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How celebrity endorsement can boost your business

14th May 2010

Celebrities have existed for thousands of years, from the victors in Ancient Olympics to Roman Gladiators. Nell Gwynn, the actress and mistress of King Charles II, and Lady Hamilton, Nelson’s married paramour, were as much objects of intrigue n their time as any of Tiger Woods’ girlfriends.

It has only been in the 21st century, that celebrities have changed. The advent of online social media, magazines and niche, celebrity focussed TV channels, means that the barriers into the world of celeb have been lowered. These days you don’t seem to need to have any talent, or any reason to have earned your celebrity status, apart from appearing on a reality TV show!  

Indeed, the term celebrity has now become a term or disparagement, synonymous with those who have found fame despite having little no no real talent.   

In a recent interview in the Observer, the actress and producer Drew Barrymore proclaimed her hatred at being called a celebrity: 'Celebrity! It's become the most disgusting word on the planet. It makes me sick to my stomach. When I started out I was an actor. And now when someone calls me a celebrity, I want to shoot them. I want to go, thank you for reducing me - I've worked for 35 years, I've killed myself to be established as someone who is responsible, reliable and accountable in my field of work, yet you're calling me a name of someone who basically got famous for no reason. It's like the worst name on the planet. I hate it. And people say it all the time: "You're a celebrity." No, I'm an actor. I'm a producer. I'm a director. I'm a toad. I'm road-kill. I'm anything but a celebrity.'

However fame means money, both for the celebrities themselves and for the businesses they choose to partner with; celebrities can be the steroids of business performance. In the short term, they can help you connect with your customers and boost your appeal to investors. However, in the long term, the consequences can be more uncertain. Time it right and sign up a celebrity just as the public is falling in love with them, and it can turn you into a stock market Usain Bolt. Time it wrong and you'll be clunking along in the slow lane until you can disentangle yourself from the trashy consequences.

From publishing to supermarkets, sporting equipment to management consultants, businesses face the conundrum of how to make the best of celebrities. 

Jamie Oliver is a prime example of a successful celebrity/brand partnership. The chef was barely off the line at the River Cafe when Sainsbury's signed him in 2000. His television and publishing careers were taking off and, together, they made a fortune. In the first two years of his association with Sainsbury's, Jamie Oliver was credited with generating an extra £1.12bn in sales, and it has been upwards ever since. Every time Jamie suggests a novel ingredient in one of his television shows, or on a Sainsbury's advert, the Supermarket stocks up in anticipation of the rush.

Even so, no relationship is always perfect. In 2008, Jamie Oliver wrote an open letter to every member of staff at Sainsbury's apologising for criticising the supermarket's decision not to participate in a public debate on chicken farming. Sainsbury's saw the move as disloyal, coming from a man paid £1.2m a year to act as its public face.

Another celebrity-business success story has been that of Kate Moss and Topshop. In 2005, Kate Moss was dropped by a number of brands after the reports came out of her supposed cocaine use, including Swedish retailer H&M, and fashion houses Chanel and Burberry. Sir Philip Green, the owner of Topshop, saw an opportunity and signed her up. Moss' rebirth and Topshop's global expansion went hand in hand. She now designs a line of clothes for the chain, which has expanded from the UK to the US and around the world. It is said that Kate makes more money as a model and designer today than she did before the 2005 scandal.

Martin Roll, CEO of VentureRepublic, a business and brand strategy firm, has established three basic questions a company should bear in mind before signing up celebrities. Are they attractive - do they look good, are they intelligent, successful and charming? Are they credible - are they trustworthy and expert in the product they are promoting? And is there a transfer of meaning between the celebrity and the brand? There has to be some compatibility between the product and the celebrity. In the case of Johnny Rotten and Country Life, it was English eccentricity. For Moss and Topshop, it was about style, high fashion and edginess.

According to Reaching for the Stars: The appointment of celebrities to corporate boards, a new study by four US-based economists, just announcing a celebrity is joining a board can boost a company's share price. Disney stock went up 4.2% when it announced that the actor Sidney Poitier was joining its board. Economists attribute this to the 'visibility effect', by drawing the attention of investors to a firm, the celebrity on the board increases interest and demand for the firm's shares. Institutional investors, supposedly the most hard-headed investors, are said to be especially star-struck when it comes to placing their money.

The study's authors admitted that when they started their research, they wondered what a sport star or actor could possibly contribute to a board discussion of cashflow statements. However they were surprised by what they found, after scrutinising 700 celebrity appointments to corporate boards from 1985 to 2006, the academics found boards that include celebrities enhanced shareholder value over one, two and three-year periods.

'The selection of such an individual to a board provides an opportunity for the firm to increase its visibility through the prominence and status associated with a celebrity director,' the study says. 'Further, such an individual can provide important networking connections or help to balance investors' perceptions and attitudes towards the firm in a more positive direction. This enhanced visibility can ultimately lead to increased share valuation.'

It's the kind of finding that drives some people crazy. A world that valued reality over reality television would not mindlessly reward celebrity. Celebrities, talented or not, are a quick way into the minds and wallets of consumers. Some have proved enduring: Delia Smith and Jamie Oliver in cooking, David Beckham in sport. But with the raft of talent and reality television shows, new celebrities are born and die every week. Identifying which have legs and which don't is a challenge for businesses looking for endorsement opportunities.

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