BUSINESS ENVIRONMENT

TERM PAPER
ON
IMPACT OF CELEBRITY ENDORSEMENT
ON BUSINESS

SUBMITTED TO: SUBMITTED BY:

Mr. KESHRI NANDAN SAURABH SHARMA
CHAUDHARY LOVELY PROF. UNIV.
Celebrity
Meaning of celebrity is “a famous person", who has remarkably
performed well in his / her field of action or activity. In our day to day
activity celebrities are people who enjoy public recognition by a large
share of a certain group of people. Whereas attributes like attractiveness,
extraordinary lifestyle or special skills are just examples and specific
common characteristics cannot be observed, it can be said that within a
corresponding social group, celebrities generally differ from the social
norm and enjoy a high degree of public awareness.

celebrity endorsement

The use of celebrities in order to increase the sales and recall value of a
brand is called celebrity endorsement for e.g. in Coco-Cola
advertisement; actor Amir Khan is the celebrity endorser for the product
or brand called Coke, and this process is referred to as Celebrity
Endorsement. Endorsements by celebrities have started since a long
time. The very fact that their use has continued for so long is proof
enough of its immense advantages, but they have several disadvantages
too. One of the first sports endorsements in India was when Farokh
Engineer became the first Indian Crickets to model for bryl Cream The
Indian cricket teams now earns roughly Rs. 100 crore through
endorsements.

Objective
  To study the impact of celebrity endorsement on business.

Importance of Celebrity Endorsement

The advertisers are always on the lookout for such faces for the
purpose of endorsement. But, the major challenge before them is to sign
the suitable celebrity for their brands or how to do “celebrity
management. "In the best of all possible worlds, the marketing or
advertising firm first would determine the properties of the product... It
would then consult number of celebrities and the meanings they made
available, and taking into account budget and availability constraints,
would choose the celebrity who best represents the proper symbolic
properties." This suggests that the image of the celebrity must fit or be
according with the product.

Framework to Make Effective Celebrity Endorsement

Program
With a high competition and rapidly changing market dynamics, a
person has to assess the market conditions and reevaluate its current
marketing strategies such as its portfolio of celebrity endorsement. The
action plan should be able to answer the following key questions: -

Do the celebrity endorsements programs increase the sales?

How to use the value generated by the celebrity endorsements

Are customers connecting the brand with the celebrity?

choosing the right celebrity does more than increasing sales; it can create
linkages with the celebrities' appeal, thereby adding new possibilities to
the brand image. Research conducted by Katherine Eckel has revealed
that celebrities can help people to make a better choice but cannot
influence 'people to make a foolish choice'.

The success of celebrity endorsement in India can be determined from a

market research which found that 8 out of 10 TV commercials scored
the highest recall were those with celebrity appearances. A few
examples:, Sourav Ganguly - Britannia, Leander Paes & Mahesh
Bhupati - J. Hampstead, , Sushmita Sen - Epson, and Aishwarya Rai -
Coke ,Shah Rukh Khan - Pepsi Sachin Tendulkar - Adidas.

We can study the effectiveness of celebrity endorsement marketing

program across the various stages of development.
Evolution of Celebrity Endorsements

1.) CONNECT CELEBRITY ENDORSEMENT WITH BUSINESS

OBJECTIVES.

The attributes of the celebrity should be mostly valuable and according

with the product, brand and company. Figure suggests different
strategies that must be followed by a company depending on its brand
positioning and the brand suitability with the celebrity.
Brand-Celebrity Attribute Suitability Matrix

 If the brand-celebrity attribute fit is slow, then the company should

adopt "Eliminate or avoid" strategy. The consumers are not able to
connect between the brand and the celebrity, and the recall value is
likely to be very low; further defeating the purpose of signing the
celebrity otherwise business losses the sales.

 It happened when Goodlass Nerolac Paints signed Amitabh

Bachchan as their brand ambassador.

 When the positioning of the brand is high but the fit with the
celebrity is low, in that case company must adopt a "Monitor and
evaluate" strategy. The company should adopt a process of continuously
track the effectiveness of the celebrity endorsement through various
surveys and monitoring the sales, etc. although Parker pens had a
positioning of premier pens, the early advertisements with Amitabh
Bachchan showed low brand-celebrity fit.
 When the positioning is not effective, but the fit with the celebrity is
high, this would affect the business sales negatively in this situation a
company must adopt the strategy of "Keep and enhance".. The celebrity
attributes go with the company's brand, strategic business objectives and
primary customer segment. The Narain Karthikeyan - J K Tyres
relationship works well in this category. The company has to identify the
opportunities to the celebrity investment and to find more better and
effective ways to reach to the target audience

when the positioning effectiveness is high( Shah Rukh Khan -

Pepsi)and celebrity fit is also high, this iwould be best condition for
business and sales are increased accordingly. company must adopt the
strategy of "Grow and partner". For e.g. Coke, the brand has identified
the "Thanda" position in the minds of the consumer, with Aamir Khan
playing the perfect role and an increment in sales was registered

2. MEASURING THE RELATIONSHIP BETWEEN CELEBRITY

ENDORSEMENT AND BUSINESS SALES

 A part of the marketing budget should be allocated to primary and

secondary research to determine the overall return on investment -
measuring the impact of celebrity endorsement on business sales or
real performance of a celebrity endorsement in comparison to the
business objectives of the company.

