Our Future: The Nano Influencer Economy

Over the next ten years, the U.S. economy will experience the largest transformation in history.

While the undercurrents of change are supported visibly by big technology, evolving government regulation, and global health crises, our economy’s new raison d’etre lives much closer to home: baby boomers will pass $30 trillion onto the next generation by 2030. And though millennials today own just 3 percent of the nation’s wealth, PNC Financial estimates they’ll collectively inherit $59 trillion by the time they’re as old as their parents are now. The powerhouse consumer brands of tomorrow will recognize not only shifting purchasing power but markedly different behaviors across all channels of distribution.

New Frontiers in Digital

Case in point—millennials are twice as likely to be influenced to purchase a product because of social media than boomers. Word-of-mouth remains the most powerful source of truth for all consumers, 80 percent of whom purchase particular products or brands based on recommendations from people that they know. Millennials are still having these conversations and giving these recommendations, but their greater trust in social media signals that said conversations and recommendations happen online.

The influence of everyday people underscores everything we do in the world of direct selling. What we’ve learned over the last 100 years of consumer to consumer commerce is only corroborated by digital retail. For example, referral web traffic converts to revenue at twice the rate of paid and organic search. In short, people buy from people they know.

For us experts in the world of what’s now being called nano-influencing (the online pattern of recommendation to purchase between everyday people that happens through social media), this power of relationships isn’t new news. It’s just happening online instead of in person; despite virtually no in-person influencing last year, many of the company’s clients shattered revenue records through their influencer e-commerce channels. The larger world of retail e-commerce, then, needs what we have: The power of everyday people.

Status Quo is Stagnating

Successful direct-to-consumer brands like Purple, Allbirds, and Dollar Shave Club proved early in the e-commerce age that brands no longer needed an in-person buying experience to be viable. And as artificial intelligence, machine learning, and the promise of a blockchain-backed future make headlines, e-commerce revenue continues to grow at a breakneck pace—but despite our best algorithmic efforts and technological advances behind the scenes, consumers remain less sticky when shopping online. Cart abandonment rates are high, conversion rates are low, and price switching is rampant.

The new social commerce economy, and nano-influencing in particular, eliminates many of those brand-weakening, price-switching moments. When a consumer purchases on a recommendation from a real-life human, the purchase funnel is shorter, effectively harnessing the existing trust and relationship to increase the conversion rate.

To differentiate from behemoth competitors like Amazon and Walmart, retail e-commerce brands need a more personal shopping experience. Many brands have found success with micro-influencers, defined by an engaged social media account with less than 100,000 followers. These folks typically have a more niche following, so brands can more reasonably predict the interest of an influencer’s followers in an effort to increase engagement. For example, a cosmetics brand would much more likely partner with a young female micro-influencer than a male athlete micro-influencer, knowing that the followers of the former are far more likely to be interested in cosmetics than the followers of the latter. But managing these relationships takes significant time for a brand, and their engagement rates still fall far from those of the everyday person.

When it comes to social commerce, it’s about the quality of followers more than the number you have. And as it stands today, this new breed of nano-influencers has by far the best relationships with their followers. This shouldn’t come as a surprise given that most of the folks under the definition of “nano-influencer” are everyday people with hundreds, rather than thousands, of followers who interact with their established circle of family and friends rather than strangers that have found them online. They’re typically more authentic and provide much more personalized attention to every interaction on their accounts. These relationships fill in the gap where it fails with larger influencers, and it’s indicative of the larger problem with retail e-commerce: a lack of personal connection. Successful companies in the future of retail, then, must strike the balance between modern digital and people-based marketing.

In fact, the rise of social commerce shows us that shopping is (and always has been) an inherently social experience. Social commerce sales are on the rise even in spite of a drop-off in in-person shopping. Ultimately, conversations about brands and products are still happening—in fact, they’re happening more often than ever before with social media, and customers prefer to make loyalty purchases online rather than in-store (which opens is an entirely different conversation about loyalty and long-term customer value).

The Future of Work is Evolving

The rise of the gig economy, too, signals the legitimacy of social commerce where nano-influencers are compensated for their recommendations. Multiple streams of income through mediums like Uber, Lyft, and Airbnb are the new norm, particularly amongst the ever-important millennial demographic and their younger counterparts in Gen Z. Simply put, our nano-influencing workforce is waiting in the wings.

Here, what we’ve learned about personal connection from seller to brand in the world of direct selling is crucial. Some of that comes from the money folks make as an independent seller, but it’s important as we enter the broader world of influencers to emphasize the way that products authentically fit in those influencers’ lives. Effective influencing is authentic and personal—it doesn’t work when it’s not.

Tech investors at Adreesen Horowitz (the cash behind the early years of Facebook, Twitter, and Stripe) dub this new kind of opportunity “monetizing individuality. ” When you combine an individual’s niche interests with their existing personal network, you’ve effectively harnessed the same niche targeting of a micro-influencer while giving end customers one-to-one attention provided by an immensely scalable network of everyday people.

The Role of Direct Selling

The last ten years have taught us that starting a business in the digital age is easy. In the next ten years, however, the brands that grow at scale will employ a human-first touch augmented by the power of technology. What we have learned about that human touch in the last 100 years of direct selling will play a pivotal role in the success of the emerging nano-influencer economy.

First, start with products that inspire people. Iconic brands in our industry have been successful because their products created a meaningful and often emotional improvement to customers’ lives.

Next, learn to tell your brand story through the eyes (and mouth) of your best customers. Nano-influencers have deep, 1:1 connection with their online followers because of offline relationships, and their ability to tell a personal brand story holds power.

Finally, give nano-influencers incentive to tell your story. Brand loyalty builds when the exchange of value is a two-way street; here, both the brand and its nano-influencers have skin in the game when nano-influencers are financially motivated.

Above all, know that the power of people wins in the digital economy. Success will come at the nexus of personal relationships, great products, and scalable technology.

Rodger Smith is the CEO of DirectScale. He brings his experience in direct selling together with his passion for technology at DirectScale headquarters in Orem, Utah.