WARC recently published this article by our Influencer Marketing Manager, Florencia Lujani, offering her advice to brands on how to navigate the tricky subject of compensating influencers. They've been kind enough to let us reproduce it below.

Influencer marketing is growing in popularity, but is getting more complicated every day. One of the more difficult areas to navigate is how to pay influencers.

Few brands can still work with influencers in an earned capacity and many influencers, rightly, are selective over their partnerships. According to a recent study, 44% of influencers have said they need to align with a brand's core values in order to accept a partnership with them. 73% of influencers said they put more effort into content creation when they're passionate about the brand or product.

Influencer negotiation can be particularly complicated. There are no rate cards, and it’s not only a transaction but nuanced affair. It requires both parties to talk specifics like deliverables, number of posts, usage rights and more, at the same time ensuring that the creative partnership isn’t affected.

Brands and agencies who have negotiated terms with celebrities in the past might believe the same approach should be followed for influencers. However, unlike celebrities, who are not necessarily consumers of the product they choose to endorse, influencers are highly valued for their trustworthiness and the content they produce on their own.

There are two elements that define influencer compensation. Firstly, you are not only paying for endorsement, you are paying for content. And secondly, there is a huge element of brand affinity thrown into the mix.

This is where the challenge lies. And with the amount that UK marketers are willing to pay influencers varying hugely, there is no universal algorithm to determine pricing. Therefore, it's important to follow these four steps.

Define the value exchange
Often, deliverables are based only on the brand’s available budget. It's important to set the correct price, but at the same time, money is only one element of the equation. Brands also need to see how they can provide value to their influencers and nurture a sense of partnership. This could be value for their audience; exclusive or early access to product, content and company news, exclusive experiences for content creation, even access to the senior leadership at the brand.

Or it could be value for them personally; network with other influencers at the brand's events, access to new audiences through the brand's network, global reach through the brand's network, increase traffic to their website or blog, increased social engagement through the brand promotion, involvement in the process of new product development and being part of the creative process. Try to identify what is that extra value that you can deliver to influencers.

Once you’ve got a clear view of what you can offer, and what you expect in return, consider that brand affinity also plays a major role in negotiating with influencers. If the brand is not a great fit for the influencer, it's likely they will require a higher fee. When possible, partner with influencers who already have an interest in the brand, so there is that affinity and content produced will be more authentic.

At the same time, brand affinity also impacts exclusivity agreements. If the brand is interested in working with the influencer exclusively, this will increase the price, especially if the requirement extends for over two weeks. This is when choosing the right influencer becomes so important: if the influencer has a genuine affinity with the brand, they will be open to explore long-term projects and exclusivity could be negotiated.

Establish Scope
Once the brand is clear on the value exchange they can offer to influencers, it's essential to fully understand the objectives to establish deliverables, number of influencers needed, from what tier, and frequency. Keep in mind that long-term relationships are more cost-effective and allow the influencer to become a real advocate for the brand. A common mistake is to focus on only one channel; usually influencers are active on different platforms and have different following base (and in some cases tone) on each. A multi-platform partnership will be more authentic and will result in better content - it can also have the additional benefit of a per-post price deduction, as one-off posts are seen as less credible and influencers don't want to compromise their reputation.

Additional key elements
Once your deliverables are clear, there are other factors to be taken into account. It is important to get as much detail from the influencer as possible beyond the public data of follower numbers and engagement rates. Also ask for conversion KPIs, audience data and so on, and if there is an influencer with more relevant audience that should be reflected in the price. Brand affinity and exclusivity are the two biggest factors that will affect price, but there are also other operational elements that can increase the price of a deal, which in our experience at We Are Social works best when overseen by our legal team.

Usage rights: as in, reposting and repurposing content produced by influencers. Most contracts will include a clause on Intellectual Property over the content produced, but if the brand is looking at using the content in other media to further amplify the campaign, then that will impact the fee and increase it a further 20%-30%. For example, if you have signed an agreement granting you usage rights in a specific territory, and then want to repurpose assets and use them in other markets, then you will need to renegotiate the original deal.

Timings: a lot of agencies work on tight deadlines, so transferring this urgency to influencers will come at cost.

Compensation methods
Most brands pay influencers a standard fee that takes into account all elements previously mentioned. This makes sure that the influencer delivers and it's usually correlated to what the brand has paid in the past, or an industry benchmark.

There’s currently debate whether marketers should change their mindset and build performance-based deals with their influencer partners - such as aiming for a certain number of likes, views, or a specific engagement rate. However, I’d recommend that brands avoid this approach; it can encourage fraudulent practices, such as influencers gaming the system by enlisting their communities to comment, click on links and share. They might buy traffic and likes, enable repeat-sharing, or even incentivise their audience to engage by using sweepstakes or giveaways. It risks putting the very authenticity we are trying to tap into when using influencers.

A better approach would be to compare all the content produced by the influencers at the end of the campaign, and reward the influencers who produced the best content. This will create a related performance model that would incentivise an influencer to put in effort that goes beyond the monetary compensation offered, and would result in better content for the brand. Unlike the previous approach, the reward wouldn’t be focused on hitting a specific metric, but would be based on the quality of the work produced, and would reward them as creative individuals.

Compensation isn’t an exact science, but as influencer marketing matures, we will move further towards industry models and benchmarks. But it’s always worth remembering that ultimately you’re dealing with people, and as such, there’s always room for negotiation.