Perhaps the least fun part of your influencer program is figuring out your budget and negotiating with your influencers. Being out of touch with what influencers charge can throw both out of whack.
The reality is that there are no set prices for influencers. However, there are a few standard compensation packages that successful influencer programs typically use. But before you start spending money, it’s critical to know what it is you want your influencers to accomplish.
What are you paying your influencers to do?
It’s not enough to say, “I want influencers to help me grow my business.” You’ll want to get more specific. If you’re like most marketers, you’re probably hoping that influencers will accomplish one or more of the marketing goals listed below:
- Create compelling social media content
- Increase brand awareness with your target audience
- Convert customers and drive sales
- Increase website traffic
Many brands use influencers as the core component of their social media strategy. In other words, these brands outsource the bulk of their social media content creation to influencers.
This strategy makes sense – not only does it free the marketing team to focus on other key tasks, but it also leaves content creation to the experts. Influencers are master creatives on social media, and can be more effective at promoting their favorite brands than those brands can do on their own.
“[Our] main goal was content, but why not open the door for these influencers to share a new brand with their community? Most of these campaigns ended up having a 4x performance.” – Lindsey Derer from Ten Tree, Brands Working Remote Talking Influencers
Additionally, using influencers to build social media content also allows brands to repurpose high-performing content for paid ads. This approach saves design costs and makes those ads more compelling.
Increase Brand Awareness
In most marketing analytics analyses, the goal is to figure out how many touch points it takes for a consumer to become a customer. These touch points guide customers through the marketing funnel and nurture them towards a purchase.
Image via Single Grain
“To achieve brand awareness, members of your audience don’t need to commit. All you want is for them to become curious about your brand.” – GRIN, Influencers For Every Stage of Your Marketing Funnel
Brand awareness, reach, and impressions are goals brands achieve at the top of their marketing funnel. Influencers can expand your reach, not just to more consumers, but to the most engaged consumers.
Top-performing influencers curate online communities around a particular lifestyle or set of values. When those influencers recommend products that they love, followers take special interest and often require fewer touch points from initial brand exposure to final sale.
“Did you know that there is an 88% increase in the purchase intent of consumers when a brand is promoted by an influencer?” – GRIN, How to Use Influencer Marketing to Drive Referral Sales
Many influencers have enormous conversion potential. These creators focus on building excitement and urgency among members of their audience.
Brands that equip their influencers with revenue sharing compensation, along with coupon codes and affiliate links, usually see a radical increase in social media sales.
Drive Traffic to Your Website
If your marketing goals prioritize search engine optimization and UX design, then you may want to use influencers to increase traffic on your website.
Many influencers are also prolific bloggers on high domain authority sites or frequently guest post on large online publications. Partnering with these influencers can increase traffic and improve your site’s search engine rankings.
Additionally, social media influencers know how to place links strategically within their posts to generate the most clicks.
Types of Influencer Compensation
Product exchange, also known as product seeding, is a compensation strategy that includes no cash transactions. In a product exchange, influencers accept free products and samples for promoting your brand.
This approach is the most cost-effective, since the cost of hiring an influencer is only as expensive as your cost of goods sold.
Another great benefit of product exchange is that influencers who accept this compensation structure do so because they truly love your brand. That means that your campaign guarantees authenticity and social proof.
Image via GRIN
The best influencer types that appreciate free products in exchange for social media posts include:
Pay Per Post
As the name implies, a pay-per-post arrangement requires you to pay a flat fee per influencer post. Particularly for marketers on a shoe-string budget, this payment approach is not ideal.
The cost of each post may vary from less than $10 to thousands of dollars. Before you pay that kind of money, you will need some assurances of that influencer post’s ROI. However, there are some key scenarios where paying for each influencer post may be your best approach.
One such scenario occurs when you have an influencer that you’ve worked with for some time, and that influencer consistently creates content that is more artistic than anything you can produce in-house. Because this brand-influencer relationship is strong, you can verify ROI before payout. Furthermore, those posts are great for repurposed content in paid ads, email, etc. – production costs that you would have had regardless.
Another common scenario in which a pay-per-post arrangement may be ideal occurs when you want to partner with influencers that have massive engaged audiences. Before you invest in these macro and mega influencers, it’s important to check the quality of their engagement. Because of how popular these influencers are, it won’t be possible for them to respond to every follower comment, but you should see meaningful conversations taking place within the comments of these influencer posts.
A pay-per-post arrangement is most common among influencers with 10,000 or more followers:
- Micro Influencers (10,000 – 100,000 followers)
- Macro Influencers (100,000 – 1 million followers)
- Mega/Celebrity Influencers (1 million or more followers)
There are many brand-influencer relationships that work on a profit-sharing basis. Paying commissions to your influencers is a great way to lower upfront costs while motivating your influencers to achieve conversions.
