The Economics of Influencer Marketing: A Q&A with Dina Mayzlin
Dina Mayzlin, Michael Carson, and Marimer Guevara — 6 min read
Companies are increasingly investing in partnerships with social media influencers who promote products and brands to their community of followers. The growth of the influencer marketing industry has coincided with an uptick in litigation matters involving social media influencers. Recent claims have involved breach of contract, copyright infringement, defamation, and deceptive advertising, often with large sums at stake.
Assessing the impact and economic value associated with influencer campaigns is of interest to both companies and legal factfinders: Companies are motivated to maximize their return on investment in influencer partnerships, while legal factfinders may be asked to determine the value of an influencer’s follower base or consider damages associated with an influencer’s alleged misrepresentations.
To learn more about the economics of influencer marketing, Vice President Michael Carson and Manager Marimer Guevara sat down with Dina Mayzlin, professor of marketing at the USC Marshall School of Business. Professor Mayzlin is an expert in social media, advertising, and communication strategies – including word-of-mouth social influence. They discussed the factors that companies weigh when considering influencer partnerships, the impact of consumer perceptions of influencer-brand affiliations, and how to understand and measure the value created by influencers and followers.
From your perspective as a researcher in this area, which influencer characteristics are most valuable to companies considering partnerships?
Persuasiveness and reach are key factors that companies are likely to consider when seeking out influencer partnerships. An influencer’s persuasiveness is positively related to their followers’ engagement level, and their reach refers to the size of their follower base. More followers isn’t always better from a marketing standpoint, however, and companies must weigh persuasiveness and reach for their particular needs. For example, it can be difficult for “macro-influencers” to maintain authentic engagement with follower communities that can number in the millions. Conversely, some “micro-influencers” have cultivated a base of highly engaged and devoted followers.
This is where a company’s marketing goals come in. A partnership with a micro-influencer may be helpful for companies looking to target a niche customer segment that could be otherwise difficult to reach, whereas a macro-influencer could be instrumental in improving brand awareness at a broader level.
There have been consumer deception cases in the news recently in which influencers are alleged to have misled consumers by not adequately disclosing their affiliation with the brand they are recommending. What can your research tell us about consumer perceptions of influencer campaigns?
First, it is important to know that the FTC [Federal Trade Commission] requires the disclosure of an influencer’s material affiliation with brands they endorse. This rule is based on the general idea that consumers are more likely to be persuaded by a product review from an unbiased source.
My own research in this area has investigated the connection between consumers’ perceptions of the degree of affiliation between an influencer and the brand they are promoting and consumers’ likelihood of purchase. This research found that, yes, consumers’ perceptions of affiliation do matter, but their prior likelihood of purchase matters too. So, for some consumers – maybe those who already like the brand – it’s possible that messages about the influencer’s affiliation (or lack thereof) with the brand may not be material to their purchase decision. In other words, it’s an empirical question in every case whether an influencer’s messages about brand affiliation were material to consumers’ purchase decisions.
How would you determine whether messages about an influencer’s brand affiliation had a meaningful impact on consumers’ purchase decisions?
There are various methods one can use to inform questions about materiality in these types of consumer deception disputes. One potential approach is to conduct a consumer survey that uses an experimental design to measure the degree to which allegedly misleading statements – or omissions – impacted consumers’ likelihood of purchase. Another approach might be to analyze user-generated content – that is, content consumers create and share online about a product or brand – such as reviews, social media posts, and comments in online forums. User-generated content can provide valuable insight into the range of factors that influenced consumers’ purchase decisions and may help determine if the influencer’s posts were relevant.
If it turns out that an influencer’s messaging was material to consumers’ purchase decisions, damages experts can opine on whether – or to what extent – consumers overpaid for the product because of the influencer’s alleged misrepresentations.
Speaking of damages, some influencer marketing lawsuits have involved questions about how to value an influencer’s contribution to a company or brand. How should we think about those value assessments?
My colleagues and I have developed a framework for understanding the complex value-creation dynamics among companies, influencers, customers, and platforms. We wanted to think about influencer marketing through the lens of the customer value chain. A value-chain model identifies the incremental value that a company adds to its product at each step in the development process – for example, through innovative design or efficient manufacturing. We can think about how influencers create value for companies – and, likewise, how followers create value for influencers – in the same way.
This model allows us to see that influencers contribute to a brand’s “customer equity” – which is the cumulative value of all their customer relationships – in multiple ways at different stages of the customer journey, such as initiating brand awareness or influencing purchase likelihood at the consideration stage. Down the line, an influencer can add value to the company by improving customer retention at the loyalty stage of the journey.
Our framework similarly helps illustrate how followers benefit influencers and how influencers’ decisions on whether and how to affiliate with companies are guided by their desire to maximize the monetization of their follower base.
Can you talk about the way this value creation can be measured?
