Celebrities have been walking off the movie set and the sports field to help promote brands for decades. Dr Ravi Pappu of UQ Business School argues that research now shows there are measurable benefits in brand credibility to linking your name to a rising star.
George Clooney, dark and broody, clutches a cup of Nespresso in his hand. A barefoot and casual Angelina Jolie is pictured reclining on a wooden boat in Cambodia, a Louis Vuitton bag draped over her shoulder. Nicole Kidman is pretty in pale pink in her Omega watch while tennis star Maria Sharapova earnestly clutches a TAG Heuer.
Celebrities have been walking off the movie set and the sporting field to help promote brands for decades – from Ronald Reagan selling Chesterfield cigarettes to tennis champion John Newcombe endorsing Queensland bananas.
One-in-four advertisements feature a celebrity. In 2003, Nike spent $1.44 billion on celebrity endorsements, while between two and three billion dollars were spent on celebrity advertising in 2006 in the United States.
While marketing managers long had to rely on their intuition that celebrities bring sparkle to their brands, an increasing body of research now shows there are measurable benefits in hiring a star – from helping people to better recognise a brand name to creating positive attitudes.
Research conducted by Ravi Pappu, Senior Lecturer in Marketing at UQ Business School, shows that not only can celebrity endorsement create a positive impact on a brand’s credibility, but it can also actually increase the value of a brand.
“We knew for some time that fit between the celebrity and the brand is important, for the consumer to think better of both of them,” he says. “However, not much is known regarding how the celebrities affect the brand value or brand equity”.
Companies know full well the power of brand value, which is basically the extent to which it can sell its wares at a premium price. To develop a brand name like Nike or Toyota takes years, and a lot of money. Pappu says that some estimates put the cost of launching a successful global brand today at close to US $500 million.
To assess brand value, Aswath Damodaran, Professor of Finance at New York University’s Stern School of Business, compared two companies: Coca-Cola and Cott, makers of RC Cola. “Soda is water with a bunch of sugar and a lot of crap thrown in. You can put whatever you want on the outside of the can, but there is really no difference between one cola and another cola,” he said.
Damodaran valued Coca-Cola’s business at $79.6 billion, while the value of Cott was limited to $15.4 billion. To figure this out, he subtracted Cott’s value from Coca-Cola’s value, arriving at a $64.2 billion total worth for Coke’s brand alone. That’s about 80% of the company’s value.
Pappu’s research, conducted in collaboration with research student Amanda Spry, took place at malls in Australia, where shoppers were asked to look at print advertisements featuring images of different celebrities promoting consumer electronics products. Rove McManus, for example, was considered to have “high credibility”, while former “Big Brother” contestant Simon Deering was considered to have “low credibility”. The results showed that the more credibility the celebrity had, the more credible and trustworthy the brand appeared.
“It is a challenging task for brand managers to try and work out how to enhance brand value, particularly when it comes to endorsement – the selection of the right celebrity can actually make a significant difference in how much the brand is enhanced,” says Pappu. “My advice is to choose a celebrity who is seen as credible, based on their trustworthiness and expertise in the product category, for improving consumer trust in the brand and the brand value. But interestingly, the studies in the mall showed that even celebrities with low credibility were able to build the brand.”
But does this translate into financial gain? Research found that Tiger Woods’ endorsement of Nike for 10 years saw their golf division reap an additional profit of $60 million through gaining an estimated 4.5 million customers. It also showed that by Woods moving away from Titleist in 2000 the company lost just over 8% in profit. Woods’ sex scandals had some impact, with Nike taking a profit hit of an estimated $1.3 million. Meanwhile, Korean celebrity Yong-joon Bae is said to be one of the major impetuses of recent increase in Japanese tourists to Korea.
Celebrities have also had long associations with not-for-profit organisations.
Delta Goodrem adds personal experience to her impact as the patron of the newly opened Kinghorn Cancer Centre, a joint facility by the Garvan Institute and St Vincent’s Hospital to realise the promise of personalised medicine for Australians diagnosed with cancer. Delta was successfully treated at St Vincent’s for Hodgkin’s Lymphoma at 18. Gotye donated the use of his song “Eyes Wide Open” to World Vision’s annual 40 Hour Famine campaign, while Cate Blanchett is a patron for SolarAid, a charity that promotes solar energy to help reduce poverty and climate change. The feel-good factor can work both ways – in September 2011, rapper 50 Cent launched energy shot drink SK (Street King) in a combined initiative with the United Nations World Food Program (WFP).
The deal was put together by Australian entrepreneur Chris Clarke, whose company Pure Growth Partners promises “each of our companies will give back to the world’s neediest with the help of every consumer purchase.” For SK energy shots, 10 US cents of each drink sold will go directly to WFP. For 50 Cent, a celebrity known for his gansta style rap, for getting shot, selling drugs and questionable gender politics, it’s an opportunity to reveal another dimension to his persona.
In a separate study, funded by the Australian Research Council and the Australian Red Cross Blood Service, Dr Pappu and Professor Bettina Cornwell of the University of Oregon examined how celebrity endorsement influences non-profit brands.
STAR QUALITY FOR YOUR BRAND
Devise a strategy – who do you want, why and which of the celebrity’s values do you believe will lend credibility to your brand?
- Devise a strategy – who do you want, why and which of the celebrity’s values do you believe will lend credibility to your brand?
- Pick carefully – a name that carries weight with the consumers you are targeting may be better than a ‘big’ name.
- Once you get the endorsement, make the most of it. Use social media to share a quote, a photo, footage, etc.
- Celebrities have agents. Getting them onside will count in your favour.
- Remember, brand is largely illusion – it’s the perceived link between a value and your product. Break that link and the illusion can disappear and take your brand value with it.
They found that if a celebrity is deemed to be a good fit with a not-for-profit brand, it will also improve what people think of the organisation.
“People actually do identify with celebrities – they see similar values with themselves and the celebrities involved,” he says. “Because people identify with the celebrities, they are actually more influenced by things associated with the celebrity. This influences people’s perceptions of a non-profit brand that is associated with celebrity.”
Pappu advises that when choosing a celebrity for promoting the brand, one of the most important considerations should be how the celebrity affects the brand value. “If a non-profit brand value gets affected adversely, people may not donate funds, or they may not support the cause. Choosing the right celebrity can help brands in communicating their positioning clearly, which ultimately contributes to brand value.”
In an era where money is tight and there is a seemingly eternal line of local and global social and environmental problems to be confronted, right celebrities are a positive way for not-for-profits to persuade people to support their brand.
Pappu has been researching and publishing on how people relate to brand names for 15 years and still marvels at how they are significant in almost all product categories from potatoes to water. “We don’t buy products, we buy brands,” he says. “Most of the time we don’t realise what an important role a brand name plays in what we buy and what we consume. People attach a lot of value to brand names, even unknowingly.”
LEARN MORE
If you would like to learn more about the research in this article, then take a look at: “Celebrity endorsement, brand credibility and brand equity”, European Journal of Marketing, 2011.