Every day, billions of people visit various social media platforms such as Instagram, TikTok, Twitter, YouTube and Facebook. According to a survey conducted in February of 2021, 46% of survey participants spent an average of five to six hours on their phones daily, with an additional 22% spending an average of three to four hours on their phones every day.
People are spending more time engaged with brands, content and other users than ever before. And to combat this market oversaturation, companies are tapping into social media influencers as a marketing strategy in their bid to draw the attention of their target consumers.
True to their name, social media influencers do really have the power to ‘influence’ behavior. As consumers, we naturally seek to emulate the lifestyle that these beautiful people display on their feed and are tempted to buy the products they promote. Marketing departments in companies know this, which is why influencer marketing has become a buzzword in recent years.
However, as more brands are beginning to realize, there are significant and hidden costs to doing business with influencers.
Companies, especially small companies with limited marketing budgets, have come to understand that not all influencers are created equal. A lot of brands orchestrate deals with mid-tier, micro, and nano-influencers without set contracts. The going rate for posts from a nano-influencer averages out to $10-$100, so companies rarely think of writing a contract for such a small expenditure. However, this means that there are no contractual obligations for these influencers to create the promotional content the way it is expected, keep the post up on their feed or even respond to the company after they pocket the money. There is zero accountability.
On the other side of that coin, nano-influencers often have the highest engagement rate, with an average 5% engagement rate as opposed to a 1.6% engagement rate for mega-influencers.
Inventory alone is a huge hidden cost in influencer marketing. More and more influencers are seeking a trial period with the product before agreeing to promote anything. If you plan on recruiting ten influencers to promote your company, and eight of them request to try your products before agreeing to work with you, then those are inventory costs to consider, especially if you are a smaller business with a finite amount of resources readily available for marketing purposes.
As a company, if you choose traditional marketing strategies over influencer marketing, your brand’s reputation management remains an internal matter. However, if you seek to do business with external sources like influencers, their reputation can quickly become your company’s problem.
If you do business with an influencer whose reputation is ruined overnight, consumers will associate that influencer’s reputation with your brand. This can mean a loss of new customers, a decrease in customer retention, and a significant blow to your brand’s overall reputation.
Social media is ever-changing and evolving. Today, there are thousands of influencers who are highly effective in delivering persuasive brand content to their followers. However, in recent times, there has been a growing need among followers for transparency from their favorite influencers and celebrities.
Influencers are often known to use Photoshop, filters, and other forms of photo and video enhancement, photo staging strategies, and even stage artificial relationships and friendships to create a mirage of a life that is not attainable to those watching them. While such kind of ‘aspirational content’ used to be a recipe for success, it is fast losing its appeal among consumers demanding more authenticity from the influencers they follow.
In such a scenario, where influencers and their activities are looked upon with a certain degree of suspicion, hitching your brand to their wagon may not always be a good decision.
As stated before, social media is constantly evolving. Many apps experience ebbs and flow in popularity and usage. Influencer marketing does generate high ROIs, with roughly $5 earned for every $1 spent, but these are numbers that can fluctuate and shift dramatically just overnight. TikTok is clear evidence that just one social media app can completely change the board.
If you are looking for quick popularity and a temporary surge in one-time purchases, then influencer marketing may be an ideal fit for your company. However, if you have more long-term goals such as customer retention and repeat business, you will have to fall back on other marketing strategies that promise more stability and reliability.
Influencer marketing can be very appealing to all kinds of companies. You can target your key consumer demographic, see massive amounts of engagement and high conversions, and not spend a fortune on marketing and advertising.
However, carefully consider these key things:
What is your company looking for? New customers? Customer loyalty? Brand awareness? Figure out what you want your company to gain from influencer marketing.
What type of influencer do you want for your company? Does this influencer match your ideal demographic? What are they known for? Do they feel like a good fit for your brand? Do you want a nano-influencer or a celebrity to promote your brand?
Are you willing to pay for the hidden costs of influencer marketing? As stated previously in this post, there are a lot of seemingly hidden costs to doing business with influencers. Does the risk outweigh the reward for your company’s reputation and brand?