Selling through social media influencers in influencer marketing: participation-based contract versus sales-based contract

With the rise of social media, social media platforms such as Instagram, TikTok, YouTube, and Twitter have been the venues to promote products in the era of digitalization. We develop game-theoretical models to investigate the impacts of the participation-based contract (PBC) and sales-based contract (SBC) on the sales of new experience products that are promoted through social media influencers (hereafter referred to as influencers). We find that both the firm and influencers can achieve a win-win outcome with the use of the SBC (PBC) if product quality is sufficiently low (high), but they cannot reach a consensus on using the same contract when selling the products that fall into a moderate range. Moreover, with the increased network overlapping effect, that is, endorsed influencers comprise a group with a larger number of similar followers, both the firm and influencers are more (less) likely to use the SBC (PBC); a stronger followership traffic effect, quantified by the number of followers, may cause difficulty in alignment of interests in influencer marketing contracting. Results provide managerial insights into designing product quality-based and influencer attributes-based influencer marketing contracts.