Download 2. The Power of Celebrity Endorsements Today

The Power of Celebrity
Endorsements Today
Upekha Makumbura
July 2015
Celebrity endorsement is a time-honoured strategy for drawing attention to
a brand. Over the years, this practice has come a long way, with significant
shifts in both the advertising and celebrity worlds opening up a range of new
possibilities. Our latest whitepaper titled The Power of Celebrity
Endorsement Today, explores the state of celebrity endorsement including
its benefits and the risks involved when things go wrong.
Introduction
Celebrity endorsement is a time-honoured strategy for drawing attention to
a brand. More than 250 years ago, the English pottery company Wedgwood
was exploiting its links with royalty to give its products a “feeling of quality”
(Gupta and Verma, 2013). The practice of celebrity endorsements has come a
long way since then, with significant shifts in both the advertising and
celebrity worlds opening up a range of new possibilities. This whitepaper
explores the state of celebrity endorsement today, including its benefits and
the risks involved when things go wrong.
Celebrity endorsements today
The celebrity endorsement model is essentially simple: a person with high
visibility (or ‘fame’) features in a campaign in order to draw attention to the
product or service it is promoting. The idea behind this is that positive brand
qualities, such as likability, reliability and attractiveness, are transferable
between the brand of the celebrity and the brand they are advertising, and
will therefore generate desirable campaign outcomes (Khandai and Agrawal,
2010).
A celebrity endorsement was traditionally a longterm contract between the
celebrity and the company to promote a brand, product or service through
adverts, campaigns, and appearances.
However, technological advances have enabled this practice to expand: a
celebrity endorsement can now range from being a spokesperson or model
for the product, to simply mentioning it on social media. Euromonitor
International lists the key types of celebrity endorsement used today:
Types
Examples
Brand empires
Oprah Winfey, Jamie Oliver
Licensing name
George Foreman grills, Ainsley Harriott foods
Brand ambassadors
Tiger Woods – Nike, Beyoncé – Pepsi
Celebrity-branded
products
Lady Gaga Fame Eau de Parfum – Fragrance, Beats by
Dr Dre – Headphones
Brand collaboration
Sean Combs – Diageo, Rihanna – River Island & MAC
Cosmetics
Assuming a company
title
Jay-Z – Co brand director of Budweiser Select, Alicia
Keys – Global creative director for Blackberry
Endorsing products on
Kim Kardashian, Justin Bieber
social media
Lending celebrity
voices
Kevin Hart – Waze, Billy Murray – Call of Duty
Promoting charitable
causes
Angelina Jolie & Brad Pitt - Maddox Jolie-Pitt
Foundation, Elton John - Elton John AIDS Foundation
Table 1: Types of celebrity endorsements (Euromonitor International, 2014)
The perks of implementing celebrity endorsements today
While celebrity endorsements have not lost the original pulling power that
Wedgwood was exploiting all those years ago, developments in both
celebrity culture and marketing have created new opportunities.
Marketing to millennials
Currently in the USA, millennials make up 21% of consumer discretionary
purchases, with an estimated excess of a trillion dollars in direct buying
power and huge influence on older generations (Millennial Marketing, 2015).
Hence, millennials (commonly defined as those born roughly between the
early 1980s and the early 2000s) are a crucial market for many companies.
This age group are known to value innovation and participation in
marketing, leading companies to constantly look for new and smarter ways
to reach them. Celebrity endorsements have been shown to be an effective
method for reaching this market.
Studies have found that millennials get just as star stuck as other
generations. When Jimmy Fallon and Justin Timberlake appeared in an advert
for the Apple iPhone 6, the advert gained 2 million views on YouTube within
mere hours of its launch (Business Insider, 2014). This is because millennials
particularly identify with celebrities who share their outlook (Ad Week, 2013).
Both Fallon and Timberlake are known for their grounded personalities and
sense of humour. As Vision Critical points out, shows like Jimmy Fallon’s are
widely watched by millennials, who also engage with him through
commenting and sharing (Vision Critical, 2013).
Figure 1: Apple advertisement (Business Insider, 2014)
Using social media
Another major advancement in celebrity endorsement has come from social
media. Celebrities have become key players on platforms including
Facebook, Twitter and Snapchat. Of course, this provides immense scope for
promoting brands through endorsements on social media sites.
Patti Williams, professor of marketing at the University of Pennsylvania, told
Wharton University (2013): “Traditionally, a celebrity would agree to be in an
advertisement, and that was essentially the extent of the relationship. Now,
celebrities are encouraged to engage with the [firm’s] customers in other
ways. This could be through the company’s own media or through the
celebrity’s own media, like a Twitter or Facebook [account]”.
It comes as no surprise, then, that a celebrity can be paid just for a single
tweet, since according to a report by Nielsen (2012), internet users spend
more time on social networks than any other category of websites. The
report found that 20% of people’s time on computers was devoted to social
channels, and 30% of their mobile time went to social networks.
According to The Brand Agent (2014), Celebrity fees for paid tweets are
based on several factors including the number of tweets, the celebrity
brand’s pre-existing relationship with the brand being promoted, and
whether an exclusivity agreement was required. In 2014, non-exclusive fees
per tweet ranged between $1,500 and $35,000 depending on the status of
the celebrity. The inclusion of an exclusivity agreement led to an increase in
fees.
