The Economic Worth of Celebrity Endorsers - Dissertation Example

The Economic Worth of Celebrity Endorsers Introduction Celebrity endorsers have long been seen as a major influence on the public. The level of popularity celebrities have among the masses have lured marketers in using these celebrities in their advertisement. And the idea that celebrities can improve sales of a company is not new and is being worked upon since the inception of print media. With the increase in media and communication technology it has become more common and sometimes necessary to use celebrities to attract customers. The effects of such a trend will be very long lasting on the area of marketing and advertisement. The costs of advertising are ever increasing and the trend of including celebrities in the promotional campaign is also driving up the compensation celebrity’s demand for endorsement. Also brand wars have also increased and globalization has caused boundaries to blur. This has increased competition and this in turn has made organizations more dependent on wide scale marketing. In such an environment it is very important for managers to find whether use of celebrity really adds value to the product or not. The metric usually used for effective advertisement is ad recall. If audiences remember advertisements then chances are that they will go and buy that particular product. The research that will be conducted is based upon the relationship between celebrity endorsement and ad recall. The effect of celebrity endorsement on ad recall will be analyzed in the telecommunication industry. This proposal will include the details of the research conducted and will also include a literature review of the topic. Research methodology and design will also be elucidated in the proposal with a set of recommendations for further research on the subject. Literature Review As we know that celebrity endorsements are regularly used for marketing of different brands all over the world, the research conducted on the subject is very extensive. Researchers have tried to identify the relation of celebrity endorsement and many things like brand image and brand equity. The work done in this regard is very diverse and many cultures have been tested regarding the importance and worth of celebrity advertisements. Research has also been conducted on how ad recall can be improved and what factors can affect recall rate of advertisements. It is very important for research purpose to define who a celebrity is. According to Kamins (1989) celebrity is a person “who is known to the public (actor, sports figure, entertainer, etc.) for his or her achievements in areas other than that of the product class endorsed”. This definition of celebrity is appropriate for our research purpose. It is acceptable for the culture in which we are conducting this research. Celebrity endorsement was found to be very effective in portraying a credible image of the product or service in terms of perceived expertise and trustworthiness (Till & Shimp, 1998). Credibility can positively affect brand image of the product by increasing the element of trust among customers regarding the particular product. The impact of celebrity endorsement was also found to be great on brand equity but the extent of this impact was dependent on the level of perceived credibility of the celebrity endorser (Spry, Pappu & Cornwell, 2011). Audiences actually find a sense of credibility when the message to buy a product comes from a celebrity because he is conceived as credible. This is the reason why credibility plays a role in celebrity endorsement. Expert celebrity can influence audience more when the product is high technology oriented (Biswas, Biswas, & Das, 2006). One of the main factors identified in studies is the fact that it is very important to match the celebrity to the product he or she is endorsing. This match should be on the basis of age or gender. A good match between the product or service and the celebrity endorser can increase the effectiveness of advertisements (Hsu & McDonald, 2002). Audiences can connect easily to people that belong to their own social group and this is the main reason why a good fit between product and celebrity is vital. Usually a product or a service is catered to one or two specific social groups and more people of that social group will connect to the advertisement if the celebrity endorser is from their social group like age or gender. A very good example is that of athletes. It was found that brand loyalty was increased when athletes were used in advertisements due to their perception as role models by the youth (Bush, Martin, & Bush, 2004). The fact that young people like to play sports may have to do with this relationship and this is the reason why we see sports stars marketing different product. The effect of these advertisements is great on youth and this is effect is strong for products that particularly focus on younger generation. Another striking feature of using sports athletes was found to be the word of mouth marketing that was found when athletes marketed the product (Kim & Hee N, 2007). Researchers have also tried to identify the economic worthiness of a celebrity endorser and it was found that celebrities are good enough investment for the company (Agrawal & Kamakura, 1995). It is important that celebrities generate a greater amount of profit for the company as compared to the cost that is incurred in hiring them. Economic decisions are solely based on cost benefit analysis so it is important for managers to conduct such an analysis before hiring a celebrity. The fact that celebrities are