Risks and Rewards of Celebrity Endorsements
Risks and Rewards of Celebrity Endorsements
By Anita Elberse
http://www.cnn.com/2009/OPINION/12/16/elberse.athlete.endorsements.tiger.woods/
In “Risks and rewards of celebrity endorsments,” Anita Elberse discusses why firms continue to invest in celebrity endorsers despite how easily media can tarnish their images. In one study, Elberse analyzed hundreds of athlete endorsements and found an average of 4% in sales 6 months after the endorsement deal even after controlling for expenses. On the day of the endorsement, she also found that the company’s stock also tend to increase. Furthermore, athletes with the strongest records were the most effective endorsers, with spike in sales after major wins. Elberse concluded that the main reasons consumers buy after endorsements is that they trust the celebrity’s opinion, and that a celebrity’s name can set apart one company’s brand from their competitors. However, firms do still cut ties with endorsers such as when Accenture and Woods ended their relationship after Wood’s infidelity scandal tarnished his image.
This article relates to the structural balance theory we discussed in class. The three nodes in this case are the consumer, celebrity, and product, with no link between consumer and product and a positive link between consumer and celebrity. However, after the celebrity endorsement, the celebrity develops a positive link with the product and sales go up. The balance theory states that for a relationship to be balanced, there must be three positives, or 2 negatives and a positive. The balance theory explains that by adding 2 positive links extending from the celebrity, the consumer and product are more likely to develop a positive link which translates to sales. In the Tiger Woods example, the balance theory also applies with balance achieved from 2 negatives and a positive and explains why the firm stopped working with Woods. The link between the celebrity and consumer became negative after the infidelity scandal, so to ensure that the consumer and product continued to have a positive link, the firm (product) had to have a negative link with the celebrity.