If sales is your primary objective for your influencer program, you may want to use a commission structure as your main payment strategy. But there is a downside to using commissions to pay your influencers – some influencers may lose their authentic edge and begin to come across as “salesy.”
Seasoned influencers know how to balance high conversion tactics with authenticity. If you’re going to use commissions with your influencers, make sure to choose your influencers wisely.
Marketers that use commissions as their preferred compensation package typically work with:
- Brand Ambassadors
- Nano Influencers
- Micro Influencers
Combination of All Compensation Types
As your influencer program grows, you’ll most likely need to use a combination of all influencer payment types. The more experience you have with these compensation packages, the easier it will be for you to negotiate successfully with influencers.
What’s critical to keep in mind is that knowing your influencers well will keep your costs low and your returns high.
For example, many influencers get into the business for the perks, such as free products, travel, first dibs on new products, product design collaborations, etc. Knowing what your influencers love can help you offer perks in lieu of paying high rates.
The more relationship-driven your program, the more authentic your influencer posts will be. Just because you pay cash to your influencers doesn’t mean that those relationships will become transactional.
But the moment that you lose sight of that relationship dynamic is the moment that “the doldrums” of inauthenticity begin to set in. The success of your influencer programs relies primarily on the genuineness of your influencers. Consumers can tell when an influencer is only in it for the money.
What impacts influencer rates?
Many influencers set their rates based on their follower count. And while follower count can be a measurement for potential reach and popularity, it’s not the whole picture.
Before you establish an influencer’s value based on their follower count, perform a “deep dive” on that influencer’s posts to find out the quantity and quality of their follower engagement. What you are looking for is meaningful comments, relevant shares, and ongoing user-generated content initiated by that influencer’s posts.
Follower counts and likes are less important than are comments and shares. The greater the effort that an influencer’s followers take to engage posts, the more impact that influencer has with their audience.
Quality of the Brand-Influencer Relationship
When you’ve been working with a particular influencer for some time and have achieved consistent success, that brand-influencer relationship should be worth more than others. In most cases, long-term influencer relationships generate greater authenticity and brand familiarity with target audience segments.
Type of Campaign
The nature of each influencer campaign can also impact how much an influencer’s participation is worth.
For example, your evergreen influencers (those influencers that you use regularly) produce content at a higher volume than your seasonal or one-off campaign influencers. As such, it’s appropriate for your evergreen influencers to be on a different pay structure than your seasonal influencers.
Depending on your brand and its deliverables, you may be able to offer influencers a number of attractive perks. Many influencers will lower their rates in exchange for samples, gifts, and special experiences.
Creating great perks for your influencers is one of the best ways to prepare for influencer negotiations. But in order for your perks to be great, you need to know as much about your influencers as possible. Just because you or another influencer thinks one thing is a great perk doesn’t guarantee that it will be to another influencer.
Filing Taxes for Influencers
Whenever cash flows in and out of your business, you need to record it for taxes. Your bookkeeping needs to include payments made to influencers, as well as product exchanges and relevant contractor expenses.
Independent Contractor (Cash Payments)
Whenever you pay an influencer in cash, you’ll need a completed influencer W-9 so that you can file a 1099 for that influencer. The only exception to this is if you paid that influencer less than $600 in any given year.
Product/Service Barter (Product Exchange)
A product exchange is technically bartered services. The IRS requires businesses to record any income generated from barter transactions in a 1099-B form. Your influencers should also complete a 1099-B form when filing their taxes.
Tax-Deductible Expenses (Influencer Perks)
If you offered any influencer perks that cost you money, you may be able to claim some of those costs as operating expenses. When itemizing these costs to lower your tax liability, make sure to confirm all expenses with an accountant or business attorney before filing your taxes.
In Conclusion: Some Quick Tips for Negotiating Influencer Compensation
“The real answer to the question, ‘How much should I be spending?’ is that it depends how much you can spend. How much can you afford? And what can you do with that amount?” – Ethan Frame, 0-100 Webinar – Chapter Three: Influencer Budget
It’s highly unusual that brands accept influencer rates without some form of negotiation. Before you come to an agreement on a fee structure with one of your influencers, you should have a few things in place.
First, you should have your own rate sheet based key reach and engagement metrics. These performance numbers help you gauge ROI before spending money. Additionally, your own rate sheet can help you see what you can afford.
Second, have attractive influencer perks in your back pocket. Many influencers will happily lower their rates in exchange for exclusive gifts, products, and experiences.
Lastly, remember that some of the most powerful influencer-brand partnerships work almost 100% on product gifting arrangements. If you choose your influencers from among your most vocal customers, you will lower your program costs and ensure that your influencer campaigns are truly authentic.