 The company should have definite and correct records obtained such
as increase in sales, customer preference brand awareness and, to
measure the effectiveness and the impact of celebrity endorsement on
sales of company in the short and long term.

 The endorsement costs are primarily driven by the endorsement fees

and promotion outlays.
CRISIS MANAGEMENT USING CELEBRITITES

On august 2006 bothCoca-Cola and PepsiCo beverages were reported to

be contaminated with pesticides, these oeganizations underestimated
how quickly the matter would be spread into a nationwide scandal.
They misjudged how quickly local politicians would seize on the issue,
in a country that tried for decades to shield its economy from
multinational corporations and still views them with some suspicion.
And they did not move swiftly themselves to quell the anxieties of their
customers.

Pesticides in the form of contamination were found in branded

beverages like Pepsi, Coca-Cola, Coca-Cola Light (the European version
of diet Coke), Fanta, Sprite, Nestea, Aquarius lemon, orange, and
grapefruit A week after the reported illnesses, The Coca-Cola Company
responded with its first public statement. Initiative was given to
celebrities and featuring leading Bollywood actor & Coca-Cola Brand
Ambassador, Aamir Khan.
Coca-Cola in India today unveiled the second series of its ‘Open
Happiness’ campaign for brand Coca-Cola. The global communication
initiative is all about inviting people to welcome small moments of joy
and happiness into their lives. The idea really is to pause, enjoy a bottle
of Coca-Cola and also enjoy life's simple pleasures.

Introducing celebrity to defend the brand in case crisis has been one of
the most accepted crisis management tool as Coca Cola did in 2006
featuring Amir khan in an ad and Amir himself becoming aware of the
production unit of Coke and telling about the filteration process in the
entire fermentation unit.the negative impact of crisis on business in that
case was reduced remarkably by using right celebrity in a right manner.

And today everyone has forgot about the crisis occurred with pepsi
and Coca Cola.
The benefits that arise from celebrity and brand relationship can be
categorized into following ways: -

 Incremental Sales

Companies can quantify the effect of the celebrity programs on sales by

performing year-to-year or quarter-to-quarter sales comparisons for
targeted consumers, geographic regions, or specific product lines.
Primary research can also be done to reveal the impact of the celebrity
on target customer's propensity to purchase.foe e.g. in case of Bata after

 Associating Celebrity Value With Hard Assets:

The benefits derived from the hard assets are those that have a clear
market value such as increased sales and increase in brand equity. And a
groth in the bransawareness and market share of the business
registered.These are the tangible benefits that a company derives from
its endorsement strategy.

 Associating Celebrity Value With The Brand:

Association value is derived from the target customers who associate the
company / brand with the celebrity. These are the intangible benefits that
the company will accrue in the long-term.
There are ways to quantify the potential value of hard assets and
association value against their impact on company's celebrity
endorsement by looking at the following catergories: -

 Brand Recognition

The main objective of celebrity endorsement is to increase the sales of

the business along with brand awareness. However, the companies use
popular, though incorrect, survey approach by asking the respondent
which celebrity endorsed their brand. Instead, they should ask the
respondent the brands associated with the celebrity. By gauging the top-
of-mind recall can enable the company to find out if a connection is
made between the brand and celebrity.

Endorsement Cost-Value Relationship

 Customer Loyalty To The Brand:

Customer loyalty can be measured in fixed intervals before and after the
celebrity campaign period to determine the impact of celebrity on
customer retention. Additionally, primary research can be conducted to
evaluate changes in the customer loyalty, customer preferences, etc.

Impact Of Celebrity Endorsement On Business :

When a consumer thinks about a brand, the link with the celebrity node
is animated to a certain level through spreading activation (Anderson
1983a). The joint activation of brand and celebrity provides a path over
which one's evaluation of the celebrity has an opportunity to transfer to
the brand.. Negative information about the celebrity activates the
celebrity node, which then activates the brand node to some degree and
allows reduced evaluation of the celebrity to transfer to the brand. It is
also important to view the consumer in their social and cultural setting to
further see how celebrity endorsements increase sales and impact brands
over time. Celebrities usually form a very good example of a reference
group appeal. This is particularly beneficial to a marketer and a brand
who can cash in on the success of the star and, hence, push his brand.
People who idolize their celebrities, hence, have a biased affinity to the
brand their favorites endorse..
As time passes on, they believe that they by adopting the brand that their
celebrity endorses are becoming more like them. Celebrities can be used
in four ways namely: testimonial, endorsement, actor and spokesperson

Negative impact of celebrity Endorsement on Business

 Negative publicity - If the celebrity is strongly associated with the

brand then the occurrence of the negative publicity can damage the
image of the brand. This can harm the trustworthiness and credibility in
the mind of the consumers. e.g., Salman Khan lost his endorsement deal
with Thumbs-Up after his infamous incidents like buck-killing and rash-
driving.

