The Trouble with Celebrity Endorsers - Article Example

The Trouble with Celebrity Endorsers The article highlights that celebrity endorses are not the most efficient ways of promoting brands in the market. The author stresses that instead of borrowing the equity of the celebrity, the company should invest in building the brand’s own equity. Promotion is one of the components of the marketing mix. With the current economic condition, business organizations are irrefutably perplexed of coming up with the most efficient promotional strategy in order to capture potential clients and retain current buyers. The numerous ways of reaching customers, the evolving lifestyle of buyers, together with the tough economic condition all adds to the marketers’ various considerations. Another point raised is brand equity. Brand equity is something that the company builds over time in order to differentiate itself from the other competitors in the market. The article suggests that instead of leveraging on celebrity’s image, the brand should be able to develop its own equity through leaving out costly promotion into adding more product features, etc. Having learned in marketing that promotion is a key in creating customer awareness, I believe that companies should invest in promotion especially in the first months or years of a brand in order to introduce it to consumers. However, in the latter life, real value should be delivered to customers. This article opens my eyes to the challenges faced by marketing strategist. Promotion is far more complicated that having celebrity wears the product or recommends the brand. There should be an alignment in the image of the celebrity as well as the celebrity being used for promotion. Nokia Issues Second Profit Warning as Spending Wanes (from Times Online) The article highlights how Nokia is faring through the economic downturn in industrialized economies especially the United States. The past months have witnessed how the world economic leader in the past is undergoing recession. As a consumer, I have read and seen how investment firms collapse, laborers laid-off, and even the more profitable retailers’ close down. Looking at in a marketing viewpoint, this change in the business environment challenges businesses to reinvent themselves and their various strategies in order to survive. Nokia’s response in the situation is to cut cost in order to maintain profitability. However, the low demand brought about by the bleak economic outlook and lower purchasing power of customers remains the key consideration. Thus, companies should focus on strategies other than minimizing operations and marketing costs. Lastly, I suggest that companies like Nokia should utilize marketing tools like the Ansoff product market grid in order to survive in the more challenging environment. For instance, it is irrefutable that even though industrialized nations are slowing down, the economies of China, South America, and India continues to grow. This gives the company a potential market to serve given that its main markets are experiencing difficulties. Nokia can focus on developing and bringing products in these markets in order to diversify risks and take advantage of opportunities. Nokia issues second profit warning as spending wanes Lilly Peel Nokia, the world’s largest mobile phone maker, issued its second profit warning in three months yesterday blaming a “sharp pull back” in global consumer spending over the past few weeks. It also forecast that global handset sales would fall in 2009 as the economic downturn picked up speed. If handset sales fall next year, it will be the first drop for eight years. Sales in Western Europe have also slowed in recent years because of high levels of mobile saturation. Phone makers are increasingly exposed to a consumer-led downturn. Matthew Key, the chief executive of O2 Europe, who revealed the group’s third-quarter results yesterday, said that customers are increasingly opting not to upgrade their phones. Manufacturers are also being hit in emerging markets, where sales of cheap handsets have helped to fuel Nokia’s growth in the past couple of years. Top of Form Bottom of Form Now, however, the rise in fuel and oil prices has left consumers reluctant either to buy their first phone, or to upgrade their handsets. “In the last few weeks, the global economic slow-down, combined with unprecedented currency volatility, has resulted in a sharp pullback in global consumer spending,” Nokia said in a statement. “The weaker consumer spending has impacted many industries, including the global mobile device market. The mobile device market has also been hit by the more limited availability of credit, which has limited the purchasing ability of some of our trade customers.” Analysts believe that handset sales could fall by as much as 27 per cent next year as Europe and America struggle through a recession. The Finnish group said that it would take additional decisive action to reduce costs significantly, including cutting back its use of consultants and contractors. Nokia also reduced its forecast for global mobile phone sales this year. Only two months ago Olli-Pekka Kallasvuo, the chief executive of Nokia, predicted 1.26 billion handsets would be sold across the industry, equal to 10.5 per cent growth, compared with 16 per cent growth in 2007, when sales broke through the billion mark for the first time. Yesterday he reduced that target to 1.24 billion. Nokia said that it expects sales and profit at its mobile division to be reduced in the fourth quarter as a result. However, the company said that it still expects at least to hold its market share for the last three months of the year, compared with the third quarter. Nokia issued a third-quarter profit warning in September as it announced its 38 per cent market share was a decline on the second quarter. Mike Grant, a partner at Analysys Masson, the technology analysts, said: “The driver for handset growth in more developed economies with saturated markets has been more about fashion and the desire for the latest and greatest shape or colour.” He added that people thought they could no longer afford such luxury. Ten days ago Nokia unveiled a range of cheap handsets aimed at emerging markets, including two internet and e-mail-enabled models for under $100. It also launched its Ovi internet service, aimed at a new generation of Indians. Mr Grant said: “This is the first time internet-enabled phones have