Researchers from Indiana University, Stony Brook University, and University of Maryland published a new Journal of Marketing study that examines whether companies should allocate livestreaming budget resources to a single big influencer or spread it across multiple small influencers.
The study, forthcoming in the Journal of Marketing, is titled “Influencer Mix Strategies in Livestream Commerce: Impact on Product Sales” and is authored by Xian Gu, Xiaoxi Zhang, and P. K. Kannan.
Livestream commerce has exploded in the last few years. Facebook, TikTok, and YouTube have introduced livestream shopping services on their respective social platforms. Amazon launched Amazon Live in 2019 and the company now features livestreams on its home page. Walmart has collaborated with TikTok to stage multiple livestream shopping events, and other firms such as Nordstrom, Macy’s, LG, and Petco have also embraced livestream commerce.
At the core of this phenomenon is the blend of live influencer marketing with real-time audience engagement. Livestream commerce typically involves an online influencer—someone with cachet on social media—presenting and endorsing products in a lively setting, possibly combined with entertainment like singing or talk shows. As the livestream progresses, viewers have the ability to interact, pose questions, and even extend their virtual appreciation by way of tips. It is a seamless integration of entertainment and shopping that challenges traditional marketing norms.
“However, the livestreaming opportunity presents new challenges for businesses. The pressing query for marketers is how to strategically employ influencers to maximize sales in this livestream-oriented market” says Gu.
Big Versus Small Influencers
The new study examines the complex dynamics between “big influencers”—with large numbers of followers—and “small influencers”—who command a niche yet engaged following. Zhang says, “the primary dilemma faced by businesses is with regard to the allocation of budgets. Should they allocate resources to a single big influencer or should they spread it across multiple small influencers? When resources are not a constraint, does combining the reach of big influencers with the targeted approach of smaller influencers yield better results?”
One may argue that combining both types of influencers should yield positive synergistic effects given that big influencers can create awareness and small influencers are effective in closing sales. A superficial glance might advocate for a mixed approach, believing in the “best of both worlds.” However, the study’s findings challenge this notion, unveiling the following insights:
- In terms of reach versus engagement, big influencers undeniably draw vast audiences, casting a wide net.
- Small influencers, while limited in reach, often boast higher audience engagement and conversion rates.
- The sheer numerical might of big influencers ensures they often bring in more absolute sales despite the lower conversion rate.
- Big and small influencers may undermine each other’s sales effectiveness when they promote the same product.
When Audiences Lose Trust
There are clear dynamics in influencer interactions, and introducing both types into a campaign can lead to unforeseen complexities. Audiences start to lose trust in larger influencers when they observe smaller influencers promoting identical products. This dilution effect implies that the influence of one influencer can be inadvertently diminished by the presence of the other, either due to decrease in trust or due to substitution effects of audience overlap, or both. This negative impact is more pronounced when a product endorsed by a big influencer has already been promoted by a smaller counterpart.
There are a number of additional factors that can influence sales outcomes. Kannan explains that “the price of the product being promoted, the variety of products featured in a single livestream, the thematic focus of the livestream, and the nature of discounts offered all play crucial roles in determining influencer effectiveness.” The study shows that the mix of sales effectiveness and influencer interaction effects vary across product categories and the effect sizes increase as product price increases. It also shows that:
- Promoting a large number of products in a livestream reduces the sales of a focal product by big influencers to a greater extent than it reduces the sales for small influencers.
- While big influencers generate higher sales of a given product when their livestreams focus exclusively on that product’s category, small influencers’ sales performance may not benefit from category focus.
- A deep price discount increases sales by big influencers more significantly than sales by small influencers.
In examining the economic viability of various influencer mix strategies, cost plays a pivotal role in formulating strategy. In general, for companies that can afford big influencers, the combined strategy and the big-influencer-only strategy perform similarly and work better than the small-influencer-only strategy. However, for companies where the costs of hiring big influencers are high, the combined strategy outperforms the big-influencer-only strategy, but is dominated by the small-influencer-only strategy.
The allure of combining both influencer types might be tempting, but companies should recognize that in the realm of livestream commerce, they might inadvertently undermine each other. Thus, the idea is not about merely employing influencers, but doing so judiciously. Tailoring approaches according to the unique characteristics of products, campaign objectives, and influencer dynamics can spell the difference between a successful campaign and a missed opportunity.
Full article and author contact information available at: https://doi.org/10.1177/00222429231213581
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Marilyn Stone is Director, Academic Communities and Journals, American Marketing Association.