ROI on celebrity endorsements?

Seems like a good research project if you're interested in marketing.

from knowledge@wharton

Like much in marketing, athlete and celebrity endorsements are as much art as science. Research makes clear, for example, that stars can create halos around brands, giving consumers good feelings about a company, says Wharton marketing professor Americus Reed. What's less clear is whether, on average, endorsements lead to greater sales -- or at least big enough jumps to justify the hefty sums that companies cough up, Reed adds. Among stock-car racing fans, for example, they clearly do. "I have videotape of a focus group where Nascar fans are saying, 'If my driver endorses such-and-such oil, then I'm going to buy that product, too, because doing that supports my driver and helps him win.'"

But in other fields, consumers won't buy something just because of an athlete's or celebrity's halo. "When you sit down and do the math and you're trying to come up with a return-on-investment number, sponsorships can be a real crap shoot," says Jennifer Miller, director of marketing for Seven Cycles, a high-end bicycle maker in Watertown, Mass.

...

Some appear to be moving away from endorsements, at least in traditional American sports like football, basketball and baseball. "They were tired of giving away 'X' percent off the top when they knew something like what happened to Kobe could happen again," says Dan Levy, a sports agent at Octagon.

"There is a select group of athletes who can break through the clutter -- a dozen to 25 can do that," he says. Instead of lavishing money and gear on less recognizable athletes in the traditional sports, companies have begun to spend more on nontraditional ones like soccer -- women's soccer star Mia Hamm is a Levy client -- and on online and grassroots campaigns.

Despite the recent scandals, Levy adds, companies' approaches to negotiating individual endorsement deals haven't changed. "People always had morality clauses in agreements." If an endorser violates the provision, a company has a legal right to end the contract. The prohibitions "can include everything from felony charges to just disparaging the brand," he notes.

Companies can avoid having to exercise such clauses by thoroughly researching any potential endorser, he points out. Levy's division at Octagon, for example, does that before it agrees to represent someone. "We make sure that their reputation is in line with the culture," he says. Once an athlete becomes a client, "we stress that every decision you make can impact your ability to work with people off the field and on the field."

If a client does land in trouble, the basic principles of crisis communication apply, he says. "It's important to get out in front of it and not to be reacting. People make mistakes and are forgiven all the time. If they continue to do the right thing in the future and take care of their business on the court, the other stuff will eventually come back. You're never going to please everybody anyway."