Negotiating a cost-effective and mutually beneficial partnership with an influencer is uncharted territory for many marketers. But it doesn’t have to be difficult if you know where to start, have set clear goals, and aren’t afraid to negotiate.
Problems influencer marketers are facing
Influencer marketing costs vary wildly. An influencer just starting out might accept free gifts, while the biggest influencers are working on multi-million dollar deals.
Costs even vary with the same influencer. Someone might work with a larger brand for free one day because they believe it has value, then ask for hundreds of dollars for a post the next day from someone else.
Since there’s such a range of costs for influencer marketing partnerships, it leaves a lot of room for negotiation and confusion over price and payment model. Influencer compensation typically depends on the number of followers, brand relationship, channel affinity, quality of content, engagement, performance, and ROI.
Negotiating terms is a daunting task when there are this many unknowns and moving parts.
- “What if my budget is too low? Will they dismiss me?”
- “I really want to work with this influencer, but their fee is way too high.”
- “What if I overpay and lose money on the partnership?”
Creators can ask for unrealistic fees that throw marketers off. Marketers, on the other hand, may not fully understand the true value of a creator and the impact they can have on sales.
Where to start bridging this gap? There is no one-size-fits-all solution when it comes to contracts and compensation. Each partnership needs to be tailored to the individual influencer — you wouldn’t pay a celebrity what you would a micro-influencer, because they’re not offering the same thing.
Here are 6 ways to pay influencers
1. Performance-based pay
This is the ideal compensation model for brands, with the lowest risk, and highest scalability.
Performance-based pay is a simple form of payment that is easy to track. An influencer would post recommending a product and the brand would only pay them when their content converts a customer, or triggers a successful event like a purchase, booking, download, newsletter signup, etc. Performance-based pay is usually a percentage of sales, for example between 5 and 30% depending on margins.
Performance-based pay is infinitely scalable for brands. You only pay when you get customers. It is easily trackable and ROI is easy to measure. You can use tools that help you track performance and payouts, for example affiliate software, unique landing pages, and promo codes. You can also build UTM links as a quick & free way to track influencer traffic & conversions in Google Analytics.
Performance-based pay is highly scalable and good for building long-term relationships with your influencers. It promotes commitment, as influencers will only earn as much as the work they put in.
Among influencers, this is generally not a favorite method of payment. Brands often have to offer something extra to make it worthwhile, such as free products, or an ‘activation payment’ to kick off the partnership. Some larger creators may not accept 100% performance-based pay, but it can be the basis of great long-term relationships if you find someone with a high-converting audience.
2. Fixed-rate + performance bonus
Otherwise known as the best of both worlds, fixed-rate combined with a performance bonus are mutually beneficial for both influencers and marketers. The influencer is paid a base sum for each post (or some other set fee, e.g. activation or per campaign), and they must generate sales to get additional pay. The bonus system can work in several ways: clicks, conversions, order value, or sales.
This is a great way to build trust with high-value partners, as well as a way to start off a partnership and move to performance-based pay only. The influencer receives a base fee that shows that they are valued by the brand, and the more sales they generate, the more money they can earn. Marketers are able to build a trusting relationship with the influencer by offering a base fee and are able to track performance to make sure the influencer is producing results. A win-win.
Fixed-rate + performance bonus could become more expensive for the brand depending on the sum of the base fee and sales performance.
3. Gifting & credits
There are different ways of approaching gifting in your influencer relationships. Gifting can work as a foot in the door, letting the influencer try out the product first and — if they like it — take things further by either discussing a potential partnership or simply promoting you on their account. The second way is gifting in the form of payment, which tends to work better with smaller creators.
If you’re just starting out, gifting is a good way of testing the waters and building trust. If both sides are happy with the outcome, a long-term partnership could be in the cards.
It’s also a great “starter” if you don’t have the cash to hire an influencer just yet. You don’t have to keep track of payments, and giving away your product is relatively inexpensive (but you do still have to consider production costs, postage and shipping fees).
Gifting tends to be a low-commitment option. Without a formal agreement between the influencer and the brand, the influencer may not promote the product at the right time, or at all. Some brands choose to send out their free product to many influencers at once and hope for the best. As this approach isn’t particularly strategic, or sustainable, there are no guarantees here.
The benefits to influencers depend on what you’re giving away. Keep expectations realistic: Influencers these days may not get too excited to post about a free toothbrush.
Pay-per-post rates can be pretty much anything, in reality. The cost depends on the platform, follower count, audience engagement, content type, and other factors. Obviously, not every brand has the cash on hand to pay five-plus figures per post, which is why it’s important to choose the most relevant influencer for your product.
Paying influencers per post can be a great way to begin to build more robust, enduring partnerships with experienced influencers who have large followings. It can give you a better idea of the process of a campaign and help you plan for the future. If you want to partner with a larger creator, you can use this as social proof afterwards. If revenue sharing doesn’t make sense for you with your product price, paying per post may turn out to be easier and cheaper.
With pay-per-post, it’s hard to measure ROI, especially if you are working with multiple influencers at once. It becomes complicated to track the performance of each post separately, particularly if the post doesn’t have a trackable link or coupon code. If you do add a link to a unique landing page or point-of-sale survey, this data will be key in measuring influencer performance and improving your ROI over time. As rates vary considerably, it can be easy to overpay for a creator. Additionally, it’s a lot more work to find influencers to work with for one-off collaborations. Time spent finding new influencers to work with for each new post will add up quickly.
