More bang for the buck from influencers with smaller followings

The study, appearing in the American Marketing Association’s peer-reviewed Journal of Marketing, is titled ‘Revenue Generation through Influencer Marketing’. 

This new study explores the effectiveness of paid influencer endorsements, particularly for DTC firms. The research sheds light on the entire influencer marketing funnel – from followers on Instagram, to reached followers, to engagement with the sponsored posting, and to actual revenue. 

Looking at the achieved immediate revenue and the related cost, the research team finds there is a significant gap in understanding the true ROI of these campaigns and homes in on a key challenge for DTC companies: identifying influencers who drive positive ROI. 

“Our investigation led us to an intriguing conclusion, namely that nano-influencers, with a smaller following, are more cost-effective in revenue generation compared to their macro counterparts, who boast larger followings,” says study co-author Dr Maximilian Beichert of the University of Mannheim. 

“This finding challenges the prevalent industry norm that places a higher value on influencers with larger audiences.”  

The study finds that the engagement between influencers and their followers plays a crucial role in this dynamic; in essence, a more intimate connection between nano-influencers and their audiences leads to more effective marketing outcomes. 

“Interestingly, our results do not negate past findings that favour macro-influencers. We propose that the rapid growth of social media platforms and the subsequent increase in followership sizes have led to a shift in the influencer landscape. What was once considered a macro-influencer is now potentially falling into the micro category,” states Andreas Bayerl, an Assistant Professor at Erasmus University. 

Additionally, past research often did not incorporate complex measures like ROI, primarily due to the unavailability of relevant data. A key aspect of this study is examining the level of engagement before a sponsored post. 

“We follow social capital theory, which suggests that influencers with more followers might encounter lower engagement levels with their followers,” comments Professor Jacob Goldenberg of Reichman University.  

“We also use language style matching (LSM) to delve deeper into the relationship between influencers and their followers. Our findings indicate that nano-influencers align more closely with their followers’ communication styles, enhancing their relatability and effectiveness in influencer marketing.” 

Important lessons for marketers 

Among the implications for DTC firms and their marketing teams: 

• Brands should consider leveraging nano-influencers for more effective marketing campaigns. This approach not only promises higher ROI, but also fosters a more authentic connection with audiences. 

• Influencer marketing platforms enable marketers to work with hundreds of low-followership influencers at the same time and efficiently leverage their potential at the cost of handling only one high-followership influencer. 

• Across ROI metrics, nano-influencers consistently outperform macro-influencers. 

• Return on influencer spend, or ROIS, which considers both revenue and costs, is more than three times higher for nano-influencers compared to macro-influencers. Even though the revenue is six times higher for macro-influencers, the associated costs are 18 times higher than for nano-influencers. 

“DTC firms and marketers should consider the powerful impact of nano-influencers and the significant engagement they foster with their audiences,” says Lanz. 

“By doing so, they can unlock new potentials in influencer marketing, ensuring that their investments yield higher returns.” 

You can read more about the study here.