Influence or Advertise: The Role of Social Learning in Influencer Marketing

Ron Berman, Aniko Oery () and Xudong Zheng
Additional contact information
Ron Berman: University of Pennsylvania - The Wharton School
Aniko Oery: Cowles Foundation, Yale University
Xudong Zheng: Johns Hopkins University, Department of Economics

No 2358, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We compare influencer marketing to targeted advertising from information aggregation and product awareness perspectives. Influencer marketing leverages network effects by allowing consumers to socially learn from each other about their experienced content utility, but consumers may not know whether to attribute promotional post popularity to high content or high product quality. If the quality of a product is uncertain (e.g., it belongs to an unknown brand), then a mega influencer with consistent content quality fosters more information aggregation than a targeted ad and thereby yields higher profits. When we compare influencer marketing to untargeted ad campaigns or if the product has low quality uncertainty (e.g., belongs to an established brand), then many micro influencers with inconsistent content quality create more consumer awareness and yield higher profits. For products with low quality uncertainty, the firm wants to avoid information aggregation as it disperses posterior beliefs of consumers and leads to fewer purchases at the optimal price. Our model can also explain why influencer campaigns either "go viral" or "go bust," and how for niche products, micro-influencers with consistent content quality can be a valuable marketing tool.

Pages: 51 pages
Date: 2023-01
New Economics Papers: this item is included in nep-com, nep-mic, nep-mkt and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/2023-04/d2358.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:2358

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().