Figure 2: A tweet by Justin Bieber (Twitter, 2015)
Each of these methods has various metrics that marketers can monitor.
However, only a few of these provide actionable information.
The impact of a tweet is short-lived, and measuring its impact on company
sales is difficult to track; however, celebrity tweets do improve brand
awareness. Internships.com got more than 95,000 hits in the first hour after
Charlie Sheen tweeted about it, even though he was in the process of being
fired from his sitcom (Daily Mail, 2011). This also shows that, for such short
term endorsement deals, the celebrity need not have a squeaky clean
reputation - especially when they are making headlines.
Figure 3: Response to Charlie Sheen’s tweet (Twitter, 2015)
Getting heard over the ever-increasing marketing noise
As the number and range of marketing platforms increase, and the attention
spans of consumers shorten, gaining an audience for your marketing
message is becoming an ever harder task. Consumers receive more than
3000 commercial images a day, among which their subconscious will absorb
more than 150 images with roughly 30 reaching the conscious mind
(Advertising Age, 2010). Conversely, recent studies of hundreds of
endorsements have indicated that sales for some brands increased up to 20%
upon commencing an endorsement deal. Anita Elberse, associate professor
at Harvard Business School, and Jeroen Verleun state that some companies
have seen their stock increase by 0.25% on the day a particularly promising
deal is announced (Elberse and Verleun, 2011). Seeing a familiar face - such
as a celebrity - endorsing the product has been shown to catch a consumer’s
attention.
Small businesses can now afford celebrity endorsements
There have never been more celebrities than there are at the present
moment. With reality show contestants, internet personalities, athletes and
socialites swelling the ranks that were once reserved for musicians and
movie stars, companies looking for a celebrity endorsement now have a wide
range to choose from. This also means that while some celebrities can still
charge astronomical fees, others are within reach of even small businesses.
Celebrities fall into different categories according to their brand power, and
each category has its own pricing structure. Evan Morgenstein, President &
CEO of CelebExperts, a company that helps businesses of all sizes secure the
right celebrity spokespeople, states: “as a rule of thumb, if a person’s fame
has no way to sustain itself (like a reality TV contestant on a show like
Survivor), you can expect fees to start at $5,000 while a celebrity from Iron
Chef America may command $100,000 or more for the same marketing
program” (Forbes, 2013).
According to Morgenstein, nearly 60% of CelebExpert’s clients are “from
emerging, start-up, or non-industry leading companies, brands and
products.” Attaching a celebrity to your brand is no longer the preserve of
high-powered multinationals, but affordable and achievable, as well as
potentially highly lucrative. The key is understanding the business’ needs
and budget in order to match the right celebrity.
The challenges of implementing celebrity endorsements today
The great potential advantages of celebrity endorsement also entail
proportionate risks, however. Choosing the wrong celebrity for the brand;
problems with the contract between the company and the celebrity; the
behaviour of the celebrity once they are linked to the brand; and even the
increasing visibility of the celebrity can all lead to a brand losing money.
In many instances, if the celebrity endorser’s popularity increases then this
has a positive effect on the brand they are promoting. However, it is possible
for brands to suffer from a steep increase in their endorser’s fame as well.
In 2010, Angelina Jolie was nearing her peak as one of the most recognisable
celebrities in the world, gaining attention not only for her acting work, but
her personal life and charitable initiatives. However, that year she was also
dropped by U.S. luxury knitwear brand St. John, with the clothing company’s
chief executive Glenn McMahon telling Reuters (2010) that she
"overshadowed the brand”.
According to Cynthia Webster and Jasmina Ilicic, when consumers see a
celebrity promoting several products, they start seeing only the celebrity and
ignoring the brand - the celebrity ‘eclipses’ the brand they are meant to be
drawing attention to (Webster and Ilicic, 2014). To avoid this, the next St.
John campaign featured the established model, and lesser-known celebrity,
Karen Elson.
Figure 4: Starring in St. John’s adverts; left: Angelina Jolie, right: Karen Elson (Google
Images, 2015)
A celebrity endorser can also overshadow their brand by taking on too many
endorsement deals. The FrogDog (2013) website considers David Beckham
an example of this. The star promotes a wide range of products, from soft
drinks to shoes, in adverts that consistently make his image their focal point.
The effect of this is that viewers tend to remember that they’ve seen David
Beckham, and not remember which product he was endorsing. Apart from
not drawing attention to the product, this can even devalue it.
Figure 5: David Beckham’s celebrity endorsements (Google Images, 2015)
According to Webster and Ilicic, consumers who do not identify strongly with
the celebrity endorser also report a more positive brand attitude when the
brand shares focus with the celebrity (‘low eclipsing’) than when the celebrity
overshadows and dominates the brand (‘high eclipsing’).
There is also the risk that a celebrity can even damage a brand’s reputation.
As the positive appearance of a celebrity can be transferred, so a negative
appearance can reflect poorly, to the degree that a brand may have to back
out of a deal even if that means losing their financial investment.
