How influencer marketing is transforming into a performance-based model
Authored by Yulia Aslamova, Head of Asia, DRIM Global.
The influencer marketing industry is evolving and will become more performance-based in 2023. Brands are now focusing on measurable outcomes, such as increased sales, website traffic, and engagement, rather than just brand awareness. They are also partnering with influencers who have a track record of delivering results and are aligned with their brand values. In order to accommodate this shift, influencer marketing platforms are introducing new tools for tracking and measuring the success of campaigns, such as analytics and attribution software. This shift towards a performance-based model helps ensure that influencer marketing budgets are being effectively used and that brands are getting a return on their investment. According to Statista, the global influencer marketing market has grown by more than twice as much since 2019. In 2022, a record $16.4 billion were spent on the market.
Read More: How Indian brands maximize influencer impact
With the rise of e-commerce and the ability to track online sales, influencer marketing is now moving towards a more performance-based model. Brands are demanding more accountability from influencers and looking for ways to measure the ROI of their influencer marketing campaigns. Thus, to meet this demand, influencer marketing platforms are developing new technologies and algorithms that allow brands to track the sales generated from influencer marketing campaigns in real time. According to MarketsAndMarkets, by 2025, the market for influencer marketing platforms is anticipated to grow at a CAGR of 32.0%, reaching a value of $24.1 billion.
The Surge in Performance-Based Influencer Marketing
As consumers require multiple interactions with a company in order to convert, influencer content boosted by performance marketing combines the best elements of two powerful marketing methods. Influencers are in charge of creating content. They create native ads, which have a higher propensity to resonate with customers and can thus improve overall conversion rates and advertising effectiveness. As a result, analysts can identify the most effective influencer material and produce paid advertisements targeted at a specific market. Moreover, higher engagement and conversion rates are frequently the result of influencer content, as it is perceived to be more authentic. Additionally, brands that use new advertising tactics will see significant market growth; those that do not adapt will fail. Digital brands have been rewarded with excellent growth prospects in recent years, but those who fall behind will suffer the consequences in the coming years.
Here is how the influencer marketing sector will develop into a performance-based approach in the upcoming years:
Lucrative Pay: In a performance-based influencer marketing model, influencers are paid based on their ability to drive sales and conversions. This shift is a win-win for both brands and influencers. Brands get a better return on their investment, while influencers are rewarded for their efforts in promoting products and services. In this model, influencer marketing becomes a more tangible and measurable marketing channel. According to a report from the influencer marketing platform Klear, influencer marketing campaigns have an ROI that is 11 times better than conventional digital marketing.
Increasing Competition: Another factor driving the shift to a performance-based influencer marketing model is the increasing competition in the industry. With more and more influencers entering the market, it is becoming challenging for brands to differentiate between influencers and measure their effectiveness. Moreover, in a performance-based model, influencer effectiveness is measured by the sales they generate, making it easier for brands to choose the most effective influencers for their campaigns.
Rise in Artificial Intelligence & Machine Learning: The rise of artificial intelligence and machine learning is also playing a role in the shift towards a performance-based influencer marketing model. AI and ML algorithms can analyse data from influencer marketing campaigns and provide insights into what is feasible and what is not. This information can then be used to optimize future campaigns, making influencer marketing more effective and efficient.
Micro-Influencer: Another trend in the influencer marketing industry is the use of micro-influencers. Micro-influencers are individuals with a smaller, but highly engaged audience. Brands are starting to realise that micro-influencers can be just as effective, if not more so, than traditional influencers with a large following. However, in a performance-based model, micro-influencers can be just as valuable as traditional influencers as their ability to drive sales is based on their ability to engage with their audiences, not the size of their following. According to a report by the Digital Marketing Institute, consumers are 92% more likely to trust personal recommendations than brand names.
In 2023, the influencer marketing sector will transition to a performance-based business model. This trend is being brought about by the necessity for organisations to assess the financial effects of their influencer marketing initiatives, rising industry competitiveness, use of AI and ML, and the use of micro-influencers. Hence, the shift to a performance-based model is advantageous for the sector since it gives brands greater accountability, efficiency, and return on investment.