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Abstract: The persistent growth of social media platforms has allowed their users to view them as valuable information sources and firms to adopt them as effective marketing tools. Firms often seek to advertise their products through intermediaries called ``influencers'' who are viewed as less biased than the firms themselves in the advice they give. Another considerably unbiased source of information is reviews of past consumers. In this paper, we address some of the firm's challenges of influencer marketing and the effect of consumer reviews on the marketing decisions. We consider different types of influencers and different partnership schemes with them. First, we show that it is optimal for a firm to partner with a single influencer type through a single type of partnership when customers are equally likely to follow the same influencer. Second, we show that firms should advertise more in the presence of social learning. Third, we consider a society split into classes such that individuals are more likely to follow influencers from their class. We show that a diverse mix of marketing channels, in terms of the types of influencers or partnerships, may be optimal when the one influencer class has a more concentrated follower base than the other.

Keywords: influencer marketing; social learning; product diffusion

JEL-codes: M30

51 pages, March 28, 2022

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