According to a report released by Duff & Phelps, the world’s premier provider of governance, risk and transparency solutions, and Kroll, a division of Duff & Phelps, 25% of companies have suffered a $100,000-$250,000 loss from a negative influencer experience.
The Face Value Report highlights results of a survey of over 900 marketing and brand managers within the FMCG sector and provides insights into the value of influencer marketing, as well as the financial and reputational impact of negative influencer experiences.
Consumer devotion to digital devices during the pandemic has supercharged the influencer industry. During lockdown, two-thirds of FMCG companies have either maintained their influencer spending at pre-COVID-19 levels or increased it slightly, while nearly a fifth (19%) upped it significantly.
By 2021, nearly half of FMCG companies (46%) expect to spend 31-50% of their total marketing budget on influencers—up one-fifth compared to the average spent between 2018-2020—while nearly one in 10 (8%)will spend more than 70%.
- Nearly half of fast-moving consumer goods (FMCG) companies will spend up to 50% of their marketing budget on social media influencers post-COVID-19
- Globally, a third of FMCG businesses said their most successful influencer campaign increased sales by $250,000-$500,000
- Less than a third of FMCG firms (27%) use third-party influencer verification services
- One in 10 FMCG companies generated between $1.1 mn-$5 mn in sales from their best campaign
Clear winners across countries emerge when comparing how much companies make from their influencer campaigns against what they spend running them. The average amount spent per influencer among FMCG companies globally is $22,151 per year. However, the UK spends on average $18,602 and boasts a high sales increase to expense ratio at 73%–comfortably above the ‘all countries’ average of 46%.
FMCG companies will typically spread their spending across dozens of influencers; 45% of companies stated they usually work with 51-100 at a time, and this could rise as the influencer method of marketing becomes more entrenched. UK companies appear to use the fewest number of influencers than other countries at around 66, compared to the global average of 81.
Michael Weaver, Managing Director Valuation Advisory Services at Duff & Phelps, said, “Marketing teams once relied on securing the most expensive celebrity they could afford for a television campaign or billboard, but this strategy is increasingly obsolete in the digital age.
“FMCG companies are satisfied with the return on investment from influencers and are diverting marketing spend away from other traditional advertising and marketing tactics to keep the momentum going.
“We can’t deny that the lockdown and subsequent restriction measures have also played a part in boosting the industry. But regardless, we don’t expect influencer marketing to slow down post-COVID-19 either,” Weaver said.
Influencer marketing also comes with certain risks—85% of FMCG companies have had their brand negatively impacted due to an association with an influencer, with almost a quarter (24%) of these companies claiming to have been adversely affected multiple times. Shockingly, 25% of FMCG companies report losses between $100,00-$250,000 from a negative influencer experience.
The survey found that over two-thirds of FMCG companies (69%) had doubted an influencer’s follower count on one or multiple occasions compared to just a quarter (26%) who had never had any concerns. It is noteworthy that in the UK, where just over half of businesses (51%) had never had such doubts about followers, the use of third-party influencer verification specialists was among the highest at 32%, compared to the global average of 27%.
Benedict Hamilton, Managing Director in Kroll’s Business Intelligence and Investigations practice, said, “Companies spend years creating brands built on trust and loyalty, characteristics which are hard-won but can be quickly lost, and are difficult to regain.
“When a negative incident with an influencer occurs, the reputational damage that follows can have long-term commercial impacts. Companies need to do their due diligence and not just take an influencer at “face value.”
“We are seeing increasing demand from brands to investigate influencers’ online activity and identify potentially sensitive issues, including those posted many years ago, to allow brands to establish whether or not an influencer’s values match their own, and ensure they are making informed decisions about their influencer programmes,” Hamilton said.