Is influencer marketing still worth the investment?
Written in December 2019
For the past few years, we witness the massive growth of influencer marketing. There is no doubt it has radically changed the way brand owners and marketers grow their businesses. The social media influencers, such as vloggers and “Instafamous”, work as brand ambassadors to share brand or products related content (pictures, videos, moments, etc.) on social media with their followers. They are attractive to advisers and brands because they help increase brand awareness and reach new audiences via their broader network. At the same time, they are seen authentic, credible and personal to their followers because people can’t identify commercial posts as advertising when those posts resemble non-commercial posts.
However, it is said the golden age of influencer marketing is over. The effectiveness is in doubt as it becomes more competitive and expensive. According to Influencer Marketing 2019 published by MediaKix, Advisers have to spend increasingly more of their budget on influencer marketing. The Association of National Advertisers did a survey earlier this year and showed only 36% of the marketers feel the efforts in influencer marketing are effective.
Since this year, more and more marketers and brand owners began to hesitate to inject their marketing budget into the influencer campaign as they did last year. They want to make sure such investment is still effective and valuable, and worth the growing price.
There are good reasons for brand hesitation.
1. It’s too expensive. Social media has become a business that sucks all the money out of brands’ wallets. When the acquisition cost outpaces the customer lifetime value, it doesn’t worth it anymore. According to the recent survey conducted by Cheq, someone with 500K+ followers (called macro-influencers) can charge as high as $250,000 for a post on Instagram. Moreover, the price is still growing as venture capital dollar raised by online brands has been pouring more money into this space in recent years. Instagram influencer marketing spending worldwide is expected to reach $8.08 billion by the end of 2020, more than 15 times of that in 2015. Many brands are working more closely with micro and nano-influencers who have fewer followers and likes but charge much less. However, finding the right and enough influencers to reach to broader customer base remains time-consuming and costly.
2. Customers could feel annoying when too many brands fight against lookalike competitors. Influencer marketing has seemingly become a “must-do” marketing tactic for a retail brand, especially for newly launched and VC-backed companies. The result is the influencers are everywhere, recommending everything. The popularity and ubiquity of influencer marketing have made customers feel bored and not trust those tricks anymore. A recent study from Sprout Social also shows that too many promotions on social media are seen as the most annoying action on social media. Lookalike brands are all doing the same things, making the tactic just “a waste of money”.
3. Customers become suspicious, especially in terms of inauthentic influencers. The fact is, being an “influencer” has become a profession and content creation has become a business rather than a hobby. They contract with MCNs (multi-channel networks) to get supports in areas such as brand partnerships, programming, cross-promotion, etc. According to a study by Splendid Communications, only 5% of the social media users thought influencers only promote brands they truly believe in, and 61% of the social media users said they have unfollowed an influencer who advocates too many products. The growing number of unrelated and inauthentic posts makes the audience more suspicious of the influencers. A recent study shows sponsored social media posts make people more skeptical toward the posts and in turn negatively affect brand attitudes. (Veirman and Hudders, 2019). If the influencers are not perceived to be independent of the product/service they recommend and lose authenticity in the eyes of their followers, their posts are not as credible and powerful as they used to be.
4. Measuring ROI is tremendously hard. 84% of the marketers agree “measuring and improving ROI” is the number one challenge when working with influencers, from the Influencer Marketing 2019 published by MediaKix. Conversion rates, brand awareness, search volume, media mentions, etc. are all reasonable metrics to evaluate the efficacy of an influencer marketing campaign, but none of them are easy to measure, nor convey a full picture of the results. Moreover, marketing strategy is a whole package that involves other techniques such as digital advertisements, contents creation, community events. The effectiveness of one specific marketing channel is hard to tell. In the long run, the brands will reallocate the money put into this space if they don’t have confident knowledge of whether the tactic works or not.
5. The data of some platform is easily manipulated and hard to trust. Fake accounts and followers bought by influencers to appear more influential remain the primary concern for most of the marketers. Fake Influencer Marketing in 2019 (CHEQ) estimated that fake followers and engagement data would cost $1.3 billion in marketing spending this year. For example, Chinese biggest social media platform Weibo, with 462 million MAU, have long plagued with fake accounts (known as zombie accounts) that are controlled by hackers who sell followers, likes, and comments, and reposts on Taobao. There are also closed groups known as “pods”, where a group of influencers share their new published posts and others would help boost the overall engagement metrics in the form of “likes”, “comments”, and “views”. Thus, for brands and marketers, it’s hard to tell whether a post is truly reaching new potential customers or just a mass of cash-eating zombies and fakeries.
What now?
Given all the pain points and unsatisfying results brands have experienced, some of them have decided to ditch influencer marketing. Without or less dependent on social media/influencer ads, what else can we do? What are other customer acquisition strategies? For a newly created brand or consumer product, how to build up the brand from day one with a limited budget?
In my opinion, we should always go back to the essence of our businesses — the products and services we are providing — What specific group of people are we targeting? How we create value and improve the quality of their life? How we better serve them? Rethinking about those questions could help us figure out alternative ways to grow our businesses.
1. Find the target customers. The very first step is to rethink our target market and narrow it down to a certain segment and group of people. Then try to figure out where those customers are, both online and offline, and be there and talk to them. Once we locate our target customers, try to engage them in a sincere and authentic manner and create value, rather than just hard sell. Aikucun, a Chinese online platform that connects fashion brands with online shoppers, acquired their first batch of users by setting up a street stall and conducting focus group interviews on the street.