very expensive to hire has increased the need of such cost benefit analysis. A down side of using a celebrity is also great for a company. Apart from the positive attributes of a celebrity, the negative attribute of a celebrity are also found to be linked to the product itself (Till & Shimp, 1998). This finding is very important for managers as chosen a celebrity now is also very important. In this age of information any news about a celebrity can spread like wild fire and that can damage the repute of the product and the company. In order to stop this careful planning is required so that no negative news is associated to the celebrity that is used for marketing. Advertisement recall is also very important in determining the effectiveness of the endorsement. Ad recall was identified as one of the major benefits of celebrity endorsement (Dhotre & Bhola, 2010). Advertisement recall was also found to be very high when the match between product and service was good ((Misra & Beatty, 2002). This is again because of the fact that a match between product and celebrity induces more interest of the audiences in the advertisement and for this reason the recall rate of ads is high. The interest audiences take in medium of communication is also very important in determining the ad recall rate. The interest people took in a magazine was inversely related to ad recall rate of the readers of the magazine (Norris & Colman, 1992). This finding is very important because it shows that how important medium is when advertising. In order to ensure that ad recall rate is improved the medium should also be chosen carefully so that advertisement also receive audience’s attention. The effect of time is very important on effectiveness of celebrity endorsement. An advertisement would be more effective if the same celebrity is used with the same brand for over a long period of time (Rajakaski & Simonsson, 2006). The recall rate of advertisement will also improve if over the time same celebrity product mix is used in the advertisements. Research Purpose and Research Question Celebrities are commonly used for endorsement purposes in order to attract consumers. In this age of information our media has developed so much and new avenues of marketing have come up like internet. In a time like this cost related to the celebrity endorsement has peaked significantly. Companies are forced to spend a lot more marketing their products or services through all mediums of communication. Marketing costs have increased themselves and buying spaces between popular programs is not easy. It is therefore very important to find a cost effective way to market the product or service of the company. For this it is essential to find out whether the effect of celebrities is potent enough or not. The effectiveness of the advertisements should be increased by using celebrities and only then the huge cost associated with them will be justified. This research will help us understand if celebrity endorsement plays a significant role in increasing the retention of advertisement in the minds of the audiences. The measure of effectiveness of an advertisement is its recall rate. A high recall rate would suggest that an ad was effective conversely a low recall rate would suggest the opposite. The aim is to identify the relationship between celebrity endorsement and ad recall because it is important to evaluate the worthiness of celebrity endorsement. The research question will aimed at the understanding of the relationship between celebrity endorsement and advertisement recall. The research will focused on one sector only, in this case the telecommunication sector so as to minimize the effect of other factors that can dilute the results of this study. Controlling other factors is important in order to find the correlation between ad recall and celebrity endorsement because these factors can affect ad recall and we are specifically interested in the relationship between ad recall and celebrity endorsement. The telecommunication industry is chosen because it is relatively low involvement product. People think less when buying a cell phone as compared to when they buy an automobile so low involvement product is used intentionally in this research. Q. What is the relationship between celebrity endorsement and ad recall in the telecommunication industry? Research Strategy and Research Design The research will be a quantitative study because we are aiming at finding the correlation between two variables. The reason of choosing a quantitative method of study is the easiness with which we can achieve our purpose. The point of concern here is the limited resources at our disposal. A focus group is difficult to conduct because of the fee of the moderator and the data collected will be very hard to analyze. On the other hand in a quantitative study we will find it comparatively easy to evaluate the data at hand. The sample size for the research would be in between 200 to 300 students of 18-23 age groups. Questionnaire method will be used for the collection of data. Participants would be randomly selected from different universities and they will be shown a magazine in which there will be three to five ads of cell phones. The participants will be divided into two groups. Both the groups would have equal number of male and female representation so that the factor of gender can be kept constant. First group of participants will be given magazines that contain celebrity endorsement. Second group of participants will be given magazines that contain cell phone ads without celebrities. The response will be compared to see whether the group of