The corporate risks of influencer marketing and how to mitigate them

Social media influencers provide companies with new ways to bring their products to the attention of consumers. Businesses are regularly told of the positives of working with influencers to build their brand and drive consumer engagement – and plenty of advice is available about how to make the most of the opportunities.

But what if it all goes wrong? How can companies limit their exposure to risk and manage the fallout if things don’t turn out as planned? Our research into a high-profile scandal involving a well-known brand and an Italian influencer can help businesses answer these questions.

Celebrity endorsement and influencer collaborations – what’s the difference?

Working with an influencer creates a very different relationship to standard celebrity sponsorship or endorsement (where a well-known figure fronts a company’s marketing campaign) – and that’s where companies can be open to greater financial or reputational risk.

In marketing campaigns involving celebrity endorsement, the company remains in control. It chooses the message, the channels and the timing. Any issue with the claims made in the campaign or with the product is clearly the responsibility of the company. However, if the celebrity is involved in a scandal outside the campaign, due to personal misconduct, it is not connected to the product.

In influencer collaborations, the company relinquishes control. It does not own the channel and may only have minimal input on timing. Crucially, the content is either co-created or created solely by the influencer. Despite this, the company is closely identified with this content through their product.

If the content and claims for the product or campaign are later found to be misleading, then the company risks being seen as equally responsible.

One example is when Kim Kardashian partnered with Duchesney to promote Diclegis, a medication for pregnancy-related nausea, during her own pregnancy. Kardashian’s posts failed to disclose the required safety information. The US Food & Drug Administration issued a warning to both Duchesnay and Kardashian for violating transparency regulations.

In cases like this, where both the influencer and the company are deemed at fault, we were interested in how the public would react. Dishonesty is a serious breach of trust with the consumer and usually evokes a strong backlash from both the public and the media. Our research found that this was particularly fierce where influencers were implicated, as consumers identify with them as individuals and so feel the betrayal more keenly.

The case of the cake – an example from Italy

Chiara Ferragni is an Italian influencer who began her fashion blog in 2009. She built this into a multi-million-dollar business, collaborating with many high-profile brands. In 2022, she partnered with Italian food company Balocco to promote a special edition pandoro, a traditional Italian Christmas cake, which is sold exclusively in November and December.

Ferragni promised that a share of the revenue would be given to a hospital charity. This was subsequently investigated by the Italian authorities and found to be untrue. While Balocco had made an upfront donation at the start of the campaign, no further funds had been paid.

Both the company and influencer were given substantial fines for misleading content and unfair business conduct. Ferragni was also prosecuted for aggravated fraud, though not convicted. The scandal – which became known as Pandorogate – was afforded widespread media attention and generated substantial activity on social media throughout Italy.

Our analysis of tweets by journalists and members of the public during the scandal showed that most of their attention and anger were focused on Ferragni, rather than Balocco. We also surveyed groups of consumers about hypothetical influencer/ company scandals and found that this response – blaming the influencer rather than the company - held true irrespective of the size, financial clout and prominence of the company or influencer involved.

Consumers appear to judge influencers more harshly than companies in any scandal. We found their attitudes are influenced and reinforced by the media coverage, which also focuses predominantly on the influencers. When we surveyed journalists on the issue, they told us that they choose stories that focus on individuals, rather than organisations, as these resonate more with their readers.

However, we found that journalists will also respond more positively to influencers who were willing to be interviewed by media outlets that had previously given them negative coverage. This helped to change consumer attitudes as well. Making statements on influencers’ own channels, or purely talking to supportive outlets, proved less effective at mitigating any potential damage to their reputation. This finding offers an important lesson for companies as well.

There is a lot at stake for any influencer involved in a collaboration that results in a breach of trust with consumers, even when the company is at fault. While companies can suffer financial and reputational harm, for influencers, the impact is directly on them as individuals. They are likely to see a drop in the value of their personal brand, loss of credibility and damage to their long-term career prospects. For some, the damage may be irreversible.

How can influencers mitigate the risk from corporate partnerships?

1. Make sure you choose the right partner: Influencers need to evaluate potential partnerships carefully, ensuring shared values and shared accountability and transparency.
2. Be prepared for the media spotlight: Know that if something goes wrong, you could be made a scapegoat by the public and the media, whether or not you’re wholly or partially responsible.
3. Have a media strategy in place to mitigate the backlash: This should not rest purely on statements you make on your own channels, but involve going proactively out to speak to journalists, including those who have written about you negatively. In doing that, you’ll gain respect and more positive coverage.

How can companies manage relationships with influencers?

1. Choose your collaborators carefully. Ensure that you associate yourself with influencers who do not have a history of misleading consumers, even unintentionally.
2. Be prepared to establish a relationship that ensures shared accountability and transparency. Consider your duty of care to the influencer involved – they may be at greater risk than you for financial and reputational damage.
3. Cultivate good relationships with key journalists and media outlets for when you need it most. The media and public’s attention is likely to be initially on the influencer - use this time to prepare a measured, thoughtful response.
4. Be aware that your prominence, size and financial clout will not shield you (although it is unlikely to open you up to harsher judgement either).
5. Be proactive; don’t just take cover. When you’re ready, gain control of reputational narratives. Take the initiative to journalists – hostile ones included – and be active and responsive on social media.