Measuring The "Oprah Effect"

By Arthur Pinkasovitch | April 14, 2010 AAA
Measuring The

"Because you touched it, the whole world saw it." Mo'Nique's Oscar acceptance speech for her performance in "Precious" perfectly characterizes the extraordinary impact of "The Oprah Effect."
With millions of daily viewers attentively listening to her every word, and some even blogging about their experience following every piece of Oprah's advice, the queen of talk has a profound impact on the businesses she promotes. Those who are lucky enough to be mentioned on the "O List," or the extremely fortunate whose products make an appearance on the "Oprah's Favorite Things" segment, experience an instant increase in sales and prestige. (Is microfinance a way to help the poor, or will it just make them poorer? Fin out, in Microfinance: Philanthropy Through Industry.)

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The Oprah Effect
Unlike typical celebrity endorsements for big name products, Oprah supports many independent family businesses, which, until their appearance on the show, are unknown to the majority of the world. And mom & pop shops aren't the exclusive recipients of the billionaire's generosity; Apple's (Nasdaq:AAPL) iPod and products from Nike (NYSE:NKE) and Ralph Lauren (NYSE:RL) have been rewarded as well.

While celebrities are often paid to promote products, even if they may not use them, Winfrey altruistically chooses items which actually capture her interest. As Oprah viewers rush to make purchases based on her suggestions, the entrepreneurs of those goods profit handsomely.

Food, beauty products and books are some of the common beneficiaries of The Oprah Effect. (College doesn't prepare grads for handling their personal finances. Find out what you need to know, in 5 Financial Mistakes New Graduates Must Avoid.)

Reading Made Cool
With over two million affiliates, Oprah's Book Club has a far-reaching influence on its members and the overall community of readers. Authors such as James Frey, who wrote the controversial "A Million Little Pieces," (2005) see overnight fame and fortune after their works climb the Bestseller's lists upon being endorsed by the club. Jacquelyn Mitchard's "The Deep End of the Ocean" (1999) remained on the best seller list for 71 weeks, largely because of Oprah's recommendation.

It is not only books, but also book-related products that gained immediate public acceptance. After Winfrey passively announced during one of her interviews that she owns a LightWedge book light, the company saw daily sales increase from $3,700 to $90,000 in one afternoon. Likewise, after endorsing Amazon's Kindle, the product was sold out in a couple of hours.

Oprah's Treats
Food products such as Galaxy Desserts and Marie Belle Hot Chocolate saw a huge surge in demand after being featured on Oprah's Favorite Things. Galaxy experienced a 1,000% growth in sales and Marie Belle increased its annual revenue from $1 million to $5 million. These two items are merely a sample from a very comprehensive list of goodies.

There are two basic ways to have your food item be featured either on the show or in O magazine: either send samples to the "O List" or just close your eyes and hope for the best. Protein Bakery actually created its business model centered on getting onto the O List; after succeeding, the dream changed to be featured on the television show. (The glitz and glam of Hollywood could help put some more glitz in your pocket. Find out how in Analyzing Show Biz Stocks.)

Extension of the Oprah Effect
Business owners are not the only recipients to have their financial positions changed with Oprah's help. Dr. Phil, Dr. Oz and Rachael Ray are well known TV personalities whose success is undoubtedly attributed to Oprah.

Prior to the launch of her own cooking program, Rachael Ray made daily appearances on The Oprah Winfrey Show. Upon gaining the necessary media exposure, Ray made her way to pursue her love of cooking on the Food Network.

Dr. Phil's success is also largely contributed to Oprah. After regular appearances on her show, Phillip McGraw published numerous best-selling relationship books and eventually launched The Dr. Phil Show, produced by Harpo Studios (which is owned by Oprah). The Dr. Oz Show came about through similar means.

Although the aforementioned individuals have seen extraordinary wealth and popularity thanks to Winfrey, the most prominent recipient of The Oprah Effect is President Barack Obama. Following her endorsement, the Illinois senator slowly saw his popularity rise, arguably helping to lead Obama into the White House. (How can the presidential election affect your portfolio? Find out in The Market And Presidential Promises.)

Are You Ready for O?
Entrepreneurs dream of getting on the Oprah Show, an occurrence that is compared to winning the lottery. As beauty product producers Philosophy and Carol's Daughter found, one day you are selling your products in boutiques and flea markets, the next, in Sephora and Macy's.

Undeniably, an endorsement from the American icon is a life-changing event. However, if the business is not ready to face the increased expected sales volume, full effects of the blessing will not be realized. One caramel shop was forced to put a "sold out" sign on its website after it became quickly apparent that they could not satisfy the surge in demand. (The road to the executive suite is paved with education, experience and knowledge for men and women alike. Find out more in Female CEOs: What It Takes To Climb The Corporate Ladder.)

Check out last week's business highlights in Water Cooler Finance: My iPad Beats Your Toyota.)

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