Should you use celebrities to promote your brand?

There are lots of differing views on the use of celebrities to sell brands but if you have the money, it makes sense to explore this option.

But tread carefully because celebrities after all are human and humans get injured or worse, make mistakes – think Tiger Woods, who was unceremoniously dumped by Tag Heur, Gatorade, Gillette, ATandT and Accenture, soon after the details of his infidelities emerged in late 2009.

Firms the world over spend hundred of millions of dollars getting endorsements from celebrities. And studies would suggest the returns are worth the investment – and the risk. Which is probably why Rolex has announced that Tiger Woods will now endorse its watches.

Indeed, a report last year by Anita Elberse for CNN found that sales of brands in consumer product categories jumped an average of 4% in the six months after an endorsement deal was announced.

Interestingly the report also noted that stock prices went up about 0.25% on the announcement and would generally react favourably each time the athlete won an event in his field.

As an aside, although Tiger Woods lost those endorsements, he is still the most endorsed athlete in the history of sport. And justifiably so if a report from Kevin YC Chung is anything to go by. According to the report, from 2000 – 2010, just the golf ball division of Nike earned an additional profit of US$60 million after acquiring 4.5 million customers after Tiger Woods began endorsing Nike products.

Of course Celebrity endorsements are not cheap. In 2000, Nike paid Woods US$100 million for a 5 year endorsement deal. Tennis player Anna Kournikova has multiple deals with Omega, Berlie Lingerie, Prince racquets and Canon. Kournikova also signed a US$50 million six year deal with Adidas. Fortuitously for Adidas they wrote a line into the contract that insisted on Kournikova winning something. This she rarely did but she still earned US$3 million from the deal.

Probably the biggest endorsement deal ever done was between Adidas and David Beckham. The lifetime deal cost Adidas US$161 million back in 2003. But at least it stops Nike from getting their hands on the globally popular football star.

Sometimes however all it takes is a little bit of good fortune related to a celebrity to generate massive sales. Victoria Beckham let it slip in an interview recently that despite the healthy state of her and husband David’s bank account, David was more than happy buying his socks from Marks & Spencer.

Since she made the statement, Marks & Spencer claim they have seen a more than 30% increase in the sale of men’s socks! And the cost of this celebrity endorsement? US$0.