What is Celebrity Endorsement (CE)?
It is a channel of brand communications in which a famous person acts as a brand's spokesperson and certifies the brand's claim by extending his status in the society to the brand. Some advertisers refer to CE as "borrowed equity". In short a company using a famous person's popularity or likeability to rub on a product or service. Once signed on, a brand becomes hostage to a celebrity's image.
CE is big business that can establish the success of a brand or damage it. A colossal $50 billion is spent annually on CEs and corporate sponsorships, according to marketing research outfit Celebrity DBI.
Before a firm chooses a famous person to endorse its brand, many factors must be looked at to ensure maximum benefit is derived. Firstly every brand has a unique unseen 'personality'. Every product or service has a perceived image in the mind of customers so marketers must find a celebrity who appropriately fits the image of the brand. The celebrity must also be popular with the brand's target market to attract more customers. The celebrity's attractiveness, expertise and trustworthiness must all be considered.
Successful Brand Endorsers
One of the most successful of all time is former basketball player Michael Jordan's endorsement for Nike. Although he is now retired, Jordan reportedly still earns $80 million yearly from the deal. Since Nike signed on Tiger Woods as celebrity endorser for its golf products, Nike grosses $250 million in annual sales. PSG British footballer David Beckham is the wealthiest soccer player in the world. He currently earns about $43.1million a year from sponsorship deals with Adidas, Samsung, and Sainsbury's. He earns more from sponsorships than on the field.
Consumer Reactions to Celebrity Scandals
When celebrities misconduct themselves, there is normally 3 reactions from the sponsoring company: stop the adverts, wait for the contract to end then refusal to renew it, or cancel the contract.
US based market research firm IPSOS MORI conducted a poll of 18,000 consumers worldwide on their purchase opinions after a company removes a celebrity for bad behaviour. 27% said they will stop buying a product or patronising a service completely. Of those who completely stopped buying a product, half of them said it was only a temporary measure. These temporary people said they resumed buying the product after sometime once the scandal died down.
This temporary boycott the research suggests pre-supposes that negative reactions to a scandal involving a celebrity is deceptive, and has less impact on a product purchases than might first seem. Additionally reactions to celebrity misdeeds vary based on a consumer's own set of values and the cultural tolerance/values of the society in which the act occurred.
It was further revealed that companies whose major markets are based in traditionally conservative countries like China, India, Saudi Arabia and in Africa must pay particular attention to the reactions of their customers. In these markets even if a scandal does not affect immediate purchase behaviour, there could be long-term image and credibility issues.
British consumers are however more forgiving of celebrity bad behaviour (only 6% were likely to stop purchases), probably because they have grown used to them. A few years ago, British supermodel Kate Moss was dropped by her sponsors H&M, Burberry and Chanel after photos appeared of her sniffing cocaine. After the scandal died down fashion brand 'Topshop' signed Kate on to front their new clothing line. 14 collections of the clothing line have been launched and such was the success that the Daily Mail tabloid reported that the cocaine scandal actually doubled Kate's income.
Advantages of CE
Famous people positively affect consumer feelings and in turn buying behaviour. Adverts featuring celebrities can increase brand sales by 20%, according to a 2000 research by Harvard Business School. Profits at Walker's crisps soared by 105% after the company enlisted former England football captain Gary Lineker to front its advert campaigns. Nike has continued to be a market leader in part due to its aggressive use of sports celebrities.
Brand ambassadors are most effective in sustaining recollection of an advert and the brand name. Research indicates that customers are more likely to choose a brand endorsed by a celebrity than those without one. CE can serve as signboards to a product's quality and also motivate consumers to buy.
Disadvantages of CE
Negative publicity of a celebrity can lead to a drop in sales. When Nike first introduced the 'Air Jordan' brand of footwear, it grossed $160million sales in the first year. In the 2nd year Jordan got injured and missed 62 basketball games and sales of the footwear fell sharply and considerably, proving that a brand can become hostage to a celebrity's image. In China movie superstar Jackie Chan featured in an anti-baldness shampoo advert. After sometime rumours emerged that the shampoo had cancer-causing ingredients. These rumours led to the company's stock price to fall and the company ended up with solvency issues.
Some celebrities are superstars and when they are used in adverts, they can overshadow a brand. How many times haven't consumers watched and enjoyed an advert and remember the celebrity who featured in it but not remember the product?
Another problem with celebrity endorsement is over-exposure of celebrities. Some celebrities endorse too many products/services and this causes confusion in the minds of consumers. This confusion raises source credibility issues. In China movie superstar Jackie Chan has featured in more than 20 adverts ranging from cars, soft drinks, washing powder, cameras, air conditioners and even hair shampoo! Because consumers assume that by endorsing a product, the celebrity has some 'expertise' or knowledge about it, if a celebrity features in too many adverts as diverse as shampoo and air-conditioners; it creates doubts in the minds of consumers about the advert.
Lastly CEs are expensive and normally beyond the reach of small and Medium scale companies.
Firm Reaction's to Celebrity Scandals
Whiles many companies instantly cut ties, others stick. Why so? After the Tiger Wood's affair in 2009 Nike stuck and supported him even after 6 others withdrew their sponsorship. Nike did so apparently because its golf line of products were started with and built around Woods so withdrawing from him was too great a cost. Some companies will not like to be perceived as kicking someone when they are down. So they will rather support them hoping things will turn out for the better.
Some companies also stick with a celebrity in times of trouble because to these firms, all publicity is good publicity no what a celebrity has done wrong.
Disgrace Insurance & Reverse Morality Clause
Due to the uncertainty and risks associated with engaging celebrities as brand ambassadors, some innovative insurance companies in the US and UK have come up with "Disgrace Insurance" policies. These are policies that seek to protect firms against lost revenue/business arising from celebrity scandals. These policies don't protect the perception of the brand, but only the money spent on the celebrity to endorse the brand. These policies are however expensive.
Some smart corporate lawyers these days also insert what is called "Reverse Morality" clauses into CE contracts to protect their celebrity clients. These are clauses where if a company engages a celebrity as a brand ambassador and the company itself is engulfed in a corporate scandal, the celebrity can sue the company to claim compensation for damage done to the celebrity's image. In other words the celebrity has reciprocal or equal rights under the CE contract. Examples of company scandals include a firm engaging in accounting fraud, using child labour in their supply chain, using exploitative labour practices at their supply factories, or even company executives making offensive public remarks.
Do Ghanaian and African celebrities have Reverse Morality clauses in their CE contracts? I doubt it.
CE can be very successful for business but their very nature means if they are not properly handled, it could become a minefield.