A detailed study
Influencer marketing and how much is too much to pay an influencer?
May, 2023 | Influencer marketing, Digital marketingBack in the day, mass media was the only major mode of marketing to the wider public. The TRP rating of a TV show, the RAM rating of a radio channel, the number of buyers of a newspaper decided how much the respective media network could charge for an ad slot/space. And the only influencers back then were the stars who acted as ambassadors of the brand. We all really thought Sachin’s energy came from Boost.
Things have changed today. There is an incredible number of individuals who could act as an influencer and perform the end to end function of a marketing campaign merely through an Instagram reel, a moj video, a YouTube integration, a tweet. It’s great to see the wheels rotating to create this new and dynamic environment. But the issue with this new environment is that influencers overcharge without understanding the concept of ROI, something media networks very well knew, except in cases of excess demand where the visibility mattered more than the value for money.
Think Chithi serial. A prime time serial on Sun TV, watched by the whole of Tamil Nadu. It’s the perfect 30 minutes to advertise your mixies, grinders, washing machines, surf excels, harpics, beauty creams. So when the whole FMCG & electronic industries are vying to advertise in this slot, an average Chithi TV spot, touted to be at Rs.60,000 per 10 sec slot can go up to Rs.1,50,000. The demand is far greater than the supply. Out of a 100 brands, only the select 20 who can spend the buck can advertise during the prime show.
To break it down, I’m taking the example of two random celebrities/influencers of instagram - Shivani Narayanan & Kishen Das. Apart from the most obvious demographic segmentation that a brand can make between the followers of the two influencers (male, 18-35 for Shivani & male & female 18-35 for Kishen) a brand will look at the engagement rate of the two of them.
- Shivani Narayan - 3.5 Million followers with an average engagement rate of 3.9%
- Kishen Das - 413 K followers with an average engagement rate of 21%
Engagement rate means, the number of people who like, comment, save, share, DM a content from a certain influencer. Engagement rate is a solid way to gauge how many of the followers of an influencer truly “consume” the content. With the help of engagement rate, you can gauge the nett engagement your content would get.
No. of followers * Engagement rate = nett engagement
- Shivani: 35,00,000 * 3.9% = 1,39,500 (average no. of people who engage with her content)
- Kishen Das: 4,13,000 * 21.1% = 87,143 (average no. of people who engage with his content)
With this information, it’s easier for a brand to understand the value of the influencer. But then comes the important part. How much should the influencer be paid?
Is Rs.50,000 the right amount? Is Rs.2,00,000 the right amount? Is Rs.5,00,000 the right amount?
Brands usually do not approach an influencer with a number in mind, because most influencers come with rate cards these days (I don’t mean this in a condescending way, great for them, they’re able to use their talent/visibility/skills to make money on their own without having to depend on larger networks to help them with that) Some influencers are very practical, they want to make the most use of the limelight they’re getting. They have a base cost, above which they’re okay to advertise for any number. Some are selective, they pick brands/products that truly call out to them (vegan/organic/home grown etc) But then there are other influencers who do not understand that all of this has basis in metrics. They quote amounts that are ridiculously high that most regional brands cannot afford them. Maybe that’s their way of filtering out the local & get only the Dysons and the Tinders to come to them. But the problem with this is, when metrics show that x is the right amount to be paid for an influencer, is it fair for the influencer to charge twice that? Thrice that?
For calculation’s sake, say Shivani charges 3 lacs for a reel. And Kishen charges 1.5 lacs for a reel.
The cost per engagement for both of them would be:
Amount / Nett engagement = Cost per engagement
- Shivani: Rs.3,50,000 / 1,39,500 = Rs.2.50 (the average cost the brand would be spending to get the attention of a single potential customer through her post)
- Kishen: Rs.1,50,000 / 87,143 = Rs.1.72 (the average cost the brand would be spending to get the attention of a single potential customer through his post)
For calculation’s sake, say Shivani charges 3 lacs for a reel. And Kishen charges 1.5 lacs for a reel.
As per market standards, the ideal CPE (cost per engagement) is 50 paise to Rs.1. So, if Shivani or Kishen or any other influencer for that matter, charges 2x or 3x of the market friendly cost, is it fair to do so? And when there’s no regulatory body that decides what’s fair, who’s to tell the influencer what’s right & what’s not?
Maybe today a few brands trying to capture a certain market will try and get their hands on as many influencers as possible in the market at whatever their quoted costs are. Because today, influencer marketing is still experimental and understanding of metrics is not widespread. But soon (very very soon), influencer marketing will become one of the primary modes of marketing for a lot of brands, regional, national & international. Then, it’ll be a play of numbers. I’m paying so much, what am I getting in return? Will be the core question. Just as it was with television or radio or newspapers.
When that day comes, influencers will find it hard to accept that brands cannot and will not pay the amounts quoted by them. Because there’s no basis to the quoted amount - except “I have so many followers” (said by most) or “My content is good” (a more reasonable, yet not entirely a satisfactory answer in my opinion)
My suggestion to all influencers of the day, the above calculations are not rocket science. Check your engagement rates and understand your CPE. Quote your amount based on that. This is a business where we survive with each other. Brands depend on influencers & influencers depend on brands. And both co-depend on agencies for smooth ideation & execution. It is for the benefit of all the parties involved that this industry is stabilized for everyone’s benefit. Until then, brb, need to go bargain with an influencer to do an urgent Diwali campaign.
Ciao!