Once upon a time a celebrity endorsement was enough to get consumers trust a brand.

How much of your business would you give to Oprah for an endorsement? Media mogul, Oprah Winfrey, took a 10% ownership in Weight Watchers. Americans love celebrities. Oprah is more than loved. She is among the most powerful influencers in the country. According to Marketing Arm, Oprah is ranked #4 out of 3,786 celebrities in the world. The question is: Will it help Weight Watchers? An even bigger question is “How effective are celebrity endorsements“?

Any brand that engages in a celebrity endorsement takes a huge risk. The Tiger Woods, infidelity scandal, ended the golf pro’s deal with Accenture. Yet, another example of the risks involved with renting celebrity names to push your brand forward. Celebrity endorsements are inherently risky because you are dealing with living breathing people.

Celebrity endorsements are effective for two main reasons:

  1. Celebrities help brands tap into their fan base. Essentially, celebrities open new markets for brands.
  2. Celebrities also help brands build credibility. When a celebrity gets behind a brand consumers feel more reassured about the quality of the product.

What are the advantages of celebrity endorsements?

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  • Celebrity endorsements are one of the quickest promotional strategies. If you want fast results, celebrities can deliver.
  • There are measurable results. A recent study found that consumer products grew at an average of 4% six months into a campaign. Some brands saw an increase as high as 20%.
  • Celebrity endorsements are considered one of the great differentiators.
  • According to a study by Jeroen Verleun, the stock market favorably responds to athlete endorsements.

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What are the disadvantages of celebrity endorsements?

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  • At times, brands can mismatch their brands with the wrong celebrity. Gap hired Jessica Parker of “Sex and the City” fame, but it didn’t work. Her character was closely associated with haute couture style which did not resonate with the GAP consumer. Later, GAP replaced Parker with Joss Stone and Keith Urban, who were perceived to be more in line with the GAP target market.
  • When the celebrity’s brand equity drops so does the revenue of the brands they endorse. People change and lives change. The message celebrities communicate change as their life events change. As the result of the infidelity scandal, Gillette, Accenture, and Gatorade dropped Tiger Woods. The result? The entire golf industry saw a revenue slow-down.
  • Some celebrities tend to overexpose themselves and their credibility may suffer.
  • Sometimes consumers focus more on the celebrity than on the brand. When that happens the brand promotes the celebrity.

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Sometimes celebrity endorsements just don’t work. Here are a few real life celebrity endorsement horror stories:

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  • The Kardashians caught a lot of heat when they put their name on a predatory credit card. Only after a lot of negative publicity they have distanced themselves from the brand.

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  • Michelle Kwan, the Olympic figure skater, endorsed Coca-Cola while serving on the President’s Council on Fitness, Sports & Nutrition.
  • Sometimes culturally a brand just isn’t going to gel with a certain celebrity. When Bob Dylan shilled Chrysler many people were shocked.
  • What if the celebrity is not as loyal to the endorsed brand as she should be? Charlize Theron was paid to only wear Raymond Weil watches, yet she was photographed wearing a Christian Dior watch.
  • David Beckham was paid by Motorola, but was photographed, in public, using an iPhone. He claimed to hold it for a friend. I wonder if anyone believed him.
  • Oprah tweeted on her iPad “Gotta say love that SURFACE! Have bought 12 already for Christmas gifts.
  • Many thought when the band “KISS” had released a casket with its name on it was in bad taste.

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Does your business really need a celebrity endorsement?

If you think that your brand needs a celebrity to succeed, think again. Today, consumers are increasingly mistrusting big companies and the celebrities they pay to endorse them. This shift is largely the result of the Internet Age, which has made consumers much more informed about brands. People trust the opinions of people within their immediate network before they trust a celebrity. According to a survey done by SheKnows Media of 1,470 women, 86% of them want to hear from everyday people before they make a buying decision.

It seems that, many times, celebrity endorsements have no bigger impact on big brands than coupons and promotions. It would be interesting to see what a big name celebrity endorsement would do for a startup. No doubt, if you can make a big name celebrity endorsement happen, it would be a huge win for for your startup.

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George Meszaros is the editor and co-founder of Success Harbor where entrepreneurs learn about building successful companies. Success Harbor is dedicated to document the entrepreneurial journey through interviews, original research, and unique content. George Meszaros is also co-founder of Webene, a web design and digital marketing agency.