 Overshadowing - When celebrity endorser is used, the risk of

consumers focusing on the celebrity and not on the brand increases.it
happens when celebrity is bigger than the brand being endorsed.

 Overexposure - This risk arises when the celebrity chooses to

endorse several different products simultaneously which might leave the
consumers confused. e.g., Sachin Tendulkar endorses several brands
such as MRF, TVS Victor, Fiat,pepsi and Boost etc.this further resuls in
reduc

 Overuse - Sometimes the company can use many different

celebrities to appeal to different market segment. But multiplicity of
endorser might blur the image of the brand and reduce the effectiveness
of the means of persuasion.

 Extinction - The favorable response obtained by a particular brand

may weaken over time if the brand gets significant exposure without the
association of the celebrity. If the celebrity contract is for a considerable
period of time, then it can lead to draining out capital without proper
return.
 Financial Risk - The decision for hiring an expensive endorser may
not be always feasible if there celbrity value is higher or lower than the
brand value or we can there is a poor fit between brabd and celebrity .

Celebrity credibility is affected negatively in some cases, especially

when there is anything negative regarding the celebrity associated with
the brand in the news, then brand is bound to be affected. For example,
Air Jordan's generated revenue sales of $130 million in the first year.
The sales dropped miserably in the second year when Jordan missed 62
games due to a broken foot. Another main worry of the advertisers is
that their celebrity endorser would get caught in a scandal or an
embarrassing situation.

Positive Impacts of Celebrity Endorsement on the Business

 Celebrity endorsement helps in reducing the tarnished (spoiled)

image of the company as a crisis management tool and leads to
regain the image of business.

 Celebrities ensure attention of the target group by breaking the

clutter of advertisements and making the advertisement and the
brand more noticeable.

 Demographic connection establishes that different stars appeal

differently to various demographic segments i.e. age, gender, class,
geography etc.
 A celebrity’s preference for a brand gives out a persuasive message
- because the celebrity is benefiting from the brand, the consumer
will also benefit and consumer associate themselves with the brand
leading to the increase in sales.
Example: Amitabh Bachchan in ‘Dabur Chwyanprash’.
 Psychographic Connection elaborates Stars are loved and adored
by their fans and advertisers use stars to capitalize on these
feelings to sway the fans towards their brand.
 Example: Dhoni in 7up
 Rejuvenating a stagnant brand:With the objective of infusing
fresh life into the stagnant Chyawnprash category and staving off
the competition from various brand , Dabur India roped in
Bachchan for an estimated project of 8 crore.
 Improper positioning : Associating with a star, however big he or
she may be, in it does not guarantee sales. The most it can do is
generate interest about that product or create a buzz around it,and
further less connection between celebrity and brand may lead to
decrease in sales particularly.

Risks Of Celebrity Endorsements

Being human, celebrities also make mistakes, but their mistakes get as
much attention as their celebrity status and this can negatively affect the
brands that they are endorsing. There are a number of examples, both
Indian and International, where scandals and scams involving celebrity
endorsers have caused embarrassment to the brands they endorse.
Companies have to make quick decisions when one of their endorsers
comes under fire or their own image could be tarnished. Guilty by
association in a consumer’s eyes describes it best.

If a brand keeps going with the same celebrity, it may adversely

affect the image of the brand and consequently, brand sales. If the
brand chooses to distance itself with that celebrity, the heavy costs spent
on signing up that celebrity and making of the ads may go down the
drain and even then the association of the brand with the celebrity might
by then be so ingrained that the damage is already done.
Conclusion

Using celebrities for endorsing the brand can be a goldmine or a

minefield for a company's sales making process. There is large number
of studies relating to the process of celebrity endorsement and brand-
building, these studies reveal that celebrity endorsement has worked
remarkably well in some consumer segments while failing in other
segment of consumers. So the role of celebrity endorsement in the
business is equivocal and cannot be seen as a guaranteed strategic tool
to win revenues, profits, market share, , etc.

Consumers can easily identify the difference between a good script and a
good brand idea. For example, while Pepsi's Sachin and Bachchan (kite
flying) ad was seen as a good script, Coca-Cola's Thanda Matlab... was
seen as a strong brand idea. "Brand" is the most valuable asset of any
company; building its image is, thus, of greatest importance..
Celebrities do not make brands but ideas do. Therefore, it is important
to invest in good ideas; which can make a business to get good returns.
Therefore a business involved in celebrity endorsement should focus
less on its Return-on-Investment, and should think more in terms of its
Return-on-Ideas.
BIBLIOGRAPHY

 Ethics in Modern Management ("Celebrity Endorsements" p.

119) by Gerald J. Williams
 A Cross-Cultural Comparison of the Effects of Source
Credibility on Attitudes and Behavioral Intentions, in Mass
Communication & Society
by Kak Yoon, Choong Hyun Kim, Min-Sun Kim. 21 pgs.
 Pesticide Charge in India Hurts Pepsi and Coke
August 22, 2006
The New York Times
The International Herald Tribune
 Crisis management in Belgium: the case of Coca Cola
Victoria Johnson and Spero C. Peppas