The Economic Value of Celebrity Endorsements

Anita  Elberse; Jeroen  Verleun

Article | Journal of Advertising Research | June 2012

The Economic Value of Celebrity Endorsements

by Anita Elberse and Jeroen Verleun

Abstract

What is the payoff to enlisting celebrity endorsers? Although effects on stock returns are relatively well documented, little is known about any impact on sales—arguably a metric of more direct importance to advertising practitioners. In this study of athlete endorsements, we find there is a positive payoff to a firm's decision to sign an endorser, and that endorsements are associated with increasing sales in an absolute sense and relative to competing brands. Furthermore, sales and stock returns jump noticeably with each major achievement by the athlete. However, whereas stock-return effects are relatively constant, sales effects exhibit decreasing returns over time. We outline implications for practitioners.

Keywords: Stocks; Value; Advertising; Sales; Brands and Branding; Decisions; Economics; Marketing Strategy; Investment Return;

Format: Print

Find at Harvard Read Now

Citation:

Elberse, Anita, and Jeroen Verleun. "The Economic Value of Celebrity Endorsements." Journal of Advertising Research 52, no. 2 (June 2012): 149–165.

In March 2017, Jason Blum, the founder and chief executive officer of film and television production company Blumhouse Productions, has another blockbuster on his hands with the movie Get Out, produced for just $4.5 million. Remarkable returns for its micro-budget films were nothing new for Blumhouse: in fact, in recent years, Blum and his team are responsible for more such outsized successes than any other producer, especially in the horror genre. The company’s approach to movie-making is quite different from that of the major studios: it is not afraid to bet on projects that other studios have passed on; it pays its key cast and crew members the minimum salary stipulated by industry unions and only pays out sizeable bonuses if a movie’s box-office reaches certain levels; it gives its directors a great deal of creative control; and it decides on a film’s release strategy only once the first cut is ready. Has Blum discovered a robust formula for success in the film business? And is his approach sustainable, even as other players in Hollywood might seek to copy Blumhouse’s strategy?

Should the ABN AMRO World Tennis Tournament gamble most of its player budget on superstar player Rafael Nadal, even after the event’s previous two editions saw Nadal and Roger Federer pull out at the last moment due to injury, leaving the tournament without any top-five players? That is the question that Richard Krajicek, former Wimbledon champion and current tournament director, is debating with Jolanda Jansen, the director of the venue that hosts the event. It is June 2017, and earlier in the day, Nadal won the French Open (“Roland Garros”) for a record tenth time. Krajicek’s plan for the upcoming edition was to focus his recruiting efforts on five exciting, mostly younger, players, and assemble a group of top-20 players around them—but after Nadal’s record-breaking performance, Krajicek is now considering pursuing the Spanish superstar for the 2018 tournament after all. What is the best course of action?

It is June 2016. Superstar basketball player LeBron James and his childhood friend and business partner Maverick Carter are celebrating James’ third NBA championship. The duo will soon have to decide on a strategy for their media businesses—their film and television production company SpringHill Entertainment as well as their digital sports platform Uninterrupted. In 2015, Carter and James negotiated a first-of-its-kind, three-year agreement with Hollywood studio Warner Bros. Entertainment that gave SpringHill Entertainment a first-look movie deal, an exclusive television deal, significant development resources that also could be used for the creation of digital content, and space on the studio lot. Later that year, Warner Bros. signed on as a lead investor in Uninterrupted. Were Carter and James right to partner with Warner Bros. in this manner? And with renewal negotiations just around the corner, how could they make the most of the opportunity?

Faculty & Research

The Economic Value of Celebrity Endorsements

Abstract

Citation:

About the Author

More from the Author