It’s important to note upfront that the nature of an influencer’s contribution to customer equity will vary from case to case. As we have already mentioned, influencer value creation may extend beyond the direct sales attributed to an influencer’s affiliate code or indirect engagement measures such as likes or reposts; conversely, such measures may overstate an influencer’s actual effectiveness.
In trying to capture the broader value associated with an influencer or influencer marketing campaign, you have the challenge of incorporating estimates of how the influencer’s campaign impacted consumers’ awareness of the brand, consideration of the brand or product, purchase intentions and decisions, and future interactions with the company. The value-chain framework we developed can be used to bound experts’ empirical approaches to understanding the nature and materiality of – and the economic value associated with – an influencer’s impact on consumers’ decision making.
Going back to your framework, you mentioned that followers create economic value for influencers. How does an influencer’s motivation to maximize this value metric impact the dynamic between influencers and companies?
Followers create value for influencers in a number of ways, including impacting the acquisition, development, and retention or loyalty of other followers. Long-term engagement with followers can build trust and perceived authenticity, which gives rise to more engaged followers and more persuasive influencers. These factors can then increase the price a company will pay to affiliate with an influencer. And as we discussed earlier, depending on their marketing goals, companies often seek out influencers with a wide reach. Accordingly, influencers may be motivated to both gain more followers and maintain the trust of their follower base when considering potential monetization opportunities.
Research suggests that a better degree of alignment between an influencer’s paid and organic posts is positively associated with follower perceptions of authenticity and trust. So, when considering affiliating with a brand, influencers may balance the short-term financial benefits of the contract against the longer-term risk that the brand affiliation will harm perceptions of authenticity and jeopardize follower engagement over time, ultimately hurting their ability to monetize their follower base.
What is novel or important about assessing influencer and follower value using a value-chain model?
I think the contribution of this model is that it allows us to make much more comprehensive judgments about the value created by influencers and followers. In addition to the ways we have already discussed, influencers can contribute to customer equity through channels that might be difficult to measure because the impact emerges over time – for example, by contributing to product development by aggregating information from followers on trends and customer needs.
Ultimately this framework can provide companies and factfinders with a flexible way to think about and evaluate the complex value dynamics that exist in the interactions between companies, influencers, and followers, as well as with the platforms on which they operate. 
[I]t’s an empirical question in every case whether an influencer’s messages about brand affiliation were material to consumers’ purchase decisions.”
Dina Mayzlin
Robert E. Brooker Professor of Marketing, USC Marshall School of Business
Vice President, Analysis Group
Manager, Analysis Group
The Economics of Influencer Marketing: A Q&A with Dina Mayzlin
6 min read
Companies are increasingly investing in partnerships with social media influencers who promote products and brands to their community of followers. The growth of the influencer marketing industry has coincided with an uptick in litigation matters involving social media influencers. Recent claims have involved breach of contract, copyright infringement, defamation, and deceptive advertising, often with large sums at stake.
Assessing the impact and economic value associated with influencer campaigns is of interest to both companies and legal factfinders: Companies are motivated to maximize their return on investment in influencer partnerships, while legal factfinders may be asked to determine the value of an influencer’s follower base or consider damages associated with an influencer’s alleged misrepresentations.
To learn more about the economics of influencer marketing, Vice President Michael Carson and Manager Marimer Guevara sat down with Dina Mayzlin, professor of marketing at the USC Marshall School of Business. Professor Mayzlin is an expert in social media, advertising, and communication strategies – including word-of-mouth social influence. They discussed the factors that companies weigh when considering influencer partnerships, the impact of consumer perceptions of influencer-brand affiliations, and how to understand and measure the value created by influencers and followers.
From your perspective as a researcher in this area, which influencer characteristics are most valuable to companies considering partnerships?
Persuasiveness and reach are key factors that companies are likely to consider when seeking out influencer partnerships. An influencer’s persuasiveness is positively related to their followers’ engagement level, and their reach refers to the size of their follower base. More followers isn’t always better from a marketing standpoint, however, and companies must weigh persuasiveness and reach for their particular needs. For example, it can be difficult for “macro-influencers” to maintain authentic engagement with follower communities that can number in the millions. Conversely, some “micro-influencers” have cultivated a base of highly engaged and devoted followers.
This is where a company’s marketing goals come in. A partnership with a micro-influencer may be helpful for companies looking to target a niche customer segment that could be otherwise difficult to reach, whereas a macro-influencer could be instrumental in improving brand awareness at a broader level.
There have been consumer deception cases in the news recently in which influencers are alleged to have misled consumers by not adequately disclosing their affiliation with the brand they are recommending. What can your research tell us about consumer perceptions of influencer campaigns?
First, it is important to know that the FTC [Federal Trade Commission] requires the disclosure of an influencer’s material affiliation with brands they endorse. This rule is based on the general idea that consumers are more likely to be persuaded by a product review from an unbiased source.
