Can companies survive without celebrity endorsements? – Patrick Chen (Eco 2)

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Ariana Grande is one of the most well-known people in the world as well as the likes of Dwayne Johnson, Selena Gomez, Cristiano Ronaldo, the Kardashians, Barack Obama, Beyoncé, Justin Bieber, LeBron James and Katy Perry.

Have you ever purchased a product of a specific brand because of its reputation? Maybe you decide to buy a shoe from Nike instead of Skechers. Or you might save up for a BMW as your first car instead of a used Holden. Most of the companies and brands that you have heard of would not have risen to success without some form of endorsement. When companies aim for their ideal endorser, they usually look for somebody who is able to have a great impact on the population. The people who have the power to do this are generally celebrities and influencers. In this day and age, a large portion of the population has access to social media and use it regularly causing it to become one of the best platforms to endorse products. And although companies are able to endorse their products easily because of social media, the earliest forms of endorsements were actually by the royal family.

The earliest reporting of celebrity endorsements point at the 1760s with Josiah Wedgwood and Sons (now known as Wedgwood), producers of pottery and chinaware. The company used royal endorsements as a marketing device to promote their product to others and to show value in the company.

The Royal Family are also recognisable globally with the power to influence consumer decisions.

According to Forbes, just one endorsement can create an increase in sales of 4%. Forbes also states that when a brand makes an endorsement contract with a celebrity official, it can see a rise of up to 0.25 on their stock. In this present day where we see advertisements everywhere we go, having a celebrity endorsing your product can make all the difference. In fact, a Taiwanese study shows that consumers can better recall products that were endorsed by celebrities, regardless of whether they were a fan of the celebrity or not. Nike, one of the world’s most popular brands, is said to spend $475 million USD annually on getting athletes to endorse their brand. When Chanel signed Nicole Kidman in 2003, it was reported that global sales of Chanel’s perfume increased by 30%. Also, when Nike signed Tiger Woods to an endorsement deal in 2000, Nike’s market share went from 0.9% to 4% within 6 months.

The University of Arkansas released a study in collaboration with the Manchester Business School in London which found that younger consumers were more likely to base their identities and appearance on celebrities.

A child (left) is seen imitating the appearance of NBA legend Allen Iverson (above).

A study by Nielson found that celebrity endorsements have varying effects on different age groups. Nowadays where younger people are growing up around social media and influencers, their judgement can be impacted. An example of this is when Michael Jordan turned Nike into one of the biggest brands of the world. Michael Jordan developed such a large fan base that Nike decided to give him his own brand of shoes which would subsequently be named “Jordan”. In 2009, it was reported that Jordan Brand took up 75% of the basketball shoe market and held a 10.8% share of the overall shoe market in the United States of America. All of this success came from one celebrity endorsement that Nike gambled on in 1984. Young children and adults wanted to replicate the athletic prowess and talent of Michael Jordan resulting in a huge demand for his shoes and apparel. Nowadays, the likes of LeBron James, Serena Williams, Cristiano Ronaldo, Lionel Messi and Roger Federer are influencing the decisions of younger kids and causing them to purchase the products of the brands that they endorse.

Research conducted by Nielson which shows the effect of celebrity endorsements on different generations.

I believe that celebrity endorsements hold the potential to have huge effects on the population. In this day and age where we are trying to be the best that we can be, it is hard not to look up at the ones who have succeeded and have acquired fame along the way. Many of these celebrities have traits that are desired by members of the public which cause us as consumers to take interest in the goods and services that they promote or use. This is because we believe that the products used are of the best quality as they are trusted by a celebrity. Before a brand develops a reputation through credibility and the quality of its goods and services, it must be able to acquire customers which can be achieved through advertisements and endorsements. Once a celebrity is able to influence the decision of a consumer so that they are able to make a purchase from the endorsed company, the brand is able to retain its customers through brand loyalty and status quo bias. Brand loyalty is the positive association that consumers associate with a particular brand which causes them to make repeat purchases from that brand. An example of this is when a consumer may like a certain product from Nike which causes them to continue buying products from Nike in the future instead of other brands such as Adidas or Puma. The status quo bias is similar in that consumers will stick to a particular choice and be reluctant to change even though it is not in their best interest. An example of this would be an Apple consumer who purchases a new iPhone every 2-3 years instead of considering options of other mobile phone companies which could save them money. This is also linked to another concept of behavioural economics in which consumers often make the common error of ‘vividness’. This is where a person values the information provided to them by someone they know personally more than if the information came from another source. As celebrity endorsements reach out to more people and give brands new consumers, the news of the quality or positive experience associated with a certain product is able to spread through recommendations thus causing people to suggest to other people to buy that certain product.

The stakeholders that are impacted by celebrity endorsements are fans, consumers, investors, the brand itself as well as the celebrity endorser. Investors should take into account which celebrities are endorsing the company that they are investing in as it has a huge effect on the company’s reputation. Celebrities themselves must also hold themselves to a high standard of responsibility and must display appropriate characteristics and traits when presenting themselves to the public. The brands themselves must also consider which celebrity they will select to endorse their products as it not only comes at a huge economic cost to acquire a celebrity endorser but their actions will be reflected on the reputation of the company.

In conclusion, celebrity endorsements are not only beneficial to company being endorse and the celebrity but to consumers as they aid consumers in decision-making and also create competition between brands which brings out the best in companies.

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