, understand the KOL’s audience to ensure it aligns with your target market. Thirdly, manage your expectations; retailers should have modest expectations about the outcomes before working with KOLs. The challenges include: The need to influence the influencers: KOLs cannot be dictated to do things; they are a partner to achieve your goals rather than your employees. Strategic fit: Entering into terms with KOLs can be very tricky. Before you really tap into their followers, understand the upfront expenses. Some KOLs don’t really understand the consumption power of their followers, so test campaigns are necessary to research the segmentation of their followers. Educating KOLs: While it can be time consuming, retail companies must educate KOLs about their brand and retail business to ensure… Read more »
"This is not a 'set it and forget it' channel. It needs to be monitored and changed to get the desired sales result. "

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