When It Comes to Influencers, Smaller Can Be Better

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When It Comes to Influencers, Smaller Can Be Better

Harvard Business Review Magazine | September–October 2024 Issue

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Today 24% of U.S.-based companies spend more than 40% of their total marketing budget on influencers, according to an Influencer Marketing Hub report.   With so much money being invested in influencers, you would expect businesses to know exactly what impact they have on sales.

But research by Bocconi University’s Maximilian Beichert and colleagues has found that most companies that rely on influencers with high numbers of followers are missing out. They studied secondary sales data on 1,881,533 global purchases and conducted three field studies across Europe looking at hundreds of paid influencer endorsements. They discovered that nano influencers, those with fewer than 10,000 followers, yield a remarkable average return of more than $1,000 on a $50 investment. Conversely, macro influencers, those with more than 100,000 followers, command a hefty price tag of well over $1,000, on average, but deliver a return of only $6,000.  Beichert offers the following four tips on how to get the best results from influencer campaigns:

1. Determine your goals before choosing an influencer. Celebrity posts do a great job of getting eyeballs. However, unless your product goes viral, chances are good that you won’t know what happens after people see the posts.  If you want your influencer-marketing expenditures to lead to sales directly and measurably, you should consider the entire influencer-marketing funnel, which the researchers describe as having four distinct tiers: an influencer’s total following (audience), an influencer’s followers who see the sponsored post (impressions), engagement with the sponsored post (likes, comments, and replies), and revenue generated by the post. 
2. Collect performance data at the point of purchase. Regardless of what kind of influencer you’re using, you’ll want to be able to directly tie a sponsored post to purchases. That can be done via voucher codes, tracking links, and even unique toll-free numbers.
3. Use influencer-marketing platforms whenever possible. For brands that can’t afford an influencer-marketing platform, Beichert recommends contacting nano influencers through old-fashioned direct messages. “You’ll typically experience a better working relationship with nano influencers,” he explains. “They’ll work harder to promote the product, they’ll be more inclined than celebrity influencers to use tracking links and coupon codes to help prove ROI, and in many cases they’ll seem more authentically interested in your products.”
4. To increase sales, opt for authenticity instead of awareness. The slow pace and high cost of working with macro influencers isn’t the only reason nano influencers are better. Beichert argues that engagement between them and their audience is what really drives purchases. Nano influencers are more likely to discuss the products they promote with their followers. Textual analyses conducted by the researchers also reveal that nano influencers use more personal and authentic language when describing products than macro influencers do. 

3 key takeaways from the article

1. Today 24% of U.S. based companies spend more than 40% of their total marketing budget on influencers.   With so much money being invested in influencers, you would expect businesses to know exactly what impact they have on sales.
2. But research by Bocconi University’s Maximilian Beichert and colleagues has found that most companies that rely on influencers with high numbers of followers are missing out.   The study discovered that nano-influencers, those with fewer than 10,000 followers, yield a remarkable average return of more than $1,000 on a $50 investment. Conversely, macro influencers, those with more than 100,000 followers, command a hefty price tag of well over $1,000, on average, but deliver a return of only $6,000.  
3. Beichert offers the following four tips on how to get the best results from influencer campaigns:  Determine your goals before choosing an influencer, Collect performance data at the point of purchase, Use influencer-marketing platforms whenever possible, and To increase sales, opt for authenticity instead of awareness.

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Topics:  Strategy, Marketing, Influencer Marketing, Return