Business management Literature Review

Introduction

Organizations of all sizes have a number of marketing tools at their disposal in order to engage and manage profitable customer relationships (Kotler 2016). One of which being celebrity endorsements; McCracken 1989 defines the celebrity endorser as any individual who enjoys recognition and who uses this recognition on behalf of a consumer good by appearing with it in an advertisement. Celebrity endorsements have been a commonly practiced marketing tool since the late nineteenth century and have expanded from being applied in traditional brand or product marketing (Knoll and Matthes 2016) to service industries such as the airline industry. One of the most notable and arguably one of the most successful celebrity endorsements has been Nike’s endorsement of former NBA player, Michael Jordan in 1985 which increased Nike’s popularity within basketball and enabled them to break new records (Mathew 2017). However, some industries, such as the Beauty & Personal Care market, have seen a shift in celebrity endorsements to the new style of a celebrity, the internet celebrity. Mintel’s Fragrance UK 2016 report shows that only 6% of fragrance buyers were influenced by celebrity endorsement to buy a fragrance in the 12 months to June 2016. Considering that the fragrance market is renowned for using celebrity endorsements, with Chanel reportedly spending $14 million on endorsing Nicole Kidman in their 2004 No. 5 perfume in an advertisement that cost them $42 million to produce (Greenman 2014). Knanom 2016 has attributed this shift to the impact of 2008 credit crunch on the way people shop, as a result consumers are now looking for alternatives to their favorite brands and the rise of the social media has changed the way consumers interact with celebrities. Therefore, this has called for an assessment to be made for the effectiveness of celebrity endorsements as a marketing tool in today’s competitive market.

This research topic resonates with the millennial researcher as they have been able to live through the social media era. Consequently, they have witnessed how non-celebrities have become an effective marketing tool due to their large social media followings enabling organizations to engage with consumers at a fairly low cost in comparison to endorsing celebrities. However, it can be argued that these non-celebrities are in fact celebrities in their own right as they can be labelled ‘social media’ celebrities as their large followings can in some instance be comparable or even more than some traditional celebrities. For example, at present YouTube beauty and lifestyle blogger, Patricia Bright, currently, has over 1 million YouTube subscribers with some of her videos receiving over 1 million views. What this means for organizations is that endorsement of such social media celebrity can bring substantial traction to their product/service, whilst at a lower cost to what a traditional celebrity may charge. In addition, the researcher has been able to witness that large organizations with substantial buying power have also started to use the social media celebrity endorser, which raises two questions to be assessed. Firstly, does the size of an organization determine what type of celebrity they use as a marketing tool? And secondly, has there been a decline in the effectiveness of traditional celebrity endorsements, which has led them to use other types of celebrity, such as the ‘social media’ celebrity? In addition, the researcher has also been able to witness how the social media era has created indirect celebrity endorsements, which in the case of this research, is when celebrities can be seen using a product/service in their social media without directly being affiliated/endorsed by the brand. For organizations, this is essentially one of the most valuable marketing tools because it comes at no cost to the organization. For example, according to McMaken 2012, sales of Al Green’s song ‘Let’s Stay Together’ increased by 490% when a video of former President Barack Obama singing it went viral. Therefore, social media has created new tools for organizations to use as a means of communication and in addition also created more opportunities for customers to engage with a brand (Jobber and Ellis-Chadwick 2012: 500).

Under the marketing mix concept, celebrity endorsements would fall under the promotion marketing tool, as it refers to activities that communicate the merits of the product and persuade target customers to buy it (Kotler and Armstrong 2016: 78). According to Kotler and Armstrong 2016: 78 discourse, the marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in the target market. Therefore, this suggests that it is one element within a multi-channel approach when combined with price, place, and the product helps to influence demand for a product/service. This view has been confirmed by Olenski 2016 who stated in reference to celebrity endorsement, ‘It is the combination of several factors especially the price and other elements that work together for the success of a brand and its acceptance in the minds of consumers as well as for its marketing offering.’ In addition, in order to increase its effectiveness celebrity endorsement has to be part of an integrated marketing approach. What this means is that an organization’s marketing mix should be based upon a clear relational and coordinated communication strategy (Jobber and Ellis-Chadwick 2012: 500). This requires careful planning and analysis to be made in order to find the right celebrity endorser who possesses qualities that fit within this strategy. As a result, all the elements of the marketing mix need to complement each other. The growth of the internet has increased the channels by which organizations can use to communicate with their customers. Before 1989 the main media channels used by organizations to communicate were broadcast and print, now there are also digital and social channels. What this has meant for organizations choosing to use celebrity endorsement is that there are now more media channels for them to make use of them in. For example, when H&M endorsed David Beckham in 2014 they used a multi-channel media approach to communicating with their consumers; they used to broadcast (television), print (magazines and newspapers), digital (websites), social (online communities such as Twitter and Instagram), outdoor (billboards) and indoor (point of sales).

