January 18, 2010

Celebrity Endorsements and Brand Image

Coke, Apple, Microsoft, Mercedes, Nike, McDonalds – are some of the most powerful brand names in the world today. These companies have taken many years and spent billions of dollars in creating their “brand”. A brand has the power to define a company’s identity and values for the products and services it provides. It is very important for a company to be able to connect with their customers and gain recognition through their “brand”. Several mediums such as logos, jingles and brand ambassadors are used to create a brand image.  The golden arches of McDonalds or the popular Pillsbury doughboy or Michael Jordan for Nike – all have helped create a brand image in the mind of the consumers. Among these, brand ambassadors are used as one of the most target-oriented medium to reach out to consumers and help companies gain a competitive advantage.

Celebrity figures have been used as brand ambassadors for a long time now and have been an extremely popular way of advertising. Some of the biggest endorsement deals have included athletes which have cost companies millions of dollars. David Beckham, one of the most well-known soccer players in the world endorses Adidas, for a lifetime contract valued at $160 million while Nike, endorsed Kobe Bryant and Lebron James for $50 million and $70 million respectively. Such companies have spent large amounts year after year to associate their brands with celebrity images to harness from their popularity. Many of these deals have been extremely rewarding helping companies to earn a brand recognition through loyal fan following and celebrity’s global reach. These campaigns run solely on the basis of a celebrity’s image and have allowed companies to develop a medium to get up close and personal with its end consumer. Everyone wants to play soccer like David Beckham, or look beautiful like Cindy Crawford, and fans would do anything that brings them closer to their role model.

The relation of a brand to a celebrity works so well at times that when you think of the brand, you automatically think of the ambassador or vice versa. Every time you think of Allstate Insurance, Dennis Haysbert comes to mind talking about ‘breaking up’ with your insurance company. Michael Jordan mirrored Nike’s brand values of courage, victory, honor and teamwork so well that consumers as well as athletes who shared those values would prefer Nike as a result. Another great athlete of current times, Tiger Woods has been the number one endorser in the world for companies such as Nike Golf, AT&T, Tag Heuer, EA Sports, Gillette, Accenture to name a few with an estimated value of $105 million. Every company that endorsed him has tried to relate his excellence and achievements in golf with their brand in order to gain competitive differentiation. Accenture’s latest marketing campaign which figured the tag line “We know what it takes to be a Tiger. High Performance – Delivered.” does just that.

The obvious question is – is this kind of marketing spend worth it?

Well, in the past 7 years, Nike’s endorsement and sponsorship financial commitments have surged from $1 billion in 2002 to approx. $3.5 billion in 2009. In 2006, Nike endorsed Tiger Woods for $100 million for 5 years, not to mention the $40 million he had previously been given for being a brand ambassador.  It’s hard to believe they would make this type of investment if it wasn’t.

At an individual ambassador level, Investopedia (a Forbes company) said Tiger Woods generates $2.5 to $4 for every dollar spent on endorsements. Combined, the 10 companies that Tiger Woods endorses could have expected $420 million in annual revenues through their brand association. If one of the world’s best athletes uses Nike products, Tiger’s influence on footwear and apparel revenue generation for Nike could be in billions.

However, given the recent events in Tiger Woods personal life, one might think otherwise. Even though Nike has decided to maintain their contract surely his ROI has taken a hit.  In fact, most of the companies have withdrawn their endorsement deals with him.  Accenture, who built their entire marketing campaign around the golfer, was the first sponsor to abandon him after his scandal in November.

Tiger is not the first, nor will he probably be the last, high profile brand ambassador whose personal life has affected his public image.  Just a few years ago one of the most famous basketball players of all time, Kobe Bryant (who endorsed top companies such as Nike, McDonalds and Sprite) lost most of his endorsement deals when he was accused of a sexual assault.

Since a company’s reputation is tied to image of the celebrity that endorses them, a negative event in the celebrity’s personal life can cause a lot of harm to their brand.

Large investments in endorsements such as the ones mentioned above could either fall flat due to celebrity scandals or return huge benefits through wide spread popularity. Nevertheless, the amount of risk associated with celebrity endorsements will always exist no matter how big the celebrity is. Infact, the more popular the celebrity, the higher the risk associated with having them as a brand ambassador. However there is a lesson to be learnt here – that brands are usually more powerful than celebrities themselves. Perhaps the billions of dollars spent on such endorsements could be put to better use such as strong marketing campaigns, advertisements and overall brand marketing. There are many big companies such as Apple, Google and McDonalds, who have not felt the need to endorse celebrities to create their brand image and have successfully established themselves as the most popular brands in the world.

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