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How Influence Transparency Affects Product Efficacy and Purchase Intentions

By Parker Woodroof, Ph.D.

Social media influencers are rapidly emerging as a popular marketing tool for brand managers, but consumers are increasingly exposed to marketing messages while simultaneously becoming more adept at tuning them out1.

Parker Woodroof, Ph.D., assistant professor of marketing

Marketers are motivated to develop communication strategies that consumers do not easily identify as a persuasive marketing attempt by the brand2. One strategy that is increasingly being used is influencer marketing, which allows brands to communicate to an interested audience through the voice of someone they ostensibly trust3.

The utilization of influencers, such as celebrities4&5, brand community members6, and bloggers7 for marketing efforts enhances consumers’ brand attitudes and increases purchasing. The ability to reach a sizeable portion of the target market quickly and cost-effectively makes influencer marketing an increasingly popular promotional tool8.

In 2019, 89% of marketers reported return on investment from influencer marketing is similar to, if not better than, other marketing channels and as of 2018, 65% of marketers said they planned to increase their influencer marketing budgets9. Influencer marketing growth is estimated to be $6.5 billion, with earned media value up to $18 per dollar invested10. By 2022, the industry is expected to be worth $15 billion9. Consumers have long held that celebrities are authentic customers who are motivated by a genuine predilection for the product or brand rather than financial gain11.

However, roughly 50% of social media users are not able to identify when promotional posts are sponsored12. Consumers are likely to be unduly influenced by influencer marketing campaigns they perceive to be genuine, non-commercial content.

This paper investigated how the type of endorsement disclosure used by a social media influencer impacts consumer perception of influencer transparency, product efficacy, and purchase intentions.

The Research

Participants viewed a mock Instagram post designed to look like it was created by a celebrity (Ryan Seacrest) and captioned with either a clear disclosure or a more ambiguous disclosure. The disclosure conditions were based on two variations of what the FTC deems acceptable regarding endorsement disclosure in social media contexts.

In the clear-disclosure condition, the post caption began with “#ad” (the caption read: “#ad I’ve been using @brightwhitesmile for a few months and I love it.”) In the ambiguous-disclosure condition, the brand is merely “thanked” for providing the product as a gift.

Participants were shown one of the pretested disclosure stimuli (i.e., a mock Instagram post in which a celebrity endorses Bright White Smile). Participants were randomly assigned to either the clear (#ad) or ambiguous (“thanks for the gift”) disclosure condition.

They were asked to “imagine you’re scrolling through your Instagram feed and see the following post recently made by [Influencer] on Instagram that was also shared on [his/her] Facebook, Twitter, and Snapchat accounts.”

Results

When consumers become cognizant that an influencer’s branded promotional post may have been motivated by an underlying financial relationship, they evaluate the influencer as significantly less transparent if a more ambiguous disclosure is used relative to a clearer disclosure. Transparency perceptions of the influencer impact consumers’ perceptions of product efficacy, as well as, purchase intentions.

Purchase Intentions

Transparency perceptions of social media influencers affect product-efficacy expectations, which are closely linked to purchase behavior13. The relationship between consumers and companies is influenced not only by transparent actions taken by the company but also by the consumer’s estimation of how the company is behaving when transparency cannot be observed14. Transparency is one of the basic conditions and values establishing positive relationships between customers and companies15. When consumers with activated persuasion knowledge — which suggests that consumers learn how to manage persuasive attempts and develop certain coping strategies that impact the effectiveness of marketing communication16 — are exposed to social media influencer posts with clear disclosures, their perceptions of both influencer transparency and product efficacy will be more positive, resulting in greater intention to purchase the product being promoted by the influencer.

Theoretical Implications

Consumers are less likely to detect ambiguous language indicative of paid sponsorship for the post unless persuasion knowledge is activated. Consumers need regulators, such as the FTC and ASA, to protect their vulnerabilities by requiring social media influencers to use disclosure language that is clear and prominent concerning their compensatory relationships with brands. Otherwise, consumers may not evaluate social media influencers who utilize ambiguous disclosures as less transparent and, in turn, these consumers may make purchases they might have otherwise avoided.

Consumers perceive influencers who are not forthcoming about commercial relationships with brands as promoters of inferior products, and consumers will be less inclined to purchase the products in the future. These findings imply that additional consumer education and strong public policy are needed to protect against unethical manipulations via predatory marketing tactics.