When we analyze pieces of literature based upon the effectiveness of celebrity endorsement, it is vital to take into consideration the year that it was written. This is for two reasons. Firstly, as highlighted above, celebrity endorsement as a marketing tool has developed in line with the developments in technology which have increased the number of media channels and shifted importance to the use of the internet. Secondly, economic conditions and events such as the 2008 credit crunch have impacted the way people shop, altering their tastes and in turn creating a tendency for the consumer to find the cheaper alternative to their favorite brands (Knanom 2016). Therefore, in the literature analysis in this research, a conscious effort has been made to provide a mixture of reviews from sources prior to 1990 (which was arguably before the rise of the internet) to more current sources. The intention behind this is to demonstrate the change of effectiveness facilitated by improvements in technology and the change in consumer shopping habits, and also to give the reader a more accurate representation of the effectiveness of celebrity endorsement as a marketing tool. Additionally, models will be extracted from literature and analyzed to help improve our understanding of the endorsement process and also to supplement some arguments on how to improve the effectiveness of celebrity endorsement.

 

 

 

 

Literature Review

Celebrity endorsements have been one of the most effective strategies to brand promotion. Organizations using this method, not only benefit from the emphasis on their product but it also has an effect on the consumer’s perception of the competitive brand (Bergkvist & Zhou, 2016). The positive affirmations of one product through celebrity endorsements is seen to negatively affect the brand of the other product (Bergkvist & Zhou, 2016). Additionally, celebrity endorsements can lead to a profit gain or a loss to the organizations. For example, in the case of Tiger Woods extramarital affairs saw organizations that had hired him as an endorser accrue losses of between $5 and $12 billion compared to those that did not utilize him as an endorser (Knittel & Stango, 2010).

In the view of Kotler and Armstrong( 2016), the primary objectives of advertising can be classified into three different purposes, to inform, remind and persuade the consumer. The informative strategy is heavily used during the introduction of a new product to inform the public of the product’s benefits, quality, and its image. The persuasive strategy is heavily utilized in the event of high competition to build a demand through the persuation that by using their products, the customers are getting the best value for their money. For the reminder strategy, its predominant purpose is to maintain the relationship with the consumers. For example, Coca-cola advertisements are meant to maintain customer awareness.

The Benefits of Celebrity Endorsement

Celebrity endorsement can lead to huge benefits and success to a business. However, it can have a negative impact on the brand of a business which any business should consider before embracing and developing any endorsement strategy. Celebrity endorsement helps the business to create brand equity. According to Zipporah & Mberia (2014), celebrity endorsement affects the level of anxiety, the perception of reality of a product on the way we view and think or feel about a product once we saw a certain celebrity we like using that product. In addition, the researchers also found that celebrity endorsement improves product’s trust with the current base of potential customers, which in return increases the chances of the product having a long lasting impression on the mind of consumers as well as attracting new consumers. The researchers also found that celebrity endorsement increases consumer’s desire for the product being endorsed. Celebrity endorsement tries to perceive the audience that, the success and talent of the celebrity associated with that product are as a result of using that product. This increase consumers’ desire for the product which in return increases sales of the product in consideration. Celebrity endorsement helps to reach different target groups. This creates a demographic connection. This is due to the fact that, different stars appeal differently to different groups in terms age, sex, marital status and geographic locations (Zipporah & Mberia, 2014). According to the research, celebrity’s endorsement to a certain product persuades the audience to use the same product as the celebrity so as to gain the same benefits as the celebrity. This perception increases the volume of sales of the business as well as consumer’s attachment to the product.

The number of celebrities of different categories has been accelerating at an alarming rate. The rise of social networks such as Facebook, Twitter, WeChat among others, Television reality shows, socialites, internet personalities, footballers, and athletes, increase the base of celebrities which was only preserved for musicians and movie stars (Makumbura, 2015). The researcher also found that, even though some celebrities may charge high prices, there are those who will charge low prices which small business can afford. This helps small business to gain the advantages of celebrity endorsement just as the big business which are enjoying economies of scale.