My own research in this area has investigated the connection between consumers’ perceptions of the degree of affiliation between an influencer and the brand they are promoting and consumers’ likelihood of purchase. This research found that, yes, consumers’ perceptions of affiliation do matter, but their prior likelihood of purchase matters too. So, for some consumers – maybe those who already like the brand – it’s possible that messages about the influencer’s affiliation (or lack thereof) with the brand may not be material to their purchase decision. In other words, it’s an empirical question in every case whether an influencer’s messages about brand affiliation were material to consumers’ purchase decisions.
How would you determine whether messages about an influencer’s brand affiliation had a meaningful impact on consumers’ purchase decisions?
There are various methods one can use to inform questions about materiality in these types of consumer deception disputes. One potential approach is to conduct a consumer survey that uses an experimental design to measure the degree to which allegedly misleading statements – or omissions – impacted consumers’ likelihood of purchase. Another approach might be to analyze user-generated content – that is, content consumers create and share online about a product or brand – such as reviews, social media posts, and comments in online forums. User-generated content can provide valuable insight into the range of factors that influenced consumers’ purchase decisions and may help determine if the influencer’s posts were relevant.
If it turns out that an influencer’s messaging was material to consumers’ purchase decisions, damages experts can opine on whether – or to what extent – consumers overpaid for the product because of the influencer’s alleged misrepresentations.
Speaking of damages, some influencer marketing lawsuits have involved questions about how to value an influencer’s contribution to a company or brand. How should we think about those value assessments?
My colleagues and I have developed a framework for understanding the complex value-creation dynamics among companies, influencers, customers, and platforms. We wanted to think about influencer marketing through the lens of the customer value chain. A value-chain model identifies the incremental value that a company adds to its product at each step in the development process – for example, through innovative design or efficient manufacturing. We can think about how influencers create value for companies – and, likewise, how followers create value for influencers – in the same way.
This model allows us to see that influencers contribute to a brand’s “customer equity” – which is the cumulative value of all their customer relationships – in multiple ways at different stages of the customer journey, such as initiating brand awareness or influencing purchase likelihood at the consideration stage. Down the line, an influencer can add value to the company by improving customer retention at the loyalty stage of the journey.
Our framework similarly helps illustrate how followers benefit influencers and how influencers’ decisions on whether and how to affiliate with companies are guided by their desire to maximize the monetization of their follower base.
Can you talk about the way this value creation can be measured?
It’s important to note upfront that the nature of an influencer’s contribution to customer equity will vary from case to case. As we have already mentioned, influencer value creation may extend beyond the direct sales attributed to an influencer’s affiliate code or indirect engagement measures such as likes or reposts; conversely, such measures may overstate an influencer’s actual effectiveness.
In trying to capture the broader value associated with an influencer or influencer marketing campaign, you have the challenge of incorporating estimates of how the influencer’s campaign impacted consumers’ awareness of the brand, consideration of the brand or product, purchase intentions and decisions, and future interactions with the company. The value-chain framework we developed can be used to bound experts’ empirical approaches to understanding the nature and materiality of – and the economic value associated with – an influencer’s impact on consumers’ decision making.
Going back to your framework, you mentioned that followers create economic value for influencers. How does an influencer’s motivation to maximize this value metric impact the dynamic between influencers and companies?
Followers create value for influencers in a number of ways, including impacting the acquisition, development, and retention or loyalty of other followers. Long-term engagement with followers can build trust and perceived authenticity, which gives rise to more engaged followers and more persuasive influencers. These factors can then increase the price a company will pay to affiliate with an influencer. And as we discussed earlier, depending on their marketing goals, companies often seek out influencers with a wide reach. Accordingly, influencers may be motivated to both gain more followers and maintain the trust of their follower base when considering potential monetization opportunities.
Research suggests that a better degree of alignment between an influencer’s paid and organic posts is positively associated with follower perceptions of authenticity and trust. So, when considering affiliating with a brand, influencers may balance the short-term financial benefits of the contract against the longer-term risk that the brand affiliation will harm perceptions of authenticity and jeopardize follower engagement over time, ultimately hurting their ability to monetize their follower base.
What is novel or important about assessing influencer and follower value using a value-chain model?
I think the contribution of this model is that it allows us to make much more comprehensive judgments about the value created by influencers and followers. In addition to the ways we have already discussed, influencers can contribute to customer equity through channels that might be difficult to measure because the impact emerges over time – for example, by contributing to product development by aggregating information from followers on trends and customer needs.
Ultimately this framework can provide companies and factfinders with a flexible way to think about and evaluate the complex value dynamics that exist in the interactions between companies, influencers, and followers, as well as with the platforms on which they operate. 
[I]t’s an empirical question in every case whether an influencer’s messages about brand affiliation were material to consumers’ purchase decisions.”
Dina Mayzlin