Celebrity Advertising

In the past two or three decades celebrity advertising/endorsement has become common practice amongst brands that wish to create and maintain attention, as well as increase product or brand recall rates (Erdogan, 1999). However, the juxtaposition of brands and organisations with admirable figures that possess qualities such as likeability, attractiveness, trustworthiness and credibility is not a new phenomenon (Erdogan, 1999).

It is believed that an eighteenth century potter named Josia Wedgewood was the pioneer of using celebrities to his advantage when Queen Charlotte began using his products, after which he began referring to himself as “potter to Her Majesty” (Seno & Lukas, 2007). Since then the use of public figures to sell products has assumed a more corporate structure with contracts in place to guide the process, governing compensation, the celebrity’s level of involvement in the product and termination rights and procedures.

In this paper, the literature overview of celebrities and celebrity endorsement will be presented, as well as the historical development of celebrity endorsement. Its effectiveness on investments and consumers in developing countries will be critically discussed, as well as the benefits and risks of celebrity endorsement. The deal between Nike and Tiger Woods will also be critically discussed and applied as an example of the effects of celebrity endorsement, as well as the effects of negative publicity. 2. Historical Development

The cigarette industry was the first to formally use a celebrity to endorse a product in 1905 when Murad Cigarettes used comedians Fatty Arbuckle and Harry Bulger (Clark & Horstmann, 2005). The growth of commercial radio in the 1930s and commercial television in the 1950s is credited with the early development of celebrity endorsement (Erdogan, 1999). In those days the supply of celebrities was very limited and they only used their status as ‘brand presenters’ because of a fear of their image being clouded by endorsements (Erdogan, 1999).

In the late 1970s celebrities became more open to the idea of endorsements which allowed for greater choice for corporations. By 1979 it was estimated that 1 in every 6 (17%) advertisements made use of a celebrity to endorse a product, and by 1988 it was 1 in every 5 i. e. 20% (Erdogan, 1999). Khatri (2006) estimates that in 1998 alone, American companies spent $800 million on acquiring celebrities to be used in advertising, promotion and public relations campaigns. In 2006, Ding, Molchanov, and Stork (2011) put the estimation between 2 to 3 billion dollars.

Since the early 1990s the use of celebrities has grown, ranging from actors/actresses, musicians and athletes, to politicians and even fictional characters (Khatri, 2006). It has become a global strategy with countries such as Japan who have celebrities featuring on 70% of their commercials, most of which are Japanese (Hsu & McDonald, 2002). China has also made large investments in celebrity endorsements, athletes especially (Schaefer, Parker, & Kent, 2010).

In the 21st century some corporations have opted to use average people or clips of real events to endorse their products such as Unilever’s Dove commercials with real women rather than models (Biswas, Hassain, & O’Donnell, 2009). This type of strategy has the potential to be more compelling as consumers find that they relate more to the average person (Biswas et al. , 2009). Celebrities seem to be a big risk since their lifestyles often lead to unfavourable acts that threaten the image of the endorsed brand.

Despite this, using celebrities to endorse products has proven to be beneficial in most cases with athletes proving to be the most favoured endorsers (Elberse & Verleun, 2011). 3. Celebrities and celebrity endorsement: literature overview 3. 1 A celebrity McCraken (1989) defines celebrities as people who receive and enjoy large amounts of public attention and recognition from a large share of a certain group of people. Typically they exhibit characteristics such as attractiveness, extraordinary lifestyles and credibility, and tend to differ from the norms of society (Khatri, 2006).

A celebrity can either be an athlete, an actor/actress, a business person, a model, an entertainer, or a pop star (Hsu & McDonald, 2002). They can appear in public through/by: 1) their professional duties e. g. Tiger Woods playing golf in front of an audience, 2) attending special events e. g. award shows and movie premiers, 3) the media (news, fashion magazines and tabloids), or 4) the endorsement of products and services (Schlecht, 2003).

