Celebrity Endorsements’ – Worth the Cost?

Arnold Palmer’s death probably ranked about 100th on the list of stories the media was covering last week. The first 99 all involved presidential candidates, which is tough to compete with. Nevertheless, I thought Arnold Palmer’s death should have been a bigger story because of his impact on celebrity endorsements.

The pioneer of celebrity endorsement deals:

Most people knew Palmer as one of the most successful golfers in history. Less known is that he was basically the pioneer of celebrity endorsement deals. He was not the first athlete to endorse a product. That was Babe Ruth. He was, however, the first athlete to turn his image and influence into a money-making machine (Arnold Palmer Enterprises). He used his personality to build a loyal following known as Arnie’s army. He earned $40 million last year from celebrity endorsements and his various business interests. To put that in perspective, his lifetime winnings from his entire golf career were only $1.8 million.

His businesses included clothing, cars, golf courses, events, and beverages. The younger generation may only know Arnold Palmer as the ice tea/lemonade beverage named after him. One of Palmer’s first and best business decisions was to hire Mark McCormack to be his agent. The deal was sealed with a handshake. McCormack was a lawyer, but he turned out to be a business genius who eventually built the largest sports marketing agency in the world, International Management Group (IMG). Palmer was McCormack’s first and flagship client. I think Arnold Palmer’s legacy is that now no celebrity is happy just being famous for playing ball or making music. They all want to be captains of industry. Has anyone seen what Magic Johnson has done since retiring from basketball?

Best celebrity endorsment deal of all-time?

Companies spend billions each year to have high profile athletes endorse and promote their products. Roger Federer earned $58 million in endorsements in 2015, Michael Jordan’s share of revenue from his Nike shoe line was $60 million last year, and Lebron James signed a lifetime deal with Nike for an undisclosed sum rumored to be over $1 billion. Perhaps the best deal for any celebrity was the deal “Big George” got for the George Foreman grill. George lent his name to a little known cooking device in exchange for 45% of the profits. He has since been bought out, but he earned a total of more than $200 million according to CNBC. Not bad for a few commercials. All of this got me wondering, “Do people really buy a product because of the endorser?”

Do celebrity endorsements increase sales?

Apparently they do. Marketwatch reports a 4% bump in stock price after a company announces signing a celebrity endorser. That number seems to make a lot of sense as research also shows that sales increase an average of 4%. Naturally, the 4% figure is for the average celebrity endorsement, not The World’s Greatest Product Endorser.

The most important trait in a celebrity endorser:

The most important trait in a celebrity endorser is how he or she enhances the brand’s trustworthiness and credibility. A company’s investment in a celebrity endorser can pay off handsomely if it picks the right celebrity and that celebrity doesn’t do anything to embarrass the brand (e.g., cheat on his wife with a dozen different women, not that any golfer would do that).

Social media is now taking celebrity endorsements to a whole new level, providing instant feedback and more measurable results. A celebrity with 93 million Twitter followers (like Katy Perry) is pretty much assured of endorsement deals. I wonder whether Barack Obama could parlay his 77 million Twitter followers into some endorsements come next January. Check out: Celebrities with the Most Twitter Followers.

Social media provides more insight than ever before into the celebrity’s life, which can make celebrity endorsements seem more believable, or not, depending on the celebrity and the brand. Apparently, Beyonce’s promotion of Pepsi got some negative feedback after she had spent the previous year promoting healthy eating on social media with pal Michele Obama. Nevertheless, brands see social media as the most effective way to engage with their customers.

Once I have 10 million people reading this blog, I will definitely be pursuing some endorsements of my own. I just need about 9.9 million more, so please forward this to all your friends.