students who were shown the celebrity ads had more retention compared to the other group who were shown non celebrity advertisement. Participants will be approached randomly and they would be asked for 10 minutes of their time. They will be told that the university is launching a new magazine and we want your input on the magazine. The participants will be given a time of 5 minutes to go through the magazine then it will be taken from the participant. Afterwards the participants would be asked to fill a questionnaire. In this questionnaire information about the advertisement will be inquired from the participants to check how much they retained of the advertisements. Data Sources and Data Analysis Data, as mentioned in the previous section, will be collected with the help of questionnaires. Responses of participants will be recorded with respect to their retention of information from the advertisement. There would be three levels of retention or recall rate, slight recall, medium recall and strong recall. The responses will be grouped in these three categories in order to measure their recall rate. Then the recall rate will compared from the other group. The correct responses would be given marks (1 mark for each correct response) and on the basis of these marks we will group the responses in the above three levels of retention. Each level of retention will have a particular number of marks assigned before the study and these marks will treated as standard. SPSS will also be used in order to calculate the coefficient of correlation ‘r’. Both sets of data (from celebrity ad group and from non celebrity ad group) will have their individual ‘r’ and then this value will be compared. If celebrity ad group will have a higher ‘r’ than the non celebrity ad group then it means that relationship between celebrity ad and recall rate is high. By using coefficient of correlation we can also comment on the extent of the relationship between celebrity advertisement and recall rate. Validity and Coherence The results drawn from this research will help us better understand the dynamics of the marketing in the present globalized world. To ensure the validity of the research we have picked a particular industry and we have chosen a low involvement product. Also we will try to use same gender ratio so that effect of gender cannot dilute the results of our study. Responses would be collected immediately after showing them the magazine and that will also help us in getting the insight on their retention level. If we will collect responses at a later stage then there are a host of other factors that play on the mind of the participants and our research results will not be objective. Students are also usually gadget freaks so they love mobile phones. This also justifies our sample size of the research. It is important to understand the influences on younger generation and that can help managers in determining the strategies for marketing for the product. Celebrities are also very famous usually among the younger generation so this is also a reason to choose young people as sample. Questionnaire method is used in the study because it is relatively easy to evaluate. It is difficult to draw out results from a qualitative interview and with limited budget and time questionnaire method is the best way knowing the insights of the students. Limitations of Research In this research we will not take into account the cultural factors that may play a role in the relationship between ad recall and celebrity endorsement. Students may belong to different culture and their interpretation of a celebrity may be different. Also we have ignored that some celebrities take part in more than one advertisement and that can also impact the ad recall. Participants may remember the celebrity because of some other ads and not the ad which are shown to them. All these limitation should be kept in mind when conducting further research on the subject. References Agrawal, J. & Kamakura, A. (1995). The economic worth of celebrity endorsers: an event study analysis. Journal of Marketing, 59(3), pp. 56–62. Biswas, D., Biswas, A., & Das, N. (2006). The Differnetial Effects of Celebrity and Expert Endorsement on Consumer Risk Perceptions. Journal of Advertising Bush, Martin & Bush. (2004). Sports Celebrity Influence on the Behavioral Intentions of Generation Y. Journal of Advertising Rsearch. Dhotre & Bhola. (2010). Analytical Study of Association between Celebrity Advertising and Brand Recall. The IUP Journal of Brand Management, 7(1, 2): pp. 25-50. Hsu & McDonald. (2002). An examination on multiple celebrity endorsers in advertising. Journal of Product & Brand Management Kamins. (1989). Celebrity and Non Celebrity Advertising in a two-sided Context. Journal of Advertising Research . Kim & Hee N. (2007). The equity effects of product endorsement by celebrities A conceptual framework from a co-branding perspective. International Journal of Sports Marketing & Sponsorship. Misra & Beatty. (1990). Celebrity spokesperson and brand congruence: An assessment of recall and affect. Journal of Business Research Norris & Colman. (1992). Context Effects on recall and recognition of magazine advertisement. Journal of Advertising. Rajakaski & Simonsson. (2006). The subject of celebrity endorsement: what it was and what it has become. Bachelor Thesis, Lulea University of Technology. Spry, Pappu, & Cornwell. (2011). Celebrity Endorsement, Brand Credibility and Brand Equity. European Journal of Marketing, 45(6) Till & Shimp. (1998). Endorsers in advertising: The case of negative celebrity information. Journal of Advertising. Read More