Even fictional characters such as Ronald McDonald and Disney characters are considered to be celebrities because by definition, they also receive a significant amount of attention and are easily recognisable (Khatri, 2006). Through his/her line of work and the perceptions of people, a celebrity acquires specific meanings that people associate with them and make them easily distinguishable through their lifestyles, status and class, for example: Pierce Brosnan (the former James Bond) is associated with class, sophistication, masculinity and represents the upper social class (McKracken, 1989).

In contrast, another example would be Jamie Oliver (a European celebrity chef) who is perceived as being free spirited, friendly, kind and likeable due to the nature of his show, Oliver’s Twist, being informal, easy-going and relaxed (Byrne, Whitehead, & Breen, 2003). These associations and perceptions offer a means of identification which turns the celebrity into a brand, allowing a celebrity to ‘sell’ his/her status to corporations who wish to acquire the celebrities cultural meanings.

This process is called celebrity endorsement (Carroll, 2008). 3. 2 Celebrity endorsement Companies seeking to employ celebrities to promote their products have four different ways at their disposal to do so: testimonial, endorsement, actor, and a spokesperson (Khatri, 2006). A testimonial is when the celebrity has personal experience in using the product and can therefore affirm its quality by citing its benefits (Khatri, 2006) This is considered to be an explicit type of celebrity advertising i. . “I use this product” (McCracken, 1989).

A company may request the celebrity to promote its product/s through character enactment, and this is when the celebrity assumes the role of an actor (Khatri, 2006). A celebrity can also become a spokesperson for a brand whereby they represent the brand over a certain period of time in the media and in public (Khatri, 2006). This is more of an implicit type of celebrity advertising i. e. “you should use this product” (McCracken, 1989).

Another way for a company to use a celebrity, and with more relevance to this paper, is through endorsement (Khatri, 2006). According to Schlecht (2003) and Erdogan (1999), a celebrity endorser can be defined as an individual who is well known by the public for their achievements and uses his/her status to promote a product by appearing with it in advertisements or in public e. g. Daniel Craig (the current James Bond) promoting Omega (a watch making company). Celebrity endorsement strives on the fact that people gain value through products (Khatri, 2006).

Seno and Lukas (2007) refer to it as a format of co-branding whereby two brands or more exchange money to facilitate the exchange of brand imagery, which would lead to the brands becoming mutually beneficial partners. This perspective would require a brief understanding of branding, which Carroll (2008) defines as a form of identity creation to build brand equity, secure a competitive advantage, increase financial returns and customer loyalty, and develop brand knowledge.

Celebrities have brand properties that consumers recognise and they attain these meanings through public manifestations and the fulfilment of their professions (Seno & Lukas 2007; Biswas et al. , 2009). Their status serves as a useful instrument for brands to attract attention, gain credibility, increase brand recall, and target specific reference groups (Biswas et al. , 2009). The endorsement process itself is dependent upon the symbolic properties that the celebrity endorser possesses, as companies try to transfer these properties from the celebrity endorser to the product being endorsed (McCracken, 1989).

This process of meaning transfer is thoroughly looked at by McCracken (1989) using a model called the model of meaning transfer. This model basically outlines a conventional path for the movement of meanings from the culturally constituted world to the consumer good, and then finally to the consumer (McCracken, 1989). Biswas et al. (2009) mention three main reasons for the use of celebrity endorsement by corporations: 1) To attract attention for the brand, 2) to transfer the image values of the celebrity onto the product/s, and 3) to influence consumers positively in terms of their attitudes and beliefs.

Through celebrity endorsement, advertising practitioners are able to project the desired images onto the endorsed brand in terms of attributes such as expertise, trustworthiness, persuasiveness, and objectiveness (Schlecht, 2003). These attributes are important for effective endorsing, and are effective in influencing attitudes and beliefs (Schlecht, 2003). Although studies have had mixed results on the effectiveness of celebrity endorsement on a brand financially, most of them do agree that celebrity endorsement is effective in drawing attention to the brand and increasing sales (Elberse & Verleun, 2011).

