3 Reasons Why Influencer Marketing is Due for a Cooldown

As Warren Buffet said, “What the wise do in the beginning, fools do in the end.”

Just like banner ads became display ads, the concept of influencer marketing isn’t new. While new platforms like Instagram and Snapchat increase the base of potential niche influencers, companies have used influencer marketing for years — through infomercials or by getting celebrities to wear their brands’ clothing or use its products — as part of affiliate or public relations programs.

Nearly 60 percent of marketers planned to increase their budgets for influencer marketing last year, although 30 percent were either losing money or breaking even, at best, on these initiatives. In fact, more than 80 percent of marketing professionals still consider influencer marketing to be effective and expect to include it in this year’s strategy.

In spite of the channel’s popularity, metrics are not in place to justify the numbers or the cost of many influencer campaigns.

Sign of Cooldown

Recent trends warrant CMOs treading more carefully in their approach to influencer marketing:

1. 
   
   The Federal Trade Commission is taking notice. The FTC has come down hard on celebrity infomercials and has set specific rules for merchants ensuring blogger affiliates disclose to consumers that they’re being compensated or given products in exchange for endorsements.In March, Lord & Taylor settled charges that it had deceived customers by not disclosing an article and Instagram posts as paid promotions. As a result, campaigns in the future may not be as effective when influencers have to declare compensation, which could harm their credibility.
2. 
   
   Companies are examining ROI. Whenever a new marketing channel is introduced, companies jumping in early tend to see outsized returns. Then the channel gets costly as people rush into the space and drive up demand. The result is diminishing returns for advertisers, as demand exceeds quality supply.As this cycle develops, marketers spend significantly more on the same influencer initiatives. Rather than pay huge fixed fees and rely on engagement metrics, companies are asking for more hard data on ROI with performance metrics like clicks, orders, and sales. To make matters trickier, 36 percent of marketing executives doubt their abilities to effectively measure the ROI for any channel.
3. Poorly chosen influencers can lower brand credibility. In a time when authenticity is a sought-after value, paying the wrong people to validate and pitch a product can actually hurt a company’s sales and reputation.

Back to Basics

CMOs can find success with influencer marketing by returning to two fundamentals:

• 
  
  Follow a performance-based model. Traditionally, PR teams without the right tools to track performance across large groups of publishers have managed influencer campaigns. Many new networks have also begun charging fixed fees for campaigns. A better approach is to manage influencers through an existing affiliate program on a revenue share or CPA basis. By doing so, you’ll have the tools to manage a larger group of partners and be certain you are measuring and attributing performance properly. Your affiliate program manager should also already be looking out for FTC guidelines.RewardStyle found success aggregating high-value fashion affiliates with a performance-based model. In its first year, rewardStyle turned the world of fashion on its head by using bloggers to generate $60 million in sales. Just three years later, it drove $270 million in sales for thousands of its retail partners.
• 
  
  Find and engage with influencers who fitthe brand. Reach, as well as how well influencers engage their audiences, are important considerations when selecting partners. Check potential influencers’ page views, Facebook friends, and Instagram followers. Then analyze engagement through comments and click-through rates and verify their relevance and authenticity in the space by assuring their content matches the brand. Once you’ve identified key influencers, building relationships increases their propensity to engage with your campaigns.With its #Totewell campaign, Madewell served as a great example of a company partnering with relevant influencers. The brand reached more than a million targeted customers by working with just five up-and-coming fashion influencers to deliver engaging and compelling posts to its Instagram followers.

Given current trends, marketer’s have compelling reasons to monitor and balance the quality and quantity of their influencer marketing. And sticking to these fundamentals will ensure that it stays an effective strategy for years to come.

This article was originally published on SteamFeed.com.

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Robert Glazer is the Founder and Managing Director of Acceleration Partners, a leading performance marketing agency focused on profitable online customer acquisition for high-growth consumer businesses. Acceleration Partners was ranked #4 in Fortune’s Top 10 Places to Work in Advertising & Marketing and has been named a Best Workplace for Women two years in a row by Great Place to Work? and Fortune. The company has also been ranked on Inc 5000/500’s Fastest Growing Companies for 4 years in a row and named to Boston Business Journal’s Fast 50 for two years in a row. Representative clients include Tiny Prints, adidas, Target, Reebok, eBay, Jet.com, The Children’s Place, ModCloth, The Honest Company, Warby Parker and Rent the Runway. You can read his Friday Inspirations at www.fridayfwd.com.