They need to believe an influencer is being transparent to have confidence that the promoted product is of high quality.

For an influencer’s brand to be valuable to companies, their brand must be credible. Ambiguous disclosures can lead an influencer to be evaluated as less transparent. Over time, this will likely cause the influencer to be seen as untrustworthy and/or less “genuine,” which directly conflicts with the attributes required for meaningful and successful connections between social media influencers and their audiences18.

Managerial Implications

Attempts to conceal the commercial relationship between the brand and influencer are effective, as evidenced by consumers evaluating social media influencers using ambiguous disclosures as being essentially equally transparent compared with social media influencers who use clear disclosures. The influencer “should make it obvious” when a relationship exists.

As consumers become more discerning in their consumption of social media content, brands risk damaging product perceptions by employing covert tactics. The lack of transparency negatively affects consumers’ perceptions of product efficacy and, ultimately, their purchase intentions. Additionally, influencers themselves are potentially damaging their own credibility by utilizing these covert tactics.

Clearly disclosing relations will benefit companies and influencers so that consumer perceptions of product efficacy and quality are not diminished. Previous research has shown that about 40% of people switch brands due to perceptions of poor efficacy19. Marketing managers should have clear guidelines and contracts for influencers detailing disclosure expectations.

The way in which content is prioritized into news feeds and subsequently shared on social media frequently changes and impacts consumers. For example, Facebook recently updated their algorithm to prioritize “meaningful user content” over public/commercial content. The update prioritizes posts that “spark conversations and meaningful interactions between people” instead of posts that receive the most views, clicks, and reactions20. This update has altered the content to which Facebook users are exposed and has contributed to a steep decline in engagement for many brands that rely on the platform for promotion21.

Because social media influencers’ posts may be favored by algorithms, product and brand managers may be more likely to turn to influencer marketing as a means of more directly reaching consumers with branded messages. It becomes increasingly important to understand the nuances involved in crafting effective product- and brand-related posts to be distributed by influencers. This includes determining the best methods for disclosing the commercial relationships underlying the social media influencer promotional posts.

The results of the studies in this research prescribe the use of clear disclosure over vague nods at brand-influencer relationships as the best long-term strategy. This confirms previous research indicating that covert marketing undermines the building of relationships with consumers22.

Current research suggests that individuals are inherently trusting of social media content, consuming content through a social lens rather than a consumer lens. Although clear disclosures such as #ad and more ambiguous “thank you” language-type disclosures are both technically FTC-compliant, it appears consumers do not understand that “thanking a brand for a gift” is an indication of an underlying relationship between the brand and the influencer unless their persuasion knowledge is activated.

From a regulatory perspective, the findings of the present research substantiate the need for the FTC to modify its guidelines to disallow the use of “thank you” language as an acceptable form of sponsorship disclosure. FTC guidelines for social media influencers are constantly evolving. For example, from the conceptualization of this research to publication, the FTC guidelines for social media influencers changed multiple times.

Managers should be aware that these guidelines change regularly as the FTC evolves in its understanding of how to protect consumers against unfair social media influencer practices. Many letters have been written by the FTC to social media influencers recently shunning unethical behavior. Social media influencers merely altering a post retroactively once they have been caught will likely not be adequate in the future as consumers’ persuasion knowledge, skepticism and scrutiny of social media influencer posts continue to increase. Regulatory agencies differ from country to country. Managers should be diligent in keeping abreast of regulations regarding disclosures used in influencer posts.

Social media platforms (e.g., Facebook, YouTube, Instagram, and Twitter) and regulatory agencies (e.g., FTC, CMA or ASA) should prioritize consumer education of appropriate social media influencer behavior. These organizations have to recognize that they have a responsibility to cultivate and mature consumers’ persuasion knowledge so that consumers, social media influencers and brands have equitable and sustainable relationships. Failure to actively strengthen consumers’ persuasion knowledge undoubtedly demonstrates complicity by these organizations.

“What’s Done in the Dark Will be Brought to Light: Effects of Influencer Transparency on Product Efficacy and Purchase Intentions” was published in the Journal of Product & Brand Management. The research was completed by Parker Woodroof, Ph.D., assistant professor of marketing in the UCA College of Business; Katharine M. Howie, Ph.D., assistant professor at the University of Lethbridge’s Dhillon School of Business; Holly Syrdal, Ph.D., assistant professor of marketing at Texas State University; and Rebecca VanMeter, Ph.D., assistant professor of marketing at Ball State University.