When Nike partnered with Olympian “blade runner” Oscar Pistorius in 2012,
it seemed like a perfect match. However on Valentine’s Day of the next year,
Pistorius was arrested for the murder of his girlfriend. Nike immediately
withdrew its ad campaign, which ironically bore the tagline ‘I am the bullet in
the chamber’. By distancing itself quickly from its celebrity endorser, Nike
avoided a negative backlash; however it did lose the money it had invested in
the endorsement deal.
Figure 6: Oscar Pistorius’s Nike endorsement (Advertising Age, 2013)
Having a backup plan for if the deal goes awry
Everyone makes mistakes. If a company decides to align their reputation with
that of a celebrity, it will need a strategy for if that relationship becomes
problematic. Even a minor blunder can be fatal to a contract, as Brazilian
footballer Ronaldinho found when he was laid off from his Coca Cola
sponsorship deal simply for appearing with a can of Pepsi during a press
conference (The Drum, 2012).
Figure 7: Ronaldinho during the Press Conference (The Drum, 2012)
When an endorser makes a mistake, there are essentially three responses a
company can make:

Dropping the endorser
This can be considered the safe move, especially if the celebrity’s actions
have caused outrage to the degree that consumers are calling on the
company to take action. When swimming gold medallist Michael Phelps was
caught in a marijuana scandal, Kellogg’s ended his endorsement deal stating
that "Michael's most recent behaviour is not consistent with the image of
Kellogg” (Brand Republic, 2009).
However, backing away from partners as soon as they get into difficulties
can reflect poorly on a brand. According to Business Insider, Kellogg’s
decision may have even done them more harm than good, as the graph
below indicates:
CTA
Figure 8: Kellogg’s Reputation performance (Business Insider, 2009)
While the Vanno company reputation index provides data which should only
be read as directional, Kellogg’s decline in reputation suggest show a
marked relationship with its decision not to stand by its celebrity endorser.
In cases where a celebrity has a longstanding relationship with a particular
brand, product or service, especially if this relationship has been in place
from the start, it can be even more damaging to break the ties.

Remaining with the endorser
Even though a celebrity scandal can immediately tarnish any brands he or
she is associated with, there is evidence that widespread outrage is often
short-lived. Although in serious cases, such as Pistorius’, there may be no
way back into popular esteem, for the majority of misdemeanours the public
will quickly forgive and forget.
BAV Consulting’s research shows that when Speedo remained by Phelps
through his scandal, having weathered a brief dip, the brand actually saw an
improvement in public perception over the long term. According to the LA
Times, Subway even exploited the surge in publicity caused by the scandal in
its advert with Phelps titled “Be Yourself”.

Replacing the endorser
This is a tricky strategy to implement, mainly because of the nature of
celebrity endorsement. Since the brand and the celebrity are intended to be
explicitly linked in the mind of the consumer, replacing the celebrity will
cause disruption to the image of the brand.
“It’s hard for a company to overcome negative hits to its brand based on a
celebrity spokesperson campaign gone wrong,” warns Morgenstein. “Jumping
into another endorsement deal with a different celebrity is unlikely to help
the company” (Forbes, 2013).
When facing a crisis in its celebrity endorsement deal, a company needs to
consider the potential short and longterm effects of the scandal on the
celebrity’s reputation, and how these will affect the endorsement
relationship and impact on the company itself.
Conclusion
While celebrity endorsements were once assumed to be longstanding
agreements, changes in celebrity culture have forced both sides to become
more flexible in their approach. While there have never been so many
celebrities, developments in digital media and news sharing have meant they
have also never had so little control over their public images. For companies
seeking endorsements to promote their brands, this has meant having to
approach deals cautiously in order to avoid losing money and reputation.
It can also be argued that a company’s money is better spent investing in its
own equity than what Bloomberg Business (2008) calls "borrowed equity".
The argument is that a celebrity’s attributes can transfer to a product while
the endorsement exists, but as soon as the relationship ends that connection
is gone.
On the other hand, such borrowed equity can provide the boost a company
needs to kickstart the launch, relaunch, or repositioning of its product,
helping it to enter the market with immediate brand value.
Added to this, the rise of social media in particular has created a vastly
improved scope for celebrity endorsement tactics, with strategies such as
tweeting providing effective and affordable solutions. Scandal can even help
to promote such tactics, balancing the risks for the company of their
celebrity misbehaving. All in all, this is an exciting time for celebrity
endorsement.
Methodology
This white paper is written with the support of various research and blog
articles, expert opinions from marketers from the London School of
Marketing, and the real life marketing performance examples of the LSM
marketing team.
About the Organisation
London School of Marketing delivers accredited marketing and business
qualifications, and offers courses from recognised professional bodies such
as CIM, ABP, BA (Hons) in Marketing, MA in Marketing and Innovation, and an
MBA from Anglia Ruskin University. Based in Central London, it is a QAA
approved institution. The school also has offices in Sri Lanka, a network of
Local Access Points (LAPs) and online programmes of learning. Courses are
run over a broad range of study modes. Further details are available at:
http://www.londonschoolofmarketing.com
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