EXPRESS: Revenue Generation through Influencer Marketing

Direct-to-consumer (DTC) firms increasingly believe that influencer marketing is an effective option for seeding. However, the current managerially relevant question for DTC firms of whether to target low- or high-followership influencers to generate immediate revenue is still unresolved. In this article, the authors’ goal is to answer this question by considering for the first time the whole influencer-marketing funnel, i.e., from followers on user-generated content networks (e.g., on Instagram), to reached followers, to engagement, to actual revenue, while accounting for the cost of paid endorsements. The authors find that low-followership targeting outperforms high-followership targeting by order of magnitude across three performance (ROI) metrics. A mediation analysis reveals that engagement can explain the negative relationship between the influencer followership levels and ROI. This is in line with the rationale based on social capital theory that with higher followership levels of an influencer, the engagement between an influencer and his/her followers decreases. These two findings are derived from secondary sales data of 1,881,533 purchases and results of three full-fledged field studies with hundreds of paid influencer endorsements, establishing the robustness of the findings.