The priceless cult of celebrity - are star endorsements good value?

Celebrity: Kate Moss

Endorsements: (Current) Top-Shop, Virgin Mobile; (Past) Gucci, Burberry, Chanel, Hennes & Mauritz, Dior

Background: Kate Moss has groomed her ‘bad girl’ image with a nonchalant dedication worthy of a rock star. A dedicated ‘party girl’, she allegedly once claimed that she’d never walked a catwalk sober, even in the morning, and that was before her much publicized brush with cocaine and heroine. Britain’s foremost fashion icon is shrewd enough to understand that rebellion is a symbol of maturity to an entourage of teenagers who are struggling to forge their own identities and independence. Over the past two decades her widely reported health problems, weight loss and recreational drug use have regularly dominated the headlines. However, despite her party antics, rebellious boyfriends, and diminutive stature, Kate Moss has become Britain’s most beloved supermodel simply by prevailing at the top of a tough industry for fifteen years.

As a leading lady once put it, all publicity is good publicity, and as though to prove the fact Kate Moss is now earning over three times the amount she did before cocaine rehab - some $56 million last year alone. This May high street retailer Top-Shop unveiled part of their new Kate Moss collection, a range said to be worn and ‘designed’ by Kate Moss herself. In effect, Top-Shop has bought itself a hefty slice of Kate Moss chic and street credibility, completing an expensive makeover of a once dowdy and declining brand. Top-Shop was not the only major British company to recently enlist Kate’s hot image. Virgin Mobile, the telecommunications company founded by Sir Richard Branson, signed Kate Moss in December of 2006 to feature in a series of ads which made light of her recently tarnished image.

Income: Top-Shop £3.0m + share of profits; £1.4m Virgin Mobile

Brand Sales: Top-Shop is part of the Arcadia Group, privately owned by the family of Sir Philip Green, also owners of BHS & Etam. Bought in 2002, the company is no longer floated on the stock exchange and so recent figures are unavailable. Although the group recorded a 96% profit increase based upon a 3.3% increase in sales in October 2003, a subsequent plunge in profits was reported in October 2006 prior to signing Kate Moss. Shares in Virgin Mobile jumped 2.9% the day after the campaign was announced, although it has since been taken over by NTL.

Value: The impact of the Kate Moss factor in rescuing Top-Shop’s profitability remains to be seen.

Celebrity: Britney Spears

Endorsements: Fantasy Perfume, Got Milk?, Pepsi, Proactiv Solution

Background: In one of history’s biggest brand promotions, PepsiCo reportedly paid Britney Spears US$ 97.5 million to endorse the Pepsi Cola brand in March 2001. At the time Britney Spears was at the height of her powers, a chart-topping icon radiating American youth and sex appeal. However, the deal soon began to unravel when Miss Spears was caught on camera in October 2001 enjoying a rival brand. This followed a previous incident in which Miss Spears had been caught drinking Pepsi’s arch rival Coca Cola in Sydney, Australia, as if to say that not even a hundred million dollars could force her to prefer Pepsi. A spokesperson for an enraged PepsiCo publicly stated, ‘You don't expect to sign someone to a deal that big and then see them drinking a competitor's brand twice in a month’.

In contrast, executives at the Pure nightclub in Las Vegas claimed to be entirely happy with Britney Spears after a scheduled New Year’s appearance, despite the fact that she fell asleep after being paid a reported $400,000 to endorse the club through her presence.

Income: $80-97.5 million, PepsiCo, 2001

Brand Sales: There is little evidence to suggest that the slow growth in PepsiCo sales was changed by the 2001 campaign in which Britney Spears featured (see inset chart).

Value: PepsiCo claimed that it had dropped Britney Spears from its campaign as the Pepsi brand itself had been eclipsed by the image of the stars it had hired, believing that it had failed to achieve the promotion it had paid so much for.

Celebrity: Catherine Zeta-Jones

Endorsements: T-Mobile 2002-2006

Background: in 2002 Catherine Zeta-Jones reportedly signed a two year, $20 million deal to become the face of T-Mobile in 2003, such was the perceived value of Zeta-Jones’ urbane chic. This hefty price tag came with a few preconditions though, including the exclusive use of T-Mobile’s products in public and private, and a contracted obligation to dissuade producers from using rival products in any of her films. However, Catherine Zeta-Jones was dropped as the face of T-Mobile in October 2006 as fears grew on Wall Street that consumers were becoming increasingly resistant to celebrity endorsements.

Income: $20 million T-Mobile USA

Brand Sales: After signing Catherine Zeta-Jones, T-Mobile saw their U.S. sales increase by over 25% in 2003, although growth later slowed during 2006. The net income of T-Mobile USA for the 2nd quarter of 2006 was $233 million, down 40% on the same period in 2005. The inset chart shows the change in the share price of Deutsche Telekom, owners of T-Mobile USA, over the period of Mrs. Zeta-Jones’ tenure as their American spokesperson, echoing the rising and falling influence of her star.