2. Social sharing could be a good way to go viral. Thanks to social media, brands could grow rapidly in terms of users and awareness by encouraging customers to share their experiences with their friends. Prescription eyeglasses brand Warby Parker encourages its customers to share how those glasses look like on social media and get feedback on style and fit. It shows those who shared content were 50% more likely to make the purchase. Sometime, just a nicely decorated store could also be an effective tool to increase brand awareness. Glossier opened its flagship store in Soho not to attract more customers to buy its makeup, but to go there, take nice photos, and post on social media so that people all over the world could know the brand and try its products.
3. Offer deals and promotions. For direct to consumer brand, it’s appealing to customers because it cuts the costs associated with traditional distribution channels and offering products without up charging. Instead of pouring money into mass marketing, brand owners could just give the benefits back to their customers. Before the launch of razor brand Harry’s, the founder just used a simple idea “waitlist” and the promise of better products at a lower price to entice customers to sign up for the razors. At the same time, they could get benefits such as free products and discounts by sharing the waitlist link with their social networks. The campaign successfully helped the brand secure the first batch of loyal customers and win over a huge list of potential customers. Those incentives are effective and economic to achieve viral promotion.
4. Build meaningful brand partnerships. The target customers usually have similar consumer behavior which influenced by demographic or psychographic factors. For instance, individuals who have the desire for status symbols will usually go to high-ended hotels while traveling. Those probably are the same group of people who purchase luxury goods more often. A successful and meaningful brand partnership can help build trust and elevate the brand’s legitimacy via the association with the partner brand. DoorDash partnered with 7-Eleven to deliver household products from the convenience store, boosting revenue and increasing brand exposure through in-store marketing collateral.
5. Retain royal users as many as possible by focusing more on customer experience, as it’s much more expensive to acquire a new customer than to retain the existing ones, and they are the most effective brand advocates. After all, those are the group of people already believe in the products and service, and the potential for ROI increase would be huge if they stay and grow with the business. A study by Bain & Company shows that a 5 percent increase in customer retention can result in a 25–96 percent increase in profits. The following are a couple of ways to further improve customer experience and retain royal customers.
- Deliver personalized value. With the information of past consumer behaviors in our system, we can better and more accurately personalize our strategy and communication in the future, and thus increase their satisfaction and potential to retain. English activewear brand Sweaty Betty leveraged its customer data and past behaviors to automate personalized messaging campaigns, resulting in a 75% decrease in cost per acquisition and a 22% increase in total order value.
- Lean into customer experience, not just pre-purchase, also focus on post-purchase. Understand the customer journey at every touchpoint and figure out ways to create extra value. For example, fashion rental subscription brand Rent the Runway cooperates with WeWork and Nordstorm to allow drop-off offline, which largely speed up the turnaround time under the subscription time and simplify the return process. Cosmetics retailer Lush launched an in-house app to help connect all the staff and customers globally and allow customers the chance to interact more personally with the brand community.
- Build up our own customer community. The community could be built in different forms and in different ways, online or offline. For example, founder of Glossier Emily Weiss developed her makeup blog into a sharing community where the founder can easily reach the end consumers, conduct survey and product research, get their feedback, and most importantly, cultivate and maintain truly loyal and enthusiastic consumers. Other effective ways include offline workshops, events, pop-up experiences, etc. that designed for potential customers and brands to connect. Skincare company Then I met you hosts regular events for customers to grow the community, such as meetup with founders and Youtube stars, lessons given by skincare experts to help customers figure out the best-fit products.
Yet, some people think influencer marketing is still the golden ticket that helps brands get access to a huge pool of potential customers. No matter what marketing strategy we are using, the most critical thing to make it effective and valuable is to know our customers, stay authentic to them, and keep refining our product and service to make sure it creates value for them.
Reference
[1] Sophie C. Boerman, The effects of the standardized Instagram disclosure for micro- and meso-influencers, Computers in Human Behavior, 103(2020)199–207
[2] Mediakix Influencer marketing 2019 industry benchmarks. https://mediakix.com/influencer-marketing-resources/influencer-marketingindustry
[3] Schouten, A. P., Janssen, L., & Verspaget, M., 2019, Celebrity vs. influencer endorsements in advertising: The role of identification, credibility, and product-endorser fit. International Journal of Advertising
[4] Weibo and WeChat KOL Marketing Costs. https://www.parklu.com/weibo-wechat-kol-marketing-costs/#
[5] Post-Influencer Culture, https://www.campaignlive.com/article/post-influencer-culture/1584141
[6] The Sprout Social Index, Edition VIII: Turned Off, https://sproutsocial.com/insights/data/q3-2016/
[7] Fake influencer marketing in 2019, https://www.cheq.ai/influencers
[8] Optimove, case study, Sweaty Betty gets personal with their data to get more personal with their customers
[9] We Analyzed 14 Of The Biggest Direct-to-Consumer Success Stories To Figure Out The Secrets To Their Growth — Here’s What We Learned, https://app.cbinsights.com/research/direct-to-consumer-retail-strategies
[10] Veirman and Hudders, 2019, International Journal of Advertising, Disclosing sponsored Instagram posts: the role of material connection with the brand and message-sidedness when disclosing covert advertising
[11] BoF Professional, 2019, The Golden Age of Instagram Marketing Is Over
