If you plan to start reaching out to influencers without an incentive model in place and expect to 'figure it out' or see what creators suggest, you might either lose the opportunity to work with good creators or fork out a lot of money or both!
To avoid this, it’s good to have an incentive structure in mind to reward influencers
There is no straightforward answer or formula to calculate the worth of a particular collaboration. Several factors decide the payment model:
- Type of creator (Nano, Micro, Macro, Celebrity)
- Type of content (Post, Video, Story, Reels, etc.)
- Type of business (eCommerce, SaaS, Events)
- Size of your business (How much can you afford to pay creators, how big is your marketing team)
In this post, we will explore 5 tried-and-tested ways to incentivize influencers to work with your brand:
- One-off Payment
- Performance based payout
- Base + Bonus
The aim is to help you get clarity on which compensation model works best for you, depending on the various factors we mentioned earlier.
Listed below are the 5 main models available to you.
Gifting or Seeding
This is an unpaid way to do influencer marketing. You send your top products to creators in exchange for a shoutout. If logistics is an issue, you can also send nano-influencers coupons to redeem on your site. It will allow them to choose the products they like the most & are more likely to create engaging content.
With nano-influencers, you can clarify upfront that you won't be paying cash but will send free products in return for a promotion, or you can send the product. Since they are not usually "full-time" creators or are still looking to grow, they would mostly be happy to do it.
With micro and macro influencers, you can send the product and bet that the creator will find your product very useful, your message very thoughtful, and connect with the brand's mission so much that they will post about it. We’ve outlined the steps to maximize your chances of getting a post using this method in this masterclass.
Advantages of influencer gifting
It's affordable & perfect for getting started with influencer marketing. The only cost you would incur would be the cost of goods, shipping charges, and any customization you would add to packaging. Even if you go for choose extravagant packaging, it would still be cheaper than flat-fee campaigns.
You can get ad creatives for your campaigns, reviews for your website, or product shots from creators. Sounds far-fetched? Here's a complete guide on how to do it smoothly.
If you use a product like SARAL, you can find look-alike influencers, track the shipment of your products, and run email drip campaigns easily within the same tool. An amazed marketer once said, "omg, you are replacing the whole influencer marketing team with this tool." So if you are a resource-crunched team, you can try SARAL free for a week!
Worst case, you don't get anything from sending free products. But at least your target audience will discover your products and might recommend them to their friends & family.
But it's not all rosy. There are some downsides to gifting.
Disadvantages of influencer gifting
Your brand will face competition from three sides: a) other brands who are also sending gifts, b) your competitor’s products that the creator might be using and is more interested in promoting c) brands that are compensating creators monetarily.
Because you're not paying anything to creators, they are not obligated to post about your brand. You have no control over how your brand might be presented either, as there is no “creative brief”. So if that’s a sensitive topic for you, you might want to drop the idea of seeding and try another model.
Initially, when you are just starting out, you won't know how many creators you need to DM to hit your goals, as not everyone might respond. So you risk doing less than what’s required and losing out.
One-off pay per post
This is one of the oldest and probably simplest (but not cheapest!) compensation methods where you pay the creators a lump sum amount, a flat fee with a free product at the start of your collaboration. Usually, you can find these rates in the influencers' media kits or check with their managers (if they are macro-influencers or celebrities).
Factors that affect a creator's price include:
- Engagement rate: The number of clicks, likes, or comments a creator gets on a single post.
- Cost of your product: Since creators would be getting your product for free, you can negotiate the price if you sell a premium product.
- Format of your post: A post is easier to create compared to a video or carousel. Pricing would change based on the type of post you want.
- Campaign requirements: Distribution on different platforms, multiple posts, or exclusivity clauses will likely attract an additional fee.
Advantages of paying per post
Unlike the gifting or affiliate model, this is less time-consuming and doesn't necessarily require any kind of tracking setup. It helps you collaborate with a large number of influencers in a short time.
The creators are responsive to you, and you will be prioritized above brands that just send free gifts. One-off payments are great to test your target market as you can work with creators in different niches.
Disadvantages of paying per post
Payment is made before you see any results. So might have a hard time justifying the ROI or showing any kind of results until after the campaign. If it fails to get results, you can't recover any.
Just one or two mentions of your brand on a creator's account are less authentic as compared to a long-term partnership where the creator is regularly recommending your product or talking about its new features.
It's not all bleak in the influencer marketing world. There are two ways to pay for only the results that you get. Let's explore those.
Performance Based Payouts
In performance-based payments, you pay influencers based on the conversions they bring in. A “conversion” can be — visiting a landing page, sales, re-share, RSVPs to an event, downloads of your app, etc. But these should be defined upfront.