Value: A spokesperson for T-mobile was diplomatic and positive about the impact that Catherine Zeta-Jones had had upon the company’s fortunes, 'When Catherine Zeta-Jones agreed to be our spokesperson four years ago, we could never have imagined the cache appeal she would have brought to T-Mobile. Her style, credibility and integrity have been a tremendous benefit for our company and our brand. We could not have asked for a better partner in launching T-Mobile USA than Catherine Zeta-Jones'.

Celebrity: Paris Hilton

Endorsements: Carl's Jr , Diamond Quest, Hardee’s, GoYellow.de

Background: Through the publicity arising from her risqué hotel video and drink-driving ban, Paris Hilton has successfully emulated both Kate Moss and Pamela Anderson as a society ‘bad girl’, whilst retaining her own unique chic as the wild and desirable hotel chain heiress. There can be little doubt that Paris Hilton has brought the fantasy lifestyle of the idle rich back into vogue. The public projection of Paris Hilton is a heady fusion of wealth, sexuality and high fashion, an image which resonates strongly with America’s youth. Having successfully created a media firestorm with her exploits, Paris Hilton quickly capitalized on the attendant publicity to become a leading fashion model in her own right, complete with her own brand of perfumes and designer ware. Naturally, big business has been quick to sign up America’s society princess to market a range of commodities.

It might come as little surprise that Miss Hilton’s advertising campaigns have caused as much controversy as her jail sentence and adult video release. In her commercial for Carl's Jr. and Hardee’s, Paris Hilton ‘lovingly’ washes a black Bentley in her bathing suit to promote a new $6 burger. Fearing a public indecency scare, Hardee’s and broadcast network executives were initially reluctant to air the raunchy commercial, although viral marketing and web sites quickly bypassed their public show of anxiety. Carl's Jr. launched the first commercial in May 2005, with a duplicate Hardee’s commercial airing the following month. As was expected, many parental groups lodged indecency complaints claiming that the video was essentially ‘pornographic’ in nature. The ad campaign, which targeted men aged between 18 and 34, even had an associated website called SpicyParis.com from which an ‘extended’ version of the commercial could be downloaded. Unsurprisingly, the company reported that the web server crashed soon after the ad appeared online due to the sheer demand to see more of Paris’ escapade with a water hose and a Bentley.

In a similar vein the German Yellow Pages, GoYellow.de, featured Paris Hilton in an online commercial in which she could be seen writhing around on a bed, eating an apple and tugging at her yellow panties. There is apparently a prize for the person who can guess what this has to do with a commercial yellow pages directory. For all her antics, there can be little doubt that Paris Hilton is the princess of self-publicity, outstripping even Jenna Jameson and Traci Lords as the queen of mainstream striptease.

Income: Paris Hilton reportedly made some $15 million in 2005 from endorsements, including income derived from her jewelry and fragrance ranges. Her 2006 income is unknown.

Brand Sales: Profits of CKE restaurants (owners of Carl's Jr. and Hardee’s) were up in 2005, although detractors claimed that despite the reported 802% increase in web searches and 4 million downloads from the spicyparis.com website, the substantial news air time and associated ‘buzz’ that the Paris Hilton campaign generated had little impact upon profits. In support of this notion, CKE Restaurants reported that profits from the summer quarter of 2006 yielded a net income of $14.2 million, versus $8.4 million for the same period in 2005 (the summer of Paris Hilton’s risqué ad). Regardless of whether Paris Hilton sold as many burgers as she consumed in advertising dollars, the company’s share price fell sharply at the same time that Paris sank her teeth into the company’s $6 burger on national television.

Value: For CKE Restaurants the infamous Paris Hilton ad was a misadventure, although for Miss Hilton herself, the ad merely served as a powerful reinforcement of her commercial image as a society sex symbol.

In conclusion, there can be little doubt that these multi-million dollar advertising campaigns serve to reinforce the star status of the celebrities involved - and there’s nothing quite like being paid to be advertised. However, from the perspective of the companies paying these celebrities for their endorsements, the value of their investment is less clear cut. In theory, a well chosen celebrity at their height of their powers and popularity may represent a cost-effective means of promoting a brand or launching a new product, especially given the amount of ‘free’ publicity their association generates. While T-Mobile might feel entirely satisfied with their investment in Mrs.Zeta-Jones, PepsiCo and Hardee’s may well feel differently.

In most cases of celebrity endorsement it would appear that the commercial reality is more of a feel good factor than a bonanza. Upon the announcement of a new celebrity endorsement, stock values tend to rise by an average of $257 million, around 1.3% of their value. This may be good for those in the boardroom who are intending to sell their shares, and certainly the announcement tends to create a wealth of associated publicity. However, actual sales often fail to rise sufficiently to cover the costs of the endorsement and associated advertising, and although profits may appear to increase, this is often difficult to distinguish from underlying trends in the market. For example, the mobile phone sector was booming during the period of Catherine Zeta-Jones’ endorsement. Perhaps PepsiCo and Hardee’s might feel that their money would have been better spent by offering free samples to potential customers than on mouth-watering images of scantily clad pop princesses. Still the celebrities are not complaining about being paid so much to receive more publicity - after all, nothing succeeds like success...