Member Exclusive   //   April 9, 2024

DTC Briefing: As influencer marketing gets more expensive, brands test out new approaches

This is the latest installment of the DTC Briefing, a weekly Modern Retail+ column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. More from the series →

Influencer marketing is getting more complex for brands.

Gone are the days when a founder could easily send a cold DM to an influencer, and get them to post about a brand in exchange for free product. Now, as more individuals have seen how lucrative the influencer space can be, creators are upping their rates and are also more likely to work with dedicated talent agencies who can help them negotiate bigger deals. The average campaign revenue earned by Instagram creators increased from $3,653 in 2021 to $5,111 in 2022, according to a 2023 report by sponsored post-pricing network Hashtag Pay Me.

In turn, younger brands have to find scrappy ways to connect with influencers, while facing pressure from agencies to shell out a lot of money to work with influencers. Some smaller brands are finding success with directly gifting influencers products in exchange for reviews, but admit the tactic is harder to scale as the business gets bigger. At some point, bigger brands often find they have to turn to talent agencies to be matched with the most effective types of influencers based on their brand needs. While this process helps streamline influencer relationships and campaigns, it also means longer timelines and higher monthly fees.

Tina Shim, vp of marketing at skin care brand Youthforia, said the three-year-old company has kept paid influencer campaigns minimal due to them costing thousands of dollars with no guarantee of sales. “There are a couple of models and creators we’d worked with in the past, but can’t afford them now that they have agents,” Shim said.

Lisa Guerrera, the co-founder of skin care brand Experiment said, “I do think overall [influencer marketing] is getting harder on the brand side,” especially for brands that outsource the program. “A lot of influencers also don’t have a great grasp on ROI,” she said, which can lead to mismatched expectations.

Guerrera has a leg up in that she is a TikTok creator herself. Guerrera has 61,000 followers and 2 million likes on TikTok, where she primarily posts educational content on beauty ingredients. Experiment officially launched in 2022 after rolling out with a test run in 2020. In order to build awareness, Guerrera said she personally works with a curated group of creators on organic content in exchange for free products. Some of them are her friends.

“For a small brand like ours that’s just starting out, gifting still makes the most sense to establish a relationship,” Guerrera said. Gifting, also referred to as product seeding, isn’t a guaranteed slam dunk for every brand. The practice involves sending a product to an influencer in the hopes that they will post about it or review it on social media. But it often takes a high-value, viral product to get influencers excited about promoting them. A 2023 Traackr survey of marketers showed 61% of respondents said that less than half of influencers who are gifted products post about them on social media.

Guerrera said this one-on-one approach is much slower to scale, “but I find it has a much better return on investment in the end.” Thus far, the company has seen its products sell through consistently using this strategy. For example, the brand’s Super Saturated serum sold out twice last year.

Theresa Bischof, head of brand marketing at wellness brand Apothekary, said, in her experience, her company is finding micro- and macro-influencer partnerships to be successful. The company has built a network of over 600 influencers over the last year. Apothekary launched in 2020, but underwent a rebrand last year. As such, Apothekary wanted to invest more in influencer marketing to better educate people on how its products can be used.

“We learned that authenticity trumps aesthetics,” Bischof said. For example, at first, Apothekary was creating sleek mocktail recipe videos with its wine alternatives but quickly found audiences preferred to see the tinctures used in realistic day-to-day content. Moving to scrappier, more raw videos proved to be successful for conversion. In the last few months, the company has been giving mixologist influencers free rein to mix up their own mocktails using Apothekary tinctures. Previously, the company was collaborating with creators on professionally shot polished clips.

But now, “we gave them creative freedom instead of being picky about the details,” Bischof said. Another thing that helped increase Apothekary’s ROI was pushing special offers. “The general ‘click the link below’ call to action didn’t work for us,” Bischof said. But giving an influencer a limited-time offer, like “no minimum purchase amount needed for today only” is far more enticing for followers.

Still, there are ongoing challenges with influencer marketing, Bischof said. Specifically, “measuring the impact of influencer campaigns can be challenging due to the ambiguity of KPIs.”

As such, brands like Apothekary are increasingly trying to measure the performance of influencer campaigns the same way they would a digital ad. Testing various tactics is now just as important as finding authentic voices to work with.

Agencies are also realizing that brands need better measurement — and to make sure all parts of an influencer campaign go toward the same end goal.

Alysha Burch, founder of branding and design house Square Root Creative, whose clients include Nestle and Hasbro, said influencers today have middlemen, agents and talent management “who are asking for absorbent rates based on total following without any consideration for true engagement.” The problem, however, is that views and mentions don’t always translate to sales and revenue.

In the past, Burch said Square Root tried using industry-specific influencers for clients’ marketing campaigns “but found very little to no ROI back to the brand in the form of sales or even web traffic.”

Burch said Square Root has found success using local and regional “brand advocates” that have fewer total followers than professional influencers. “Communication [with this type of talent] has proven to be far better and there are no brokers inflating pricing,” Burch said.

When working with brands, Shana Davis-Ross, founder of influencer management agency Ponte Firm, said it’s important for the agency and the talent to both clearly understand the company’s goal. That could range from building broad general awareness to announcing a new product. The agency, the company, and the influencer also all have to be aligned on whether there is a specific sales volume the brand is looking to hit.

“Our creators know what content performs best on their channels,” Davis-Ross said, but it’s important to test different creatives to find traction. “If something is not working, we often request that our talent be given more creative freedom over the content they’re creating on behalf of the brand.”

Youthforia’s Shim said that one of the benefits of working with agencies is that they can streamline the process of working with many influencers and help standardize rates. But there are some downsides. For one, the timeline gets longer and the rates shoot up, as more parties are taking a cut of the total rate. “Getting requests for $25,000 for one TikTok post is not attainable for us right now,” Shim said. “I might love the talent but we just turned three, we can’t do that.”

Youthforia has only done two rounds of paid influencer campaigns so far, and only started to work with paid influencers about a year ago. “The results are good in that we enjoy working with these creators but the conversion results have been mixed,” Shim said.

As a result the brand still relies on product gifting to create word-of-mouth buzz for the most part. To support the brand’s influencer program, Youthforia introduced an ambassador program a month ago, which includes a dedicated segment for college students, and has almost 600 people signed up so far. Ambassadors receive free products and special discounts in exchange for posting about Youthforia products.

Experiment’s Guerrera said that even as the influencer model gets more systemized, “I don’t find the cookie-cutter growth tactics as the way to build a trusted brand people will love long term.”

With so many brands vying for attention, Guerrera said influencers have to love the product at the end of the day. “If your product helps [influencers] get views they’ll post about it, whether paid or not.”

What I’m reading

  • Serena Williams is the latest celebrity to launch a beauty brand, called Wyn Beauty. Starting this week, the brand’s products will be available for sale through its direct-to-consumer website and at 685 Ulta stores.
  • A new Forbes piece highlights how TikTok Shop quickly became an online dollar store destination.
  • Grove Collaborative rolled out a refreshed, consolidated version of its flagship cleaning line to help boost its retail presence. 

What we’ve covered

  • Rollup company Full Glass Wine announced it is acquiring DTC wine subscription brand Bright Cellars.
  • Inside tattoo care brand Mad Rabbit’s ambassador marketing strategy.
  • U.K.-based Baby brand Mori is courting luxury department stores as it expands in the U.S.