Ryan Lochte, Kate Moss, Kanye West, and most recently Kyrie Irving, are just a few celebrities that have lost branded company deals because of their actions. In 2016, Ryan Lochte lost brand endorsements with Speedo and Ralph Lauren because of a false robbery claim. Kate Moss lost her brand endorsement with Chanel, Burberry, and H&M in 2005 after she was allegedly caught snorting cocaine. Last year in 2022, Kanye West was dropped by Adidas for his antisemitic remarks. Most recently, Kyrie Irving’s relationship with Nike was suspended for posting a video considered to be antisemitic. While celebrity endorsed products generate substantial profits for companies, those profits are also affected when those celebrities engage in behavior that is contrary to the views of the company. So, what should companies do? Should they continue to use celebrities to endorse their products? Or should they find alternative means to advertise their products? Due to the effect of celebrity behavior on company brands and products, and the costs associated with hiring celebrities for endorsements, companies should consider alternative means of advertising their brands and products.
When a company hires a celebrity to endorse their product, depending on the celebrity, company sales can increase by approximately $10 million or by approximately 4% in sales. Companies can also receive up to .25% in stock returns with celebrity endorsements. When businesses use celebrities to endorse their brand, it increases the brand’s visibility, enhances the credibility of that brand, and boosts the awareness of the product they are endorsing. Celebrity endorsements can be done through commercials, however, social media has played a large part, as well. Through social media, celebrities can access consumers through different mediums. They can access consumers through their own following but also through other celebrity networks. While these endorsements help increase the sales of a particular company product or brand, celebrity endorsements can be risky and expensive.
In 2012, Pepsi paid Beyonce $50 million to appear in their Pepsi campaigns. However, controversy ensued because she was also involved in Former First Lady Michelle Obama’s “Let’s Move” fitness campaign. Many considered the clash of the two campaigns to be hypocritical because the “Let’s Move” campaign was encouraging children to be active, while Pepsi has been criticized for promoting soda that has negative effects on people’s health. Admittedly, some suggested that Pepsi hiring Beyonce was a bad business deal because it was unlikely that Beyonce would actually increase the sales of soda. Additionally, it was unlikely that Beyonce would further increase Pepsi’s awareness because it was already a global brand.
Another notable endorsement that was not only expensive, but also risked the company name was Jared Fogel’s endorsement deal with Subway. While Jared Fogel was not initially a celebrity, he became one and was given the same benefits regarding celebrity endorsements. Jared Fogel was Subway’s primary spokesperson for 15 years. When Fogel endorsed Subway, there was an increase in the sandwich sales. In fact, when Fogel commercials briefly stopped airing in 2005, Subway saw a 10% loss in sales. In 2015, Fogel was arrested and convicted on child pornography charges. With that news, Subway lost trust with consumers and its reputation score fell six percent and its sales decreased by 3%. Similarly, in the wake of Kanye West’s antisemitic remarks, Adidas will likely lose $247 million to end its partnership with West.
While the financial risks associated with celebrity endorsements can be great, celebrity endorsements can also have reputational risks for businesses. As previously noted, when there are scandals with celebrities, companies are at risk of being associated with that scandal which affects the company branding. Companies do not want to be associated with a celebrity’s bad behavior. Therefore, they are likely to cut ties with celebrities that are involved in some form of scandal. When Speedo and Ralph Lauren cut Ryan Lochte from their endorsements, they wanted to use it as an opportunity to reinforce company values. In Adidas’ statement about severing ties with Kanye, Adidas was sure to emphasize how Kayne’s statements violate their “company’s values of diversity and inclusion, mutual respect and fairness.” When celebrities behave badly or are enthralled with scandal, companies are quick to sever ties because “an endorsed brand tends to take on the same negative traits as the celebrity.”
Companies should consider alternative means of advertising their brands and products. Celebrity endorsements and partnerships are expensive to maintain. Depending on the size of the company, companies can spend millions of dollars for a thirty second commercial. Even small businesses that hire local celebrities can expect advertising fees to begin at $5,000 to approximately $100,000. “Celebrities usually get a hefty fee up front plus points on the backend. They only travel first class, they expect to be put up in a five-star hotel, and to be driven everywhere in a limousine. Celebrities can make a product, but they can also break the bank of your company.” In fact, the average cost of a thirty second Superbowl commercial is $4 million, and that price does not even include the expenses associated with hiring a celebrity. Aren’t there better uses for that money? Well… yes. All the money that companies use for celebrity endorsements could be invested back in the businesses. If companies find alternative means to advertising their brand and product, they also avoid the risks associated with potential celebrity scandals.
So… what can companies do? 1. Companies can think outside the box. Companies should work on researching ways to make their products and brands unique. They can invest more money into improving their product, rather than endorsing celebrities that could potentially tarnish their reputation. 2. Businesses should also find ways to directly engage and supportonsumers and fans. It’s important for companies to directly engage with consumers because they are the ultimate targets. Instead of creating products and brands that continue to promote celebrity status’, it may make more financial sense to focus on what consumers want. Companies like Fenty Beauty, though promoted by a celebrity, they are doing celebrity endorsements the right way, by being focused on important matters like inclusivity. Fenty prides itself in having something for everyone, which is why it has drawn so much success. 3. Companies should be more socially responsible. The wants and needs of consumers are constantly changing. Consumers are no longer just interested in any brand or product; they also want the company they support to impact the world. Numerous businesses post on their website the various organizations that they support, however, many of them do not boast in the social changes they make. 4. Finally, businesses should utilize social media effectively. In the age of technology, celebrities may not be as necessary to endorse products. In fact, companies can utilize their own social media platforms to endorse their own products without paying the exorbitant fees associated with celebrity endorsements.
Ultimately, there are a lot of risks and costs associated with celebrity endorsements. It may be time to do without them.