Focus on and research influencers with fewer followers.

Researchers from the University of Mannheim, Erasmus University Rotterdam, Reichmann University, and the University of Basel have published a new study examining the effectiveness of paid endorsements by influencers, especially for DTC companies.

Research published in marketing journal, The title is “Generating Revenue with Influencer Marketing” and the authors are Maximilian Beichert, Andreas Beyer, Jakob Goldenberg, and Andreas Lanz.

Over 80% of U.S. companies use influencers for marketing purposes in what has quickly become a $17.4 billion industry. Influencer marketing is a key trend in the rapidly evolving digital landscape, and it’s getting even more attention as Instagram expands its advanced analytics tools for influencers and brands in 2023.

Instagram is the most prominent user-generated content network for both brands and influencers, with 3.8 billion sponsored posts annually. When considering influencer marketing as a revenue channel, identifying influencers that deliver a positive return on investment (ROI) remains the biggest challenge for direct-to-consumer (DTC) companies.

This new study investigates the effectiveness of paid influencer endorsements, specifically for DTC companies. This study sheds light on the entire influencer marketing funnel, from Instagram followers to followers reached, engagement on sponsored posts, and actual revenue.

Looking at the immediate revenue achieved and the costs associated with it, the research team found that there is a significant gap in understanding the true ROI of these campaigns, a key challenge for DTC companies. Focus on identifying influencers that deliver ROI.

Nano-influencers: The era of less is more

“Our research has led us to an interesting conclusion: nano-influencers with smaller followings are more cost-effective in generating revenue compared to macro-influencers with larger followings. This finding challenges common industry wisdom: ‘Influencers with larger audiences are more valuable,’ Beichert says.

This study found that influencers’ engagement with their followers plays a key role in this dynamic. Essentially, a closer connection between nano-influencers and their audience leads to more effective marketing outcomes.

The researchers use a combination of secondary revenue data and field surveys. They are analyzing data from one of Europe’s leading DTC companies. This data includes influencer-specific discount codes shared on Instagram, associated with approximately 1.9 million products sold, generating over €17 million in revenue.

Additionally, results were confirmed on YouTube and TikTok. This analysis is complemented by three different field studies of 319 paid nano- and macro-influencers on Instagram. This managerially relevant comparison resolves the debate about whether macro-influencers leverage their greater influence and whether they are more persuasive when it comes to purchasing decisions. will help you.

“Interestingly, our results do not negate previous findings that favored macro-influencers,” Bayer said. We propose that this has brought about a change in the influencer landscape.Macro influencers may now fall into the micro category.”

Furthermore, past studies often did not incorporate complex measures such as ROI, mainly due to unavailability of relevant data. An important aspect of this study is to examine the level of engagement prior to sponsored posts.

“We follow social capital theory, which suggests that influencers with more followers are likely to have lower levels of engagement with their followers.We also use linguistic style matching (LSM) to “We’re digging deeper into the relationship between influencers and their followers. Our findings show that nano-influencers more closely align with their followers’ communication styles, increasing the relevance and effectiveness of influencer marketing.” Goldenberg explains.