Do celebrity endorsements actually work? The best answer is that it depends on the celebrity, their natural alignment and tie with the product, how their personality connects with consumers and the lasting impression the celebrity creates.

Companies fork over hundreds of millions of dollars every year for advertising campaigns featuring celebrities of various types. Hollywood stars, star athletes and hit singers and bands appear regularly on television, in magazines and other marketing venues. Here are a few that may actually be worth more than the millions they are getting paid. (For more, read When Celebrity Endorsements Don't Work.)

TUTORIAL: Greatest Investors

The Oprah Effect
Oprah Winfrey is arguably the most powerful person on the planet when it comes to influencing consumers on a grand scale. With the number one daytime show for over two decades, her television platform was a marketing springboard for books, magazines, products and new television shows. According to, most recently she founded the Oprah Winfrey Network (OWN) carried by 80 million homes nationwide.

The numbers for her daytime show were staggering. With a weekly audience of 48 million viewers, Oprah was a cultural force that permeated the entire landscape. Her book club had a total of 70 selections and 59 of those climbed onto the USA Today bestseller list. Her recommended books sold 55 million copies after they received mention on her show.

Oprah gave away countless products on her shows, which gave them instant national exposure, including 276 Pontiac G6 sedans in 2004. She also spawned the birth of several new shows by promoting and featuring guests who achieved their own fame. These include Dr. Phil, Rachael Ray, Dr. Mehmet Oz, Suze Orman and Nate Berkus.

William Shatner
While best known to older generations as the captain of the starship Enterprise, Shatner reinvented himself to younger generations as a cranky lawyer on "Boston Legal" and's chief pitchman. His connection to the online travel site dates back to 1998, a year prior to the company's IPO. He was first asked to do a few radio spots, which then evolved into a television commercial campaign. When Priceline told him what they could pay him, Shatner said it was nowhere near enough.

Instead, he decided to accept warrants for the company's stock as payment. It was a good decision as the dot-com boom took the stock to dizzying heights a year later, but then the boom went bust as the Internet stock bubble imploded. The New York Times reported that he sold half his stock before the crash, but his current holdings are not public information.

What isn't in doubt is the success the company has enjoyed over the past decade with Shatner as its front man. His ubiquitous spots as "The Negotiator" have resonated with travelers looking for bargains, and the company's revenue and profits have been consistently climbing. In the third quarter of 2011, revenues rose year-over-year by 45% to $1.45 billion. Pro forma net income rose year-over-year by 103% to $478 million. The stock is trading near its all time high in the $500 per share range on a split-adjusted basis. (To learn more about advertising, check out 8 Of The Most Successful Ad Campaigns Of All Time.)

Tiger Woods
Woods provides an interesting case study because of his rise and fall from grace after his marital infidelities were exposed. He and fellow golfer Phil Mickelson, according to Sports Illustrated in 2008 and 2009, are the top two athletes ranked by endorsement income. Both have consistently made far more money off the course than on it.

Data compiled by Golf Datatech LLC shows that both Nike and the sport of golf benefited from Nike's sponsorship of Woods over a 10-year period. It's estimated that the company's golf ball division reaped $60 million in additional profits by acquiring 4.5 million new customers that switched makers because of Woods. Further, when Woods left Titleist for Nike in 2000, sales of Titleist golf balls dropped by almost 8% during the following year.

After Woods' troubles surfaced, Nike lost 105,000 customers and took a $1.3 million profit hit. Nonetheless, Datatech still concluded that Nike's profit was $1.6 million more than it would have been without Woods. That validates the company's decision to stick with Woods rather than abandon him.

It's common for designers to seek out celebrities to wear their latest fashions at big events like the Oscars and Emmys. They often give them away or offer significant discounts to attract the top stars. The impact this has on their businesses can be huge.

Designer Johanna Johnson spent three months on a custom dress that she gave to "Mad Men" star Christina Hendricks, without knowing for sure that the dress would even be worn. After the actress appeared on the red carpet at the Emmys in the Johnson creation, visits to the designer's website quadrupled overnight. The wave of 210,000 hits crashed her online store, and her small staff couldn't keep up with the instant growth in demand.

While Hendricks is not generally considered an A-list star, this shows the power of celebrity when combined with an event that's all about glamor and who's wearing what to the latest Hollywood gala.

The Bottom Line
Who doesn't remember the Super Bowl ad where Pittsburgh Steeler "Mean Joe Greene" tossed his jersey to a young fan in exchange for his bottle of Coke? It was a magic moment in advertising history, but it's doubtful that Greene could have duplicated the impact of that spot's commercial success. There are also famous celebrities that were a figment of someone's imagination: Jolly Green Giant, Geico Gecko, Pillsbury Doughboy and Tony the Tiger are just a few of them.

Advertisers gamble even when they use normally bankable stars. Did people flock to T-Mobile because it was pushed by Catherine Zeta-Jones? Did anyone run to KFC for a chicken dinner when Jason Alexander started selling the brand? Consumers need to feel a genuine connection with the celebrity and a belief that he or she might actually be using the product. Sometimes that just doesn't happen. (For related reading, see Tiger's Investor Tip: Beware Celebrity-Driven Companies.)

Related Articles
  1. Savings

    7 Ways to Trim Fat from Your Spending

    Check out these seven ways to cut the fat from your spending.
  2. Economics

    What Does Brick and Mortar Mean?

    Brick and mortar stores are traditional street-side businesses that deal with customers face-to-face.
  3. Investing Basics

    The Economics Behind Marathons

    Marathons are growing in popularity at a record pace. Entry into these events commands a hefty price, but it's nothing compared to the organizational costs.
  4. Stock Analysis

    How Expensive Is Whole Foods, Really?

    Learn about Whole Foods Market, Inc., and discover how Whole Foods pricing actually compares to that of other grocery store operations.
  5. Budgeting

    The Hard Way We Pay For Convenience

    Convenience is a luxury. However, any cost-conscious individual should be aware of these ridiculous ways we pay for convenience and how to avoid them.
  6. Mutual Funds & ETFs

    Top 3 Consumer Cyclical Mutual Funds

    Obtain information on, and analysis of, some of the best performing mutual funds that offer exposure to the consumer cyclicals sector.
  7. Retirement

    Why Some Celebs Say 'No Inheritance for My Kids'

    To some of the super rich, inherited wealth is not the ultimate gift, it's a burden. Here's how their children—as well as charities—stand to benefit.
  8. Investing

    Kevin O'Leary Biography

    Kevin O'Leary is a television personality, businessman and investor from Canada. A brash public personality with a net worth of roughly $300 million, he is considered to be the Canada’s answer ...
  9. Entrepreneurship

    7 Top-Earning Child Stars

    These seven top-earning child stars earned millions through different parts of the entertainment industry, including television, film and music.
  10. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  1. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  2. Are Social Security payments included in the US GDP calculation?

    Social Security payments are not included in the U.S. definition of the gross domestic product (GDP). Transfer Payments For ... Read Full Answer >>
  3. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  4. How do changes in interest rates affect the spending habits in the economy?

    Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including ... Read Full Answer >>
  5. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  6. How much does seasonality affect the net sales figures of companies, such as retailers?

    Seasonality affects both sales and net sales figures of companies in different ways. For some companies, seasonality has ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!