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Pay for Performance: The Key to Cost-Effective Influencer Marketing

April 17, 2023

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As the Internet society grows, the effectiveness of SNS advertising is becoming more evident. Among the various advertising methods, influencer marketing has gained popularity due to its significant advantages. This cost-effective marketing technique can generate high conversion rates at a lower cost. The effectiveness of influencer marketing, however, is partly dependent on how influencers are compensated. There are three forms of pay: performance-based compensation, fixed compensation, and hybrid compensation. This article will delve into the differences between these types, with a particular focus on performance-based influencer marketing. Continue reading to learn how to make the most of your influencer marketing initiatives in the Philippines.

What is performance-based influencer marketing?

Influencer marketing has become an increasingly popular method for companies seeking to broaden their reach. At the core of influencer marketing lies the question of how best to compensate influencers.

With performance-based influencer marketing, companies can set specific conversion goals, or CVs, for their campaigns. There are a variety of CV settings available in social media advertising, including purchases, business inquiries, free trials, sample applications, event registrations, and user registrations.

The key benefit of performance-based influencer marketing is that costs and results are numerically aligned. Companies only pay influencers when they achieve the agreed-upon conversion goals. A set unit price is established for each success fee, which is typically negotiated between the influencer and the client. For instance, if a beauty product with a sales price of 1000 yen is sold, the influencer may receive a performance fee of 100 yen.

It should be noted that the amount of difficulty in getting results will vary based on the nature of the conversion targets. As a result, for each project, it is critical to determine a unit price on which all sides can agree. Businesses may achieve a more focused and cost-effective marketing approach by concentrating on performance-based influencer marketing.

There are various major payment strategies to consider when it comes to rewarding influencers in digital marketing. These include rewards based on the number of likes, the number of plays for pasted advertisement videos, billing for clicks on ad banners, and remuneration for product purchases.

While these performance rewards have traditionally been utilized by affiliates who operate blogs and advertising sites, they are increasingly being adopted as a means of rewarding influencers who are active on platforms like TikTok and Instagram. This shift is driven by a growing need to improve advertising response rates, in addition to building brand awareness of the products and services provided by companies. By leveraging cost-effective affiliate-type and performance-based advertising strategies with highly influential influencers, businesses can improve their sales performance.

Advantages of using performance-based influencer marketing.

Improve Cost Effectiveness with Clear Conversion Settings

Clarifying the purpose of your advertisement and setting clear conversion goals can improve the cost-effectiveness of your influencer marketing campaign. Combining objectives with performance-based rewards can help define influencer content and avoid ambiguous results. Judging the degree of achievement numerically is also an advantage for the requester, ensuring clear and measurable outcomes.

Avoid Wasteful Expenses and Reduce Corporate Risks

Result-based reward types can help avoid financial risks for companies practicing influencer marketing. Paying rewards based on the desired conversion rate can be costly if the target is not reached. By using a performance-based reward system, companies can avoid wasting costs and still reward influencers for achieving desired results.

Improve the Creative Quality of Influencers

Many SNS advertising campaigns fail to achieve the expected PR effect and increase sales. This is often due to incomplete advertising content and a mismatch of influencers. However, by using a performance-based reward system, influencers can focus on creating high-quality content and achieving the desired results, rather than just gaining followers. This helps to improve the creative quality of the content and increase the chances of success.

Disadvantages of using performance-based influencer marketing

Difficulty in securing highly influential influencers with performance rewards

Contractors often prefer fixed rewards over performance-based rewards as the latter has high hurdles to achieving goals and may not lead to income. High-priced products with little exposure or low-profile products may not get enough likes or play videos. Influencers with more followers may also choose fixed rewards over performance rewards.

Compensation tends to be higher when results are achieved compared to fixed compensation

It is not cheap to achieve conversions with SNS ads. The unit price of the performance reward may be more than 10% of the price, especially when using popular influencers. As a result, costs may increase as the branding effect promotes the influencer and improves the results.

Difficulty in predicting the total amount of advertising expenses

Performance-based rewards are paid only when results are achieved, making it difficult to accurately set a budget that divides the period. Although it is possible to discontinue the project when the budget is reached, it is not possible to make a timetable.

Decreased conversion quality

Influencers’ primary goal is to increase profit margins, which may result in content that aims for simple results rather than quality. This may decrease appeal and not lead to gaining fans or improving the credibility of the company.

Although performance-based influencer marketing has its drawbacks, it can still be a cost-effective way to improve advertising response and sales performance for businesses, especially when used with highly influential and relevant influencers. It is important to weigh the pros and cons before deciding on this marketing strategy.

What is fixed-fee influencer marketing?

Fixed-fee influencer marketing is a type of influencer marketing where the reward for each advertising project is predetermined. The influencer is paid a fixed amount of remuneration per follower unit price, which is determined based on the number of followers they have. This type of marketing is advantageous because it allows for easy marketing planning and cost management, as the request cost is clarified in advance.

The market price of the follower unit price varies according to the rank of the influencer. The follower unit price tends to increase as the number of followers increases, as the number of followers indicates the breadth of influence and popularity. Additionally, influencers often have strong fan bases in specific categories, allowing for targeted marketing strategies. In the mega influencer class, other influencers may follow the mega influencer, allowing for additional followers and a stronger ripple effect.

The unit price also varies depending on the content of the advertisement. While the fixed remuneration type does not reflect achievement of results in remuneration, the pricing can be negotiated depending on the posting method and content. For example, a video introducing the benefits and usage of a product may have a higher unit price than a photo post.

FInal PopStar Tip

Finally, the usefulness of influencer marketing as a low-cost advertising technique for organizations looking to expand their reach has become clear. Companies may specify precise conversion targets for their campaigns with performance-based influencer marketing, and influencers are paid only when the conversion goals are met. When settling on a marketing plan, it is critical to examine the advantages and drawbacks. 

Send us a message or contact our Team at contact@pop-star.me for more information on how PopStar can help you in your influencer marketing here in the Philippines.