Erdogan (1999) talks about the importance of congruency between the celebrity and the brand, or the product match-up hypothesis, which Seno & Lukas (2007) define as the consistency between the characteristics of the celebrity and the attributes of the product. This implies that a link between the celebrity and the brand/product enhances the believability and attractiveness of the campaign, which in turn may positively affect brand equity (Erdogan, 1999).

The match-up hypothesis is one of the models used when selecting an appropriate celebrity to endorse a product, the others being the source credibility model and the source attractiveness model (Liu, Huang, & Minghua, 2007). The model of meaning transfer can be used to understand how the meanings are transferred from the celebrity all the way to the consumer (Khatri, 2006). 3. 3 Source credibility and source attractiveness model

The source credibility model asserts that celebrities with perceived expertise, reliability and trustworthiness are considered to be credible and persuasive sources, and are effective in influencing beliefs, opinions, attitudes and behaviour through internalisation ( Liu et al. , 2007). Erdogan (1999) points out that it is not important whether the celebrity is actually an expert or not, as long as they are perceived as one, although well-known expert celebrities produce higher recall rates than non-expert celebrities.

A very successful example of celebrity credibility is John Travolta and the Australian airline, Qantas (Seno & Lukas, 2007). It is widely known that John has a passion for airlines and even has a commercial pilot license (Seno & Lukas, 2007). He also has his own Boeing 707, therefore this makes him a credible aviation expert (Seno & Lukas, 2007). Multiple celebrity endorsement, which is when the celebrity endorsers two or more products, can negatively affect the credibility of the celebrity (Hsu & McDonald, 2002).

Consumers tend to question whether the celebrity is endorsing the product because they believe in its positive effects, or whether they’re endorsing it purely because they are being paid to (Hsu & McDonald, 2002). The same can be said for when a brand uses multiple celebrities, but this can be beneficial and increase the scope of the meaning transfer to the brand if done correctly (Seno & Lukas, 2007).

An example of this would be L’Oreal using Heather Locklear and Andie MacDowell to convey a mature image, and then using Beyonce Knowles and Milla Jovovich to convey a younger image for their hair colouring product line (Seno & Lukas, 2007). The source attractiveness model asserts that the source familiarity, likeability, similarity, and physical attractiveness to the respondents determines the effectiveness of a message ( Liu, Huang, & Minghua, 2007).

Physically attractive celebrities generally have a positive effect on products, as well as on consumer attitudes towards a brand (Seno & Lukas, 2007). Whether attractiveness creates purchase intentions is still ambiguous, a lot of the research clashes, but it is effective in drawing attention (Erdogan, 1999). 3. 4 The match-up hypothesis The match-up hypothesis, as mentioned earlier, contends that the effectiveness of a message depends on the congruency between the celebrity and the product i. e. the degree of a ‘fit’ (Erdogan, 2007).

The greater the link, the quicker an associative link may be established by the consumer (Seno & Lukas, 2007). An example of successful congruency would be when Catherine Zeta-Jones was employed by the cosmetics firm Elizabeth Arden (Seno & Lukas, 2007). Catherine is considered to be a personification of the essence of Elizabeth Arden (Seno & Lukas, 2007). 3. 5 The model of meaning transfer McCracken’s model of meaning transfer depicts how marketers transfer meanings from the culturally constituted world to the consumer good (Biswas et al. , 2009).

The effectiveness of the endorsement process depends on the meanings of the celebrity which are developed through distinctions of demographic factors such as status, class, gender, and age, as well as personality and lifestyle (McCracken, 1989). Celebrities have powerful meanings and provide brands with the ability to associate themselves with those meanings (McCracken, 1989). There are three stages within the model of meaning transfer. Stage one begins when the advertiser identifies the cultural meanings that should be associated with the brand (McCracken, 1989).

