You wouldn’t be in the minority if your impression of influencer marketing is A-list celebrities hawking products they’d never use. But the industry isn’t as homogeneous as you might think: For every Kim Kardashian, thousands of lesser-known influencers are having a dramatic impact on direct-to-consumer (DTC) marketing.
Businesses have taken notice. 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. Twenty-two percent spend 10% to 20%, 16% spend 20% to 30%, and 12% spend 30% to 40%. 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—the typical worth of the free products they receive. 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:
Determine your goals before choosing an influencer.
If you hope to generate awareness for a product or get a lot of views on social media, you’ll probably want a big name promoting your brand. 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. When it comes to the last three tiers, the research has found that on a cost basis, nano influencers consistently outperform macro influencers.
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 800 numbers.
The typical macro influencer agreement doesn’t allow smaller DTC brands to see beyond impression data. If you decide to work with macro influencers, you should be sure that they’re willing and able to provide tracking information to determine whether their posts actually led people to buy your product. Some big influencers won’t. Micro influencers—those with 10,000 to 100,000 followers—and nano influencers offer audiences in a wide variety of sizes and types and will work directly with you to provide visibility into the results of campaigns.
Use influencer-marketing platforms whenever possible.
Trying to find a celebrity to endorse your product on social media can take a long time, especially for smaller, more-frugal DTC brands. Typically deals with star influencers are negotiated by talent agencies, a process that is costly and slow, and their contracts make it difficult to assess ROI if the influencer is unwilling to add tracking data to posts.
Platforms such as Grin and Upfluence allow marketers to work with hundreds of small influencers at once. The platforms provide performance metrics, facilitate payments to the influencers, and, most important, help brands find influencers who are already inclined to promote their products.
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.”
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.
“Nano influencers are just like us,” Beichert says. “They interact with followers just like they do with their friends on social media. This authenticity is so much more powerful than a sponsored post with no engagement from a well-known celebrity. You don’t need massive reach. You need a bunch of small influencers with intimate groups that can promote your products in a trustworthy way.”
About the research: “Revenue Generation Through Influencer Marketing,” by Maximilian Beichert et al. (Journal of Marketing, 2024)
“Influencers Must Genuinely and Demonstrably Care About What We Do”
Dominik Bucher is the general manager and CFO at Paul Valentine, an affordable jewelry company based in Germany. Founded in 2015, Paul Valentine has more than 600,000 Instagram followers. Last year it shifted its focus from macro influencer to nano influencer campaigns. That change resulted in an increase in return on investment that was so large it prompted the retailer to nearly double its influencer-marketing budget.
Can you tell us about Paul Valentine’s original influencer strategy?
Initially, we worked with larger influencers, targeting those well-known in the German market with a follower count in the seven digits. They were quite costly, often demanding five-digit sums. In some cases those macro influencers charged 20 times what a micro influencer would charge. Despite the heavy investment, we did not see the return we hoped for in terms of sales volume. We had an inkling that there might be some brand awareness generated and maybe even sales we couldn’t attribute to the campaign, but it was virtually impossible to accurately measure the impact of these campaigns on long-term sales.
How did the research on influencers change your strategy?
We shifted our focus to people with smaller followings, which led to increased short-term returns that were measurable. We avoided influencers who one day promote a pen and the next day promote a water bottle. We wanted influencers who were familiar with our products and industry. We began working with a larger number of influencers, particularly nano and micro influencers, mostly because they were so much less expensive. The results have been great. We’ve seen a large increase in ROI for our campaigns. Last year our influencer-marketing budget was only 8% of our total marketing budget. This year we bumped it up to 15%.
What do you now look for in influencers?
Rather than focusing solely on the number of followers, we value the way influencers communicate with their audience. Authenticity and a genuine connection with followers are paramount to us. We sell jewelry. So we try to find influencers who have a track record of discussing jewelry on their social media feeds. We look to see whether they respond to comments and whether they help people make choices about which jewelry to buy. It’s not enough that they wear our product in a photo on Instagram. Influencers must genuinely and demonstrably care about what we do. We believe that these influencers, who also tend to be more selective about brand partnerships and integrate the products they review into their daily lives, yield more-effective promotions.
How has Paul Valentine managed the increased number of influencer campaigns?
We use a platform called Brandbassador to connect with nano influencers. They use it to view offers from brands like ours. It’s like a dating app. It works for us because we get to quickly and easily find influencers that are a fit for our products. We now have a community of regional influencers that we’ve met through the platform. We’re also considering implementing an automated system on our website, where an influencer comes to us and we give them a budget to purchase our products. Then they post about it on social media with a tracking link. We analyze their results, and then we decide whether to give them a second budget.
How have your interactions with influencers changed since you switched from macro to nano and micro influencers?
Working with macro influencers was so time-consuming. It’s never easy when ad agencies or talent agencies are involved, and the influencers we worked with had large agencies. You’d contact the agent, and it would take weeks for them to get back to us. Smaller influencers tend to be more grateful for the opportunity to work with brands, and they take more time to think about how to present the products, leading to more-authentic content. This authenticity resonates well with our audience, which often seeks a more relatable and personal connection than what might be offered by larger influencers, who may cycle through numerous brand partnerships. We can connect with nano and micro influencers directly via email or on social media to discuss our campaigns. That would never happen with a celebrity influencer.
