Influencer Marketing – need of mandate

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For people who are active on social media, it is near to impossible that they have not come across an influencer. The Government of India is planning to release guidelines and regulations for influencer marketing.

Influencer Marketing has grown leaps and bounds with the rise in internet users and penetration of smartphones. This is looked upon as an efficient way of marketing as the users can be targeted for a specific product or service. Companies are using this niche avenue to market their product or service where the Return on Investment (ROI) is high. For every dollar spent, the companies earn about $5 to almost $18, depending on the influencer.

Influencer marketing has existed for decades. Almost half of the world’s population use social media now where YouTube and Instagram gave a proper space for influencer marketing. In India, approximately 54% of the Indian population use smartphones where most social media users follow at least one influencer.

These influencers are of two main types: Celebrities as influencers where we have famous people endorse or promote the product or service. Another type is Social influencers who have gained a large number of followers from their content on social media. Companies can take both the routes to channelize the marketing accordingly.

Approaching a social influencer over a celebrity influencer could be economical for the company. For example, a social influencer who is putting content on make-up routines with 10k followers will be a better option for promoting a beauty product over a celebrity with 10k followers. This is because the followers of the social influencer will be more interested in beauty products when compared to a celebrity influencer. The company can promote the product through the social influencer where it will reach a more targeted audience. This race of influencers has created another class now called ‘virtual influencers’ where the animated figures are used as influencers.

In 2022, the market for influencer marketing is expected to grow to a $16.4 billion industry. Initially influencer marketing was not looked upon as a viable channel, but now due to the rapid increase in number of smartphones and internet penetration, almost 93% of the marketers use influencer marketing in their marketing strategy. Adidas uses this mechanism extensively and they have improved their sales by 25%. Similarly, Pepsi used TikTok and Instagram influencers to promote their brand.

From the customer perspective, instead of seeing a random ad in television or other media. they may be comfortable with this medium of marketing as they have developed a trust with the influencer over the time. Among teens, almost 70% of them trust these social influencers over celebrities. Customers prefer and depend more on the influencer recommendations.

This exponential growth in this field also triggers many flags. The influencer who is promoting the product might not aware about the nature of the product or the ethical issues behind that brand they are promoting. Similarly, the consumer who looks at a post by an influencer might not be informed whether the brand display is organic or a promotion. Unlike the conventional marketing technique, there are very less regulations for this mode of marketing. Each social media has their own grievance redressal mechanism but country specific regulation is less. In India we do not have a formal regulation yet from the government. United States through their Federal Trade Commission came up with some regulation like the influencer must reveal their relationship with the brands within their posts. Similarly, Advertising Standards Authority in UK have released their regulation for these ‘online advertisers’.

In India, the Advertising Standards Council of India(ASCI), a non-governmental, self-regulating body released certain directives for regulating the influencer marketing sphere last year. They have asked the influencers to disclose the information regarding the advertiser in their content. Such disclosure should be prominent, candid and understandable to the consumers. ASCI is permitted to lodge a complaint if there is non-compliance. Since this is a non-governmental organization, not all influencers will comply with these standards. Also, not all micro and nano influencers will be aware of such guidelines. If there is any serious violation, ASCI can approach the Central Consumer Protection Authority for any redressal. The Government of India is planning to draft similar guidelines for influencer marketing which will be enforceable by law.

One main advantage for the consumers is they can differentiate between the original content by the influencer and the paid promotion. As of now companies use this gray area of marketing to promote their brand with the help of the influencers as original content of the influencer. With this new regulation the consumer can make an informed decision about the brand. To enforce such guidelines, the social media companies must comply with the guidelines and any violators as mentioned by the authority must be removed from the platform. On the contrary, earlier studies have suggested that stringent regulations for influencer marketing will reduce the competition and the prices for the promotion will rise, which eventually merge this sphere with the classic advertising sphere.

Major advantage in influencer marketing is consumers get what they are looking for through the person they trust, the companies can target the exact consumers, influencers will earn for the effort they put in for the content generation. Stringent regulations will tamper this mutual relationship and make this medium as a mainstream advertising medium too. In the regulations the government is proposing, they should keep all these factors in the basket and make responsible regulations advantageous for all stakeholders.

  • Prof. Booshnam, Assistant Professor, Analytic Great Lakes Institute of Management, Chennai