Whether it’s a TV commercial, billboard advertisement, or a post on social media, we as a consumer cannot escape the constant stream of celebrity endorsements. One of the first ever celebrity endorsements stretches back to the 1930’s when baseball icon Babe Ruth was paid to endorse the brand Red Rock Cola. The trend has remained strong as athletes, musicians, and actors have made millions of dollars promoting consumer goods.
An endorsement from a big-name celebrity can increase a company’s sales of their products an average of 4 percent while increasing a company’s stock value by 0.25 percent as soon as the news hits headlines. For larger companies, who are more likely to jump on the bandwagon of celebrity endorsements, a 4 percent increase can equal to millions, or even billions, of dollars.
Studies have shown that consumers show greater recall of products when they’re endorsed by celebrities, regardless of if they are actual fans or not. This is because the human brain recognizes celebrities in a similar way to how it recognizes people we legitimately know. If the consumer happens to be a fan, they will place a higher value on the product that is being endorsed, giving it the same effect as if they are getting advice from a friend. Not only do these endorsements impact revenue for the business, but they can also positively and negatively impact stocks.
In October 2015, media mogul Oprah Winfrey announced that she was purchasing a 10 percent stake in the popular weight loss and maintenance company Weight Watchers. She credited the points-counting diet company with finally providing her a practical way to manage her weight and invested $43 million in stock shares. Once the announcement was made live, investors saw the value of their stock increase by a staggering 92 percent within a few days after. By the end of November 2015, the stock was worth $27.76 a share. This is a 279 percent increase from the stocks low point of $6.79 a share before the announcement.
It’s not just women who can have an impact on weight loss programs. In January 2018, shares of Weight Watchers rose more than 6 percent after music star and producer DJ Khaled was signed to be a “social media ambassador”. Khalid, who has 4.16 million followers on Twitter and 12.1 million followers on Instagram, shared with his followers that he had lost 20 pounds on the program. Of the endorsement, Weight Watchers CEO Mindy Grossman said, “By capturing and sharing his process, (DJ Khaled) will enliven and inspire his community, showing that it’s possible to integrate healthy habits into your life.”
— Oprah Winfrey (@Oprah) October 19, 2015
Pepsi is no stranger to using celebrities to endorse their soft drink products. In the early 2000’s, you couldn’t turn on your television without seeing a commercial break that featured pop music sensation Britney Spears promoting “The Joy of Pepsi”. There was also the mega-popular Pepsi ad that features Spears alongside two other pop stars, Pink and Beyoncé, that debuted during the 2004 Super Bowl.
It’s clear that these advertisements helped boost both the Pepsi stock and its revenue, but sometimes Pepsi gets it wrong. Fast forward to April 2017, when Pepsi decided that model Kendall Jenner was the face of their newest campaign. The advertisement was hit with major controversy, as it featured Jenner leaves a photoshoot to join a protest where she hands a police officer a Pepsi to defuse tension.
“Clearly we missed the mark, and we apologize. We did not intend to make light of any serious issue. We are removing the content and halting any further rollout. We also apologize for putting Kendall Jenner in this position,” Pepsi said in a released statement. Even despite the controversy and the major backlash the brand received on Twitter, the stock was up 1.7 percent at close the same day that the advertisement was taken down.
In September 2018, Nike put out a “Just Do It” advertisement, featuring various athletes, including former NFL star Colin Kaepernick, who in 2016 began kneeling during the national anthem to protest racial injustice. The text overlay on this advertisement read, “Believe in something. Even if it means sacrificing everything.” After an initial hit to its shares, Nike’s stock rose 6.25 percent, adding $6.38 billion to the company’s value. The advertisement, which was released via Kaepernick’s Twitter account of 2.06 million followers, has received over 370,000 retweets and over 922,000 likes.
In addition to the rise in the stock, Nike received an increase in traffic to their website, a record customer interest to their various social media feeds, and growing online exposure on a global scale. “We feel very good and are very proud of the work we’ve been doing,” Nike CEO Mark Parker said, speaking on the company’s quarterly earnings call. “We know it’s resonating quite strongly with consumers here in North America and around the world.”
Nike is no stranger to celebrity endorsements. In 1984, they launched the Nike Jordan shoe brand. Statistics show that Jordan boosted Nike’s bottom line with the Jordan Brand taking 75 percent of the basketball shoe market, while also having a 10.8 percent share of the overall shoe market in the United States.
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