Attribution in such cases (and in general with influencer marketing) can be difficult. One simple way is to track conversions through an influencer-specific landing page or through their discount code. But mostly, that also doesn't give an accurate picture as people hear about a brand from an influencer but purchase later on the main site. The solution to this is to add a post-purchase survey to find out the number of people who heard about your brand first from an influencer.
There can be two variations of this model:
a) Fixed amount per conversion: You pay a fixed amount irrespective of the average order value of the customer. E.g., paying $5 per sale.
b) Variable amount per conversion: You pay a percentage of the sale brought in, e.g., 5% of the sale amount, or 10% of the first 100 orders with a lower percentage for everything after that.
Check out this post to find out how you can run your use of this model and put your influencer marketing on autopilot.
Advantages of performance-based payouts
There's less risk for the brand as you only pay for the results and not just the actions of a creator. It also pushes the creators to talk about your product genuinely. The success is compensated in a fair and transparent way.
It helps brands avoid the dangers of fraud because it might be easy to buy followers or artificially inflate engagement, but it's not possible to fake the sales.
Long-term partnerships with creators help brands collect data over a period of time which can be useful to make strategic decisions on brand messaging, products that add the most amount of revenue, etc.
Disadvantages of performance-based payouts
If you are a small business, just starting out paying for products that help you track attributed conversions will add an additional burden on your budget.
There is no way to track results accurately. It can take a considerable amount of time before a creator is compensated fully for the time, effort, or cost incurred to create a post. These factors might discourage creators from adopting this model. But let’s fix that in the next model.
Base + Bonus Mixed Model
This model is a mix of per-campaign payment and performance-based payout models. Brands pay a fixed amount upfront and then a percentage of the sales that came through an influencer after that.
Advantages of the mixed model
It compensates creators for the time, effort, and cost incurred to create a post. If they believe in your brand and are confident about getting results, they will be motivated to collaborate with you.
Just like in the performance-based model, it de-risks you as you are not paying without seeing results.
This model can help you find out your true brand advocates. You can eventually work with them to build a successful ambassador program. Check out this post to find out what an ambassador program is and how Notion uses it as the centerpiece of its marketing.
Disadvantages of the mixed model
Fixed-rate + performance bonus could become expensive for the brand after a while, and they might end up paying the creators more than what they would have paid in a flat-fee structure.
It might not work out if the base payout demanded itself is very high. Ideally, you should seek a 25%-50% off their normal flat rate to add commissions on top.
You will have to always keep checking the discounts people are getting, commissions you are sending out, and how much you are investing in making this whole model run from a resources and tools perspective.
Equity for Creators
Giving ambassadors or long-term collaborators stock options or equity is a new way to incentivize them, and one example that we came across was that of Poshmark. They revealed plans to offer their ambassadors a share in the company while filing for IPO.
"At our request, the underwriters have reserved up to 330,000 shares of Class A common stock, or up to 5.0% of the shares offered by us in this offering, for sale at the initial public offering price through a directed share program to eligible Posh Ambassadors and certain individuals identified by our directors and officers." (source)
Companies like Karat organize events that offer brands an opportunity to get macro influencers as investors too. This flips the traditional “pay-per-post” model on its head as the creators pay you and promote your products!
Advantages of equity sharing
This encourages brand ambassadors to promote the brand even if there's no active pay per post or commission engagement, as they have an incentive for the growth of the business. Your equity partners will promote you at every opportunity they get, as even creators want to build long-term wealth promoting your products, as opposed to getting paid just a couple of times a year.
Disadvantages of equity sharing
It can be complicated to execute. It requires a whole new level of educating the influencers around stocks, equity, etc. Ensuring all the paperwork is in place requires a team of people other than just marketers.
If the company is not based in the same location as the creators, this model might not work due to the regulations and legalities.
Here are some final thoughts we want to leave you with when deciding how to compensate creators:
- Work with what's possible for your brand. If you are just starting out and can only offer free products, find creators who will happily accept that. Don't try to stretch your budget just because you feel like you have to work with a million-follower-creator because a competitor is doing so.
- Justin Beiber has a million fans, but if you are selling a niche product, that audience is likely not relevant to you. The lesson is to focus on the engagement rate and niche of the creator rather than the follower count and work out a money model that works best for both you and the creator.
- At SARAL, we believe in creating long-term relationships with creators. They are humans, not machines where you slot in cash and get customers. Seek out creators who want to work on the win-win model. The tool is just an assistant that enables the relationship.
- To build relationships, find the ambassador's personal goals and see if you can help them in any way. This is one reason why the Lululemon Ambassador Program is so successful. When a creator posts about you, re-share their content, & thank them. Send them gifts without any obligations.
We would love to hear your thoughts on these money models or if you have any apprehensions about starting with influencer marketing. Signup for our “No BS” Influence Marketing Letter to become friends over email.
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