been offered for under $100. With Ovi in India it is possible that many Indian people will have their first e-mail address as ovi.com sent from their mobile phone.” The Trouble with Celebrity Endorsements Celebrity spokespeople are expensive and risky, and they don't always pay off Tiger Woods is one of the greatest athletes of all time. He's also a product-endorsement gold mine. I have no trouble believing that Tiger actually prefers to use most of the products he endorses, including his Nike (NKE) equipment, Titleist (FO) golf balls, Gatorade sports drink, Gillette razors, American Express (AXP) card and Tag Heuer (LVMH) watch. But Buick (GM)? That's a stretch. Yet GM has paid Woods millions of dollars to stand up for the brand. Tiger may be the endorsement champ, but he's not alone. Michael Jordan—Nike, Gatorade, Hanes (HBI), McDonald's (MCD), Chevrolet), Bill Cosby (Coke (KO), Jell-O (KFT), Del Monte (DLM), Ford (F), Kodak (EK)—and Peyton Manning—Sony (SNE), MasterCard (MA), DirecTV (DTV), Gatorade—have all been at the top of the heap of celebrity endorsers. And there are hundreds of other examples of famous endorsement deals, from Karl Malden for American Express to Brooke Shields for Calvin Klein to William Shatner for Priceline (PCLN). Most advertisers can't afford the millions of dollars it takes to ink a celebrity endorser. But if your company falls in that category, take heart. Celebrity endorsers aren't only pricey, they're risky. Before you take the plunge on an international, national, or even local celebrity, ask yourself a few tough questions. Are you being smart, or just lazy? "Borrowed equity" is the term used to describe the value of a celebrity spokesperson. The premise is if Endorser A wears Product B and drinks Product C, maybe consumers will want to, too. But borrowed equity is just that—borrowed. It may rub off on the brand endorsed, but in the long run it belongs to the celebrity. In some cases the match between person and product is strategic, such as Jordan's natural tie to Nike or Cosby's comical personality for a fun product like Jell-O. That's also the case for Wilfred Brimley's grandfatherly tone for healthy Quaker Oats (PEP) and Dennis Haysbert's imposing frame and booming voice for the "Good Hands People" at Allstate (ALL). In some cases the product can be shown to demonstrably solve a celebrity's problem, such as Dan Marino and Mike Golic shedding unwanted pounds using NutriSystem (NTRI). But Catherine Zeta Jones for T-Mobile (DT)? Emmitt Smith for Just For Men? Jason Alexander for KFC (YUM)? I suspect each of these companies can trot out research and Q-scores that justify their investments, but they're spending a lot of money for the borrowed equity of a talking head. It may be flattering for corporate leaders to rub elbows with celebrities, but unless there is a natural strategic tie it's not much more than an expensive date. Will you be building your brand equity, or theirs? In the 1970s, the Pittsburgh Steelers "Steel Curtain" defense was anchored by a hulk of a man nicknamed "Mean Joe" Greene. As it turned out, Greene wasn't so mean in real life, but when he roamed the gridiron he struck fear in the hearts of opposing teams. That's why Coca-Cola's idea of having Mean Joe toss his jersey to a young boy in exchange for a bottle of Coke was brilliant. The commercial made charming use of Mean Joe's image, but Coke was the star. Fast forward 30 years or so to Paris Hilton's scantily clad, soft porn television commercials for Carl's Jr. (CKR) and sister company Hardees. The spots got a lot of attention, but not for the burgers they advertised. They became building blocks in Hilton's wall of infamy, while the sponsoring brands endured thousands of consumer complaints. Even squeaky-clean celebrities can present problems for brands trying to retain borrowed equity. How does Tiger Woods' paid relationship with Buick affect his endorsement of Tag Heuer? How many of Peyton Manning's commercials are remembered for the logo at the end rather than the charm (and remarkably good acting skills) of the star? Would I want Woods or Manning to use and endorse any of my clients' products? You bet. But the more of them they endorse, the more diluted each endorsement becomes. What's the risk that they may do something you regret? Because celebrities exist in the spotlight, surrounded by paparazzi eager to turn a stolen moment into a quick buck, the risk of getting caught doing something embarrassing is much higher than for the average Joe. And they don't even have to be alive to do it. You would think that Ben Franklin is a safe bet as the face of Franklin Templeton Investments (BEN). Yet anybody who has read David McCullough's best-selling biography of John Adams might disagree. McCullough paints a picture of Franklin that is less than flattering, and since reading the book I've been given pause each time I see a Franklin Templeton ad. Once you tie your brand identity to a celebrity (living or dead), you're hostage to that person's image. Will the borrowed equity increase over time? The surest way to ensure long-term value from a celebrity spokesperson is to invent one. Advertising agency giant Leo Burnett pioneered this approach with Tony the Tiger, the Jolly Green Giant, and the Pillsbury Doughboy. Budweiser (BUD) made hay with frogs and a lizard a few years back, and the roly-poly Michelin Man recently made a comeback (slimmed down for a more health-conscious culture). Geico has done a masterful job making a little green gecko and big hairy cavemen famous. Since they're not real people, the risk of them doing something illegal, immoral, or embarrassing is nil, and the company can evolve their roles and storyline over time. Is there a better way? The answer is almost always yes. Celebrity spokespeople are expensive and risky, and they don't always pay off. If you believe your brand is in need of additional equity, instead of borrowing it from a celebrity, develop it yourself. You may need to refocus your efforts on making your brand more appealing, more affordable, or more easily available (and perhaps all of the above). Or you may simply need to find a way to develop a more attention-getting, interesting and compelling appeal. Take the money you would otherwise hand over to an already well-paid celebrity and invest it in developing original creative ideas that will make your brand stand out. That way, the equity you create will be nothing but your own. Read More