According to Sana & Sohail (2011) Television has an added advantage of combining visual and audio materials, which has appealing and long lasting effects on consumers. It has the biggest effects on viewers which influence them to start buying and using the product. Television’s impact on customers tastes and preferences is pervasive (Ramalingam et al, 2006). The researcher also found that Television has a wide audience coverage at an affordable cost and its visual effects have strong impact on consumers.

Another benefit of social media endorsement is the reduction of operation cost by reducing the number of hours spent by staffs on advertising the products (Neti, 2011). In addition, social media endorsement increases the probability of revenue generation due to increased sales. Furthermore, it also helps customers to help other customers through online platforms such as YouTube and Twitter, by exchanging their views and reviews about a product. Therefore, according to Neti (2011), the main benefits of social media endorsement is brand awareness which increases its market coverage, consumer interactions through different transactions conducted online by the customers, referrals ( most of the referrals are paid if the referred user uses/ buys the preferred product) and reputation management.

In addition, celebrity endorsement personifies the business’s product. For instance, when a business decides to use celebrity endorsement as a form of advertising, the personality and attributes of the celebrity are auto-transferred to the product. The endorser will make sure that the product rhymes with his/her personality which is directly reflected to his/her followers. For example, KFC uses Real Madrid player, Cristiano Ronaldo as its endorser. His healthy status, elegance, and success in life are reflected in the product. This causes more consumers, more so his followers to buy the products of KFC. This increases the sales of KFC.  Herbalife also uses the same football player to advertise its nutritional products.

The Drawbacks of Celebrity Endorsement.

When a celebrity is attached to a certain product, he or she helps to shape the image of the targeted product to the consumers. It increases the trust and bond between the product and the consumers. However, this can work against the product if the endorser starts receiving negative reactions from the audience. This may happen when the endorser start receiving negative allegations such use of illicit drugs, sexual scandals_ Tiger Woods and the Nike endorsement, untrustworthy endorsers, for example, the endorsement program between First Speedo and the American swimmer, Rayn Lochte, affected the sales of the company negatively when he claimed that he and his colleagues were robbed at Rio, Brazil, at a gunpoint. He later admitted that he had exaggerated the whole scenario. This displayed him as untrustworthy to the consumers which lowered the sales of the product. First Speedo makes a lot of losses as a result. Scenarios like these are likely to negatively affect the public image of the product as well as endorser himself/herself (Zipporah & Mberia,2014). The researchers also stated that the endorse may overshadow the brand, an effect know as Vampire effect. This may have a negative impact on the brand since the audience remembers the endorser more than the product. This might lower business sales even though their aim was to raise the volume of sales. Also, if the same celebrity endorses different brands from different businesses, a concept known as the multi-brand endorsement, his or her novelty might get diluted. This makes the endorsement have minimal effects and influence on consumers.

According to Kulkarni & Gaulankar (2005), credibility and celebrity trap are also major drawbacks of celebrity endorsement. Celebrity trap refers to a situation where replacing endorsers becomes extremely hard. Celebrity endorsement, therefore, becomes an addiction to the sales team which leads to the surplus of endorsers. On the other hand, celebrity credibility means the doubtfulness by the customers towards the endorser and the brand, especially when the endorser is associated with something negative. Furthermore, many companies’ image has been tarnished by the negative publicity resulting from celebrities misbehave (Kumar & Kaushal, 2014). A good example is Pepsi which suffered great losses after the misdeeds of its three endorsers – Madona, Mike Tyson and Michael Jackson (Katyal, 2007).

Different Types of Celebrity Endorsement

Different persuasion techniques have different effects and impacts on different customers. The message sent to consumers usually result in different actions. The actions might be buying a certain product, avoiding addiction, giving donations to charities, voting for a certain politician among many other actions (Atay, 2011). Celebrity endorsement has been one of the most effective channels used by most businesses since the twentieth century. However, the advertisement does not have an immediate response or action from the audience but it has long lasting effects. Celebrity endorsement may take different forms depending on the message the business wants to display to its consumers.