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How do Small Businesses Respond to COVID-19?

If you’re a small business owner, the last couple of weeks have been filled with long days, more stress and anxiety, and questions about the future as the country responds to the COVID-19 pandemic.

School closings, mass event cancellations and postponements, and social distancing have challenged small business models across the country, including in Arkansas. How can small businesses respond to obstacles created by COVID-19?

Remain Calm

Jeff Standridge, Ed.D., adjunct instructor of Finance and managing director of the Conductor, said small business clients, customers and employees are looking to the owner for guidance.

“Your attitude and demeanor can make them feel comfortable or worried,” said Standridge. “Your thoughts impact your feelings, your feelings impact your actions, and your actions impact your results.”

Put Yourself in Your Customer’s Shoes: Reach Out!

Business owners should figure out ways to make customers more comfortable in doing business with them in the middle of self-isolation and reduced trips outside the home, said Standridge.

“Before you decide to close for two weeks, look for ways to reduce human contact points within your business,” he said. “If you can serve your customers remotely, you should do it.”

It is important for customers to see care, concern and empathy from businesses, said Standridge.

“It builds trust and loyalty,” he said. “Reduce risks, increase convenience, go above and beyond to meet their physical and emotional needs.”

Reaching out to top customers or clients, asking how they can be helped and informing them of changes your business is making can be helpful.

“Everyone is facing this crisis together, so be transparent about what your business is going through,” said Standridge. “Customers can empathize with brands facing a crisis, as long as you communicate with them properly.”

Doing the Right Thing Now Will Benefit You in the Long Run

The potential for negative press, ill will or loss of business from the general public is possible for the firms and businesses that do nothing or are slow to respond to the crisis, said Parker Woodroof, Ph.D., assistant professor of Marketing.

Whether it is transitioning to online services, reimbursing clients for missed or canceled services or offering gratuities, “being the first small business in the competitive environment gives you a competitive edge and advantage,” said Woodroof.

Go Online

When many stores shuttered in China and workers stayed home in response to COVID-19, Standridge said the savvy business owners shifted their sales strategy to social media, email and phone calls to avoid heavy losses.

“If you’re closing your store, find ways to keep your employees earning a paycheck by reaching out to your clients, selling on social media, putting your email list to good use or using a video tool to reach new leads,” he said.

Keep Your Routine

Things may not seem the same at the moment, but it’s important to keep some semblance of a routine.

Always have coffee with a mentor? Lunch with a fellow small business owner? Keep those appointments, said Vance Lewis, Ph.D., assistant professor of Management, just adapt.

“You can still have those morning coffee chats, greetings, lunches and comradery over the phone or internet just as easily as in-person.”

Plan for Cash Flow Implications & Get Help

Develop and plan for scenarios likely to result in an increase or decrease in demand for your products and services during the outbreak, said Standridge.

“Determine any potential impact on business financials using multiple possible scenarios that affect different product lines or store locations,” he said.

Other strategies that can be implemented include:

  • Reduce or eliminate all non-business-critical tasks and expenses.
  • Identify essential, revenue-critical employees and make sure they are focused on business-critical tasks.
  • If you reduce staffing levels, consider developing rotating work schedules to continue serving clients. Maintain some level of income to as many employees as possible.
  • Talk to your bank and suppliers about alternate payment arrangements. Talk to suppliers about extending payables. Talk to your bank about temporary interest-only payment arrangements.
  • Eliminate excess inventory to generate cash.
  • If the situation calls for it, reach out to your bank about the SBA Economic Injury Disaster Recovery Loan program.

Cynthia Burleson, director of the Center for Insurance & Risk Management, said it could be beneficial for small business owners to consider business income coverage.

“This is nuanced and often misunderstood,” said Burleson. “Owners need to understand their policy to see if they may have the potential for partial help due to loss of income.”

For more information regarding the policy, click here.

Doug Voss, director for the Center for Logistics, Education, Advancement & Research and Scott E. Bennett Arkansas Highway Commission Chair, encouraged small businesses to negotiate payment terms with financial institutions.

“Protect your employees’ health and financial well-being to every extent possible, and avail yourself of state and federal assistance programs,” said Voss.

For more information on programs available to small businesses, click here.

The Conductor provides free, one-on-one virtual consultation for small businesses.

“We work every day to help business owners in Arkansas to get their game plan together if they need guidance or assistance,” said Standridge.

Go to arconductor.org to set up a session.