By Andrew Apfelberg, Partner, Greenberg Glusker
For as long as any of us can recall, celebrity endorsements have been a staple of the American marketing landscape. Famous athletes, actors, actresses, musicians and other pop-culture icons have always served as powerful tools for companies seeking to reach consumers and persuade them that their products are ones they too ought to own.
The explanation is simple: if we see that someone we admire and trust to some degree is associated with a specific brand, we want to be associated with that brand as well. In the best-case scenario, we’ll buy the product; but at worst, we’ll recognize the brand in the future.
This conversation about the power of celebrity endorsement is now moving to the digital world. Sometimes referred to as “online influencer marketing,” the concept is the same but just applied to the Internet as a marketing channel. Forward-thinking brands are now harnessing the power of personalities to promote their products via social media and other online marketing platforms.
The Importance of Getting the Right Match
Dr. Astrid Keel and Dr. Rajan Nataraajan, both faculty members at Auburn University, have studied celebrity in the context of product endorsement. In their research paper, “Celebrity Endorsements and Beyond: New Avenues for Celebrity Branding,” (Psychology & Marketing, September 2012), one of Drs. Keel and Nataraajan’s key conclusions is that there are different models of celebrity selection and it’s essential for companies to choose celebrity endorsers who align with the values represented by their brand. If there is a misalignment, there is a risk of the celebrity’s personal brand “eclipsing” the brand of the product or company they were hired to promote.
Students of recent American pop culture are familiar with a number of celebrity endorsement arrangements that didn’t work out so well for the companies that inked the deals with high-profile brand advocates. MasterCard found itself embroiled in litigation with the Kardashian sisters after a dispute over fees associated with their joint-ventured “Kardashian Kard” credit card blew up in the newspapers. And of course, major brands such as Nike, Anheuser-Busch, Oakley and Radio Shack all headed for the exit doors when their prized celebrity endorser Lance Armstrong confessed to using performance-enhancing drugs as a cyclist.
Of course, there is always some degree of risk associated with celebrity endorsements since no one can predict human behavior. But when properly done, an effective celebrity endorsement can have a massive payoff for a brand that far exceeds the cost of creating and building that relationship.
The most successful athlete endorsement campaign in history—and one of the most successful celebrity endorsement relationships of all-time—is the long-running association between Nike and Michael Jordan. The Air Jordan shoes are always among the bestselling basketball shoes every year, even though this celebrity has been out of the game for a decade, and the Jordan brand is now a branch of Nike that has grossed more than $1 billion. OPI Products has been very successful with associating their nail lacquer with celebrities and athletes such as Katy Perry and Serena Williams, allowing them to increase sales within targeted audiences. And of course Apple relied on a worldwide endorsement deal with the rock band U2 in order to sell the once-revolutionary iPod into millions of homes.
The lesson is that a carefully selected celebrity partner and a well-structured endorsement deal can yield massive economic benefits for any company—especially those that sell branded consumer products. The online environment, where brand messages can go viral and be communicated far more broadly at a much more affordable investment, only fuels this potential.
Picking the Right Endorser
The most important ingredient in a successful celebrity endorsement deal is to choose a celebrity who resonates with two audiences: (1) the brand’s core demographic (current customers); and (2) the brand’s aspirational demographic (target customers). Any company that can achieve these twin objectives—retain existing customers and acquire new customers—is a company that is going to be successful in the marketplace and on the balance sheet.
There are two different models for choosing celebrity endorsers who resonate with these different target audiences. One option is to pick an endorser who appeals to both demographics groups at the same time; these folks are extremely valuable, but also extremely rare to identify. The other option is to pick two primary endorsers and use them in separate branding campaigns, either concurrently or at different seasons. A key factor in this decision is whether the company is seeking an overall brand ambassador (i.e., for all product lines and for a couple of years) or just an endorsement of a specific product for a particular season (e.g., back to school).
Once the objectives are established and the endorser model is determined, it’s time to get started. To begin, conduct a thorough analysis of the company’s core demographic and an analysis of celebrities that have the highest appeal ratings with that audience. Then repeat this same process with the company’s aspirational demographic and identify celebrities that have influence with that audience. Finally, assess who the stakeholders are in this arrangement—outside of customers and prospects—and analyze which celebrities on your two lists may need to be eliminated based on potential conflicts with those special stakeholders.
It’s important to note that the stakeholders involved in this assessment include both distributors and retailers. The selection of the celebrity should enhance those relationships. For example, if the retailers in your target audience really want to be associated with a particular artist, they will be thrilled if a company from whom they purchase product has a deal with that artist. There is no more effective means of gaining valuable shelf space to sell your product than to have the retailer enthusiastic about your products and promotions. The same principle holds true for distributors who may have their own self-promotional motives for wanting to align themselves with products endorsed by particular celebrities. Your employees’ morale can also be lifted if they are excited about the celebrity that is associated with your products.
Once this analysis is complete, here are some tips for picking the right endorser, based on years of experience in negotiating and structuring successful celebrity endorsement deals:
- Determine an appropriate budget and the various components of that budget, depending on what you want the endorser to do for your brand;
- Make a list of “must haves” and “nice to haves” for what the company wants from its celebrity endorser;
- Find out the most effective and prudent way to reach out to the celebrities on your list in a credible way;
- Anticipate questions, problems or other issues that the target celebrities are likely to raise in discussions; and
- Try to determine what the individual celebrities will want to get out of the relationship themselves and whether or not your company is in a position to meet those needs.
From this point, it’s just a matter of scheduling meetings and working through the two target lists until the company’s lawyers are able to work out a mutually satisfactory agreement with the individual(s) who best align with your brand values. It may be wise to divide the budget between a celebrity endorser for the brand’s current customers and another celebrity endorser for the brand’s aspirational customers, or it may make more sense to pursue one of those audiences now and the other one in a future year, or it may even be possible to find a single endorser who can be leveraged with both audiences.
Celebrity product endorsements have been ubiquitous throughout American history because most consumers want to be associated with brands that are connected to high-profile people whom we recognize and admire. The power of celebrity endorsement is even greater now in the digital age, where a 140-character tweet with an attached link can drive hundreds of thousands of consumers to a brand’s website in a matter of minutes.
To be sure, there are risks associated with celebrity endorsement deals since they are centered around human beings, all of whom are flawed. But with the right research, careful strategizing and sound contract negotiations, a successful celebrity endorsement deal can power a brand — new or old — to extraordinary levels of success.
Andrew Apfelberg is a partner at the Los Angeles-based
law firm Greenberg Glusker, where he is a member of the firm’s Corporate Legal Services Practice. Apfelberg serves as outside general counsel for middle-market companies throughout the U.S., advising them on strategic transactions including licensing, M&A and various financing deals. Andrew has particular expertise in the branded consumer products, new media and technology industries. His clients benefit from his strong business and finance background gained from working for investment bank Houlihan Lokey Howard & Zukin prior to attending law school. For more information, go to www.greenbergglusker.com.