Celebrities may act as a business spokesperson for the brand being advertised. According to Schlecht (2005), companies regularly use celebrities as spokespersons to deliver their advertising message to their consumers. This is one of the most widely used forms of celebrity endorsement. According to the researcher, celebrities have a huge and potential influence to consumers when used as spokespersons. As compared to other types of endorsement, celebrity has higher chances of attracting attention and being remembered easily by the consumers. They increase product’s awareness in the market, develop positive feeling and connection toward the product and they are also perceived as entertaining. Therefore, using celebrities as product spokesperson might positively change consumers’ attitude toward the product and probably increase sales. This form of endorsement is suitable for a product brand which is targeting a large number of consumers, like an international community. However, when choosing celebrity spokesperson, the business has to consider the following traits;

Celebrity Credibility

According to Ofori-Okyere & Asamoah (2015), the celebrity should appear to the audience as having relevant knowledge and skills, experience and trust in order to give unbiased information. This will reflect celebrity’s positive attitude toward the product which will affect consumer’s acceptance of the product.

Celebrity Attractiveness

The chosen endorser has to be attractive. Beautiful/ handsome, elegance and likeability are important qualities (Ofori-Okyere & Asamoah, 2015). According to a research done by Hou (2012), local celebrities are most likely to be perceived as more real by consumers. Most of the people tend to depend on individuals who share similar traits with them, in this case, ethnicity.

Power

Another factor to consider is persuasive power. Endorser should have the power to persuade and influence consumers to purchase the advertised brand. Therefore, a celebrity spokesperson should be able to change a consumer who had negative attitudes about the advertised product, to one who can buy and become an ambassador of the brand being advertised.

The celebrity can also act as an observer on social media by commenting on the product or posting about the product. According to Pacheco (2015), the online platform such as Facebook, YouTube, Instagram, Twitter among others, have a large number of online followers who can be a potential target for the product brand. Pacheco (2015) stated that it’s easier to use online influencers to reach a certain niche of consumers rather than spending thousands to get an international celebrity to endorse your product. For example, you can use a local blogger who has more than 100,000 readers to advertise your fashion or coffee shop. This way, you will use less amount to advertise your product to a targeted audience who will be interested in your services. Since there are thousands of online influencers, it will be easy choosing one who suits your targeted base of customers. However, some online influencers do charge high amount of money to endorse your brand.

Conclusion

According to my research, social media endorsement is a tool that can affect and dramatically change the sales of a business, either positively or negatively. It’s clear that businesses cannot ignore the influence celebrities have on their followers. Therefore, using celebrity endorsement as a form of advertising is a good strategy to reach the target consumers. Celebrity endorsement can be used by small businesses as well as international business to reach their consumers. According to Ad Age, a brand that signs an endorsement contract with a celebrity can receive a stock rise of up to 0.25 immediately the news becomes public. However, the vice versa is also true. If the endorser is engaged in any scandal, the sales of the product drop tremendously which may result in big losses to the business.

 

 

 

References

Atay, E. G., 2011. CELEBRITY ENDORSEMENTS AND ADVERTISING EFFECTIVENESS. CELEBRITY ENDORSEMENTS AND ADVERTISING EFFECTIVENESS: THE IMPORTANCE OF VALUE CONGRUENCE, 1(1), pp. 36-65.

Bergkvist, L. & Zhou, K. Q., 2016. Celebrity Endorsements: A Literature Review and Research Agenda. International Journal of Advertising, 35(4), pp. 642-663.

Knittel, C. R. & Stango, V., 2010. Shareholder Value Destruction Following the Tiger Woods Scandal. Journal of Department of Economics, University of California, 1(1), pp. 3-5.

Kotler, P. & Armstrong, G., 2016. Principles of Marketing. 2 ed. New Delhi: Pearson Higher Ed.

Kumar, M. R. & Kaushal, D. S. K., 2014. Pros and Cons of Celebrity Advertising in India. International Journal of Scientific & Engineering Research, 5(12), pp. 2229-5518.

Makumbura, U., 2015. The Power of Celebrity Endorsements Today. The Power of Celebrity Endorsement, p. 20.

Neti, M. S., 2011. Social Media And Its Role in Marketing. International Journal of Enterprise Computing and Business Systems, 1(2), pp. 2230-8849.

Ofori-Okyere, I. & Asamoah, E. S., 2015. Celebrity Endorser Selection Strategies. International Journal of Business and Marketing Management, 3(1), pp. 2350-1529.

Pacheco, G., 2015. Types of Endorsement to Use in Your Business. Aslan Journal.

Schlecht, C., 2005. Celebrities’ Impact on Branding. Center on Global Brand Leadership, p. 212.

Zipporah, M. M. & Mberia, D. H. K., 2014. The Effects Of Celebrity Endorsement in Advertisements. International Journal of Academic Research in Economics and Management Sciences, 3(5), pp. 2226-3624.

 

 

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