5. Content licensing fees
No matter how great you think your professional product photos may be, they will never compare to customers using your product and posting about it: user-generated content. If you pay an influencer a content licensing fee, you’ll be able to use their content on your website, social media channels, or other marketing materials. The agreement can be for a set period or ongoing.
In 2022, this model seems to be growing in popularity – influencers are more likely to ask for additional content licensing fees than they have been in the past.
If you need a constant flow of new and fresh content, this is a good solution. Content expires quickly and it can be hard to keep up, so a content licensing fee is a good way to get new content daily. When working with larger influencers, an upside is the mass-appeal and exposure you’ll get from big names.
Plus, creating content can be expensive if you don’t have the right equipment, infrastructure, and team in place. It might simply be cheaper to pay an influencer.
Content licensing fees are not a feasible solution for every brand. It works best for brands that need their products to be used/worn to be authentic. This is most often done with large influencers (which also means it’s a fairly expensive option).
6. Comped events or travel
Mainly used as a form of payment by travel companies, offering a free trip in exchange for promotion has somewhat fallen out of favor in other industries like beauty and fashion.
Influencers can offer premium content to their followers. Unique photos and videos of the experience give authenticity to the destination and make for more engaging content. It also helps you save on influencer fees, as creators often will not ask for payment on top of the trip, especially if offering higher-end holiday packages.
It’s difficult for travel marketers in particular to track ROI. Consumers often book vacations up to six months to a year after the end of a campaign.
Choosing the right influencer payment models:
Now that you have all of the different types of influencer payment methods laid out in front of you, how do you choose?
What do influencers prefer?
This depends on the influencer. In general though, direct payments are generally going to be most attractive. Either pay-per-post, or a hybrid fee plus commission bonuses are most likely to be accepted.
Gifting has its place too. It helps influencers who are just starting out to build a reputation and give them a test run of working with a brand. This works both ways: Gifting is also great for small businesses just getting started with influencer marketing.
For more established influencers though, you’re probably not going to get away with solely gifting free products. Especially if that person’s primary income comes from their social media channels.
At the end of the day, remember that like everyone else, influencers just want to feel like they are being compensated fairly for their work and impact.
Be prepared to customize each partnership
One size doesn’t fit all. You’re not likely to pay a celebrity the same amount (nor necessarily in the same way) as you would a smaller influencer. Be prepared to adapt your approach to compensation models & amounts depending on the creator.
Payments also depend on the platform the influencer is posting on. The average Twitter post may cost less, but its shelf life is much shorter than a YouTube video or blog post, for which you would pay more.
Treat an influencer as you would an employee — pay them!
Gone are the days of being able to give away free stuff as a method of payment. Gifting and rewards still have their place on this list because it helps influencers, especially those starting out, build their reputation, and gives them a sort of trial run with a brand before they commit to a long-term partnership.
At the end of the day, influencers work hard. They have bills too, and need to make a living. Compensating them fairly for the impact they have on growing your business is a great way to build long-term profitable partnerships.
What are you trying to achieve?
Choosing between influencer payment methods comes down to your marketing goals and, of course, budget. It’s important for both you and the influencer to have a common understanding of expectations for your collaboration.
How you pay influencers can also be impacted by your goals & KPIs. Are you building brand awareness, or social followers? Or is your goal simply to directly generate sales.
Think about your margins, customer value, and what kind of returns are needed to make this channel profitable. If you have any other marketing channels (e.g. PPC), take a look at what kind of cost-per-acquisition you’re getting there too for a benchmark. Test out different partnership models, and see what works for you.
Keeping track of influencer payments
You’re going to need a process for keeping track of your influencer marketing campaigns. This becomes more important as you scale up & recruit more creator partners.
To start with, you can use a spreadsheet or a tool like Modash to record how much you’re spending per influencer per campaign. Once you start tracking a campaign using the monitoring tool, you’ll get an overview of performance per influencer. You can note down costs to quickly compare which partnerships are generating the most engagements:
Tip: Monitoring also collects content for you automatically. Every Post, Story, or Reel is automatically saved according to the hashtags or mentions you choose to track. No more screenshotting stories before they disappear, and lots of time saved for reporting, repurposing, and more.
That works pretty well if you’re working with fixed costs (i.e. gifting, or pay-per-post). However if you’re working with performance-based pay, you’ll need additional tools & steps. For example, you might use your e-commerce platform to track usage of unique discount codes, or you might use an affiliate management software for calculating affiliate commissions. This will differ slightly depending on your business model and partnerships.
As you start reaching out & negotiating with more influencers, you’ll start to get a better feel for how influencers like to work, and the value they can drive for your brand.
Don’t be deterred if you see a few extortionate prices pitched by creators. There’s 200M+ creators in Modash’s influencer discovery platform. The perfect partners are out there for you; you simply need to keep searching, reaching out, and negotiating. There’s an element of testing & learning like with any marketing channel.
Let us know if we can help! Our team talks to influencer marketers all day every day. There’s a good chance we can help you optimize your strategy, and provide advice where you need it: email@example.com.