The advertiser then looks for an appropriate celebrity to embody these meanings, allowing the advertiser to transform these meanings into a visible and concrete form (McCracken, 1989). In the second stage the meanings are transferred from the celebrity to the endorsed product/brand, who then becomes associated with the product/brand (Khatri, 2006). The advertising campaign used within this stage must suggest similarity between the product and the celebrity for effectiveness, and must shape the personality of the product (McCracken, 1989).

The third stage is controlled by the consumer and includes the transferral of the meanings embodied by the consumer good to the consumer (McCracken, 1989). People use products and the meanings they embody to enhance their sense of self and define themselves i. e. possessions are used as an extension of self (Erdogan, 1999). The transferral of meanings from the consumer good to the consumer is done through rituals, and the consumer must actually claim the meanings, the meanings do not automatically transfer onto the consumer (McCracken, 1989).

McCracken’s model has been expanded by researches from a one-directional flow of meanings to a two-directional flow that emphasizes how the activities of individuals could shape the cultural meanings of products and brands i. e. a consumer-centric model whereby consumers co-create brand meanings (Allen, Fournier, & Miller, 2008). Such is true for Harley-Davidson whose image was created by a rebellious motorcycling club called Hell’s Angel, who at the time was not the intended target market due to their involvement in illegal activities (Allen et al. 2008). 4.

Effectiveness of celebrity endorsement: returns on investments and effects on consumers in developing countries Celebrity endorsements have been proven to help brands stand out from a cluttered and competitive market and vastly improve the brand’s communicative abilities by cutting through the excess noise (Erdogan, 1999). Celebrities can be successful in achieving a higher degree of attention and brand recall, and they are able to enhance the credibility and attitude towards the product/brand (Schelcht, 2003; Biswas et al. , 2009).

They do this by bringing in a diverse and unique set of characteristics that the public identifies with (Seno & Lukas, 2007). 4. 1 Return on investment Many studies have been done on the equity effect of celebrity endorsement and the results tend to differ, but generally most of the results show that celebrity endorsement has a positive effect on equity and increases sales (Elberse & Verleun, 2011). The two main reasons for this are: 1) an endorser can help re-affirm the true quality of the product, and 2) an endorser can serve as a point of differentiation by enhancing certain attributes of the product (Elberse & Verleun, 2011).

Agrawal and Kamakura (1995) did a study on 110 celebrity endorsements that were announced between the years 1980 and 1992 to determine the returns on investments on the announcement days. They observed a 0. 44% abnormal return on the announcement date, with a positive average abnormal return of 0. 54% (Agrawal & Kamakura, 1995). Ding et al. (2011) also did research by observing the announcements of 101 celebrity endorsements involving 45 firms and 85 celebrities between the years 1996 and 2008.

They observed abnormal returns and cumulative abnormal returns of 0. 5% and 0. 19% respectively on the day immediately following the announcement (Ding et al. , 2011). They concluded with a 0. 44% excess return on announcement day, and a marginally positive impact on stock returns (Ding et al. , 2011). Another study was done on Michael Jordan’s impact on the market value of the firms he was endorsing in 1995 (Elberse & Verleun, 2011). It was found that the brands he endorsed experienced a 2% increase in stock returns, and more than $1 billion in market value (Elberse & Verleun, 2011). 4. 2 Effects on consumers in developing countries

In today’s world where globalization is opening up economies and integrating different cultures, celebrity endorsement has been widely used by developing countries such as China and India who accounted for 10% of the global increase in advertising expenditure (Biswas et al. , 2009). In 2004 it was estimated that between 18% and 20% of advertisements in India made use of celebrity endorsements (Biswas et al 2009). Khatri (2006) mentions a study done in India involving 480 respondents in 4 cities and 3375 in 8 cities to determine the effects of celebrity endorsements on the public.