Since the late 1930s when Red Rock Cola hired baseball great, Babe Ruth to endorse its soft drink brand, companies around the world have used athletes and celebrities to promote their products. Companies utilize celebrity endorsements as part of an entire branding process to communicate their brands to particular sets of customers. When selecting a celebrity endorser, a company might consider the attractiveness of the celebrity (in terms of physical appearance, intellectual capabilities, competence and lifestyle), the credibility of the celebrity (his or her perceived expertise and trustworthiness) and the apparent compatibility between the celebrity and the brand.

TUTORIAL: Investing 101

Companies expect to see a return on their investments - both in terms of rising stock prices and increased sales - when paying the big bucks to sign a celebrity. Research has shown that stock prices rise one quarter of 1% following the announcement of an athlete endorser, and sales increase an average of 4%. Sales may also enjoy a bump whenever the athlete experiences a career triumph such as a Grand Slam win or Olympic gold medal. Here are six celebrities and the companies they endorse.

Michael Jordan
In 1984, Nike (NYSE:NKE) launched what would become the most successful athlete endorsement campaign in history. Michael Jordan, one of basketball's greatest players, signed on with Nike before he ever even played a game in the NBA. Fresh out of college, Nike offered Jordan $500,000 and his own shoe line. The Jordan Brand is now a subsidiary of Nike that grossed over $1 billion in 2009. That figure represents approximately 5% of Nike's overall revenues. Decades after the initial deal was signed, Jordan continues to boost Nike's bottom line. According to 2009 statistics provided by SportsOneSource, the Jordan Brand had a 10.8% share of the U.S. shoe market, and 75% of all basketball shoes sold in the U.S. are Jordans.

Maria Sharapova
Maria Sharapova gained attention at 17 when she defeated two-time defending champion, Serena Williams in the 2004 Wimbledon final. Despite an impressive career prize money earnings of more than $16 million, Sharapova has earned far more through endorsement deals. In January 2010, Sharapova renewed her contract with Nike (NYSE:NKE) for $70 million over eight years, making it the biggest deal ever for a female athlete.

Sharapova has been the highest paid female athlete in the world for seven straight years. She earns twice as much as any other female athlete. Sharapova earned $25 million last year compared to 2010 No. 1 seed tennis player, Caroline Wozniacki's $12.5 million. Sharapova also has endorsement deals with Canon, Motorola, Colgate, Palmolive, Prince, Tiffany and Evian.

William Shatner
William Shatner may already be better known for his comedic presence as Priceline's Negotiator than for his role as Captain James Tiberius Kirk on "Star Trek". Priceline (Nasdaq:PCLN) came close to being another dotcom bust when the entire travel industry was challenged following the Sept. 11 terrorist attacks. Priceline rebuilt its brand around hotels - instead of airfares - and expanded its market in Europe. In addition to rebranding, Priceline brought in the Negotiator to boost revenues. The relationship has been mutually beneficial. Priceline's stock has soared to over $500, and Shatner has allegedly made hundreds of millions of dollars on the deal. (For some Endorsements that have been less than successful, read When Celebrity Endorsements Don't Work.)

Justin Bieber
According to Forbes, teen heartthrob, Justin Bieber earned $53 million from May 2010 - May 2011. He earned nearly $40 million from touring, and another $13 million from endorsement deals, merchandising and music sales. Bieber endorses the One Less Lonely Girl nail polish collection from Nicole by OPI, a brand sold exclusively at Walmart. The line sold out within weeks at more than 3,000 Walmart locations across the U.S.

Bieber also endorses the privately owned Proactiv brand, an acne treatment system. Proactiv, which reportedly spends between $12 and $15 million per year on endorsements, will pay Bieber $3 million over two years for his Proactiv endorsement. There were 125,000 YouTube downloads and 500,000 views of Bieber's Proactiv clips logged during the first day that the deal was announced. Guthy-Renker, the firm that markets and sells Proactiv, notes a visible uptick in sales when Proactiv is endorsed by musical artists like Bieber, Jessica Simpson, Katy Perry and Avril Lavigne.

In 2004, the band U2 endorsed Apple's iPod as part of its Silhouette ad campaign. Other bands, including the Black Eyed Peas and N.E.R.D., were part of the breakthrough campaign. U2 brought Apple's stock shares (Nasdaq:AAPL) to a 52-week high within 72 hours of the endorsement. U2's then-new single "Vertigo" was released through a 30-second ad and was offered for sale exclusively on iTunes. U2, which had been known for turning down multi-million dollar endorsement deals, was not paid for the "Vertigo" ad but was able to gain a new, younger audience because of the deal.

Angelina Jolie
Angelina Jolie is Hollywood's highest paid actress, and is known equally for her beauty and humanitarian efforts. Earlier this year, the luxury fashion house, Louis Vuitton (NYSE Euronext:LVMH) signed Jolie to its Core Values advertising campaign. The endorsement deal will earn Jolie $10 million. Vuitton's Core Values campaign will run for 18 months, and feature other celebrities that are known humanitarians including U2's Bono. Bono and his wife, Ali Hewson, donated their fees to several charitable organizations including Conservation Cotton Initiative, which supports sustainable farming practices in Africa.

The Bottom Line
It seems that consumers inherently like to eat, drink, wear and drive the same products that celebrities use. Many consumers see the success of celebrities and, whether by conscious decisions or subconscious processes, wish to emulate the famous by using the same products. Companies are on to this and spend millions of dollars each year securing celebrities to endorse their products. (To read about the biggest endorsement a company can receive, check out Measuring The "Oprah Effect".)

Related Articles
  1. Stock Analysis

    The Biggest Risks of Investing in Sears Stock

    Learn about the factors that have led to Sears Holdings' underperformance the past several years and where the ailing retailer could be heading in the future.
  2. Stock Analysis

    4 Key Indicators That Move The Markets

    Educated investors need to keep their finger on the pulse of the economy, and watching certain indicators is a good way to do that.
  3. Savings

    Craft Beer Clubs – Bargain or Not?

    If you're an aficionado of artisanal brews (or would like to be), a beer club can be a palate-pleasing, albeit pricey, way to expand your hops horizon.
  4. Entrepreneurship

    3 Ways You Can Support Small Business Growth

    Discover a number of different options available to support small business growth, including crowdfunding campaigns and shopping locally.
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Professionals

    Advisors: Do You Need to Tweak Your Marketing?

    Advisors use a variety of marketing techniques to attract clients, but they don't all work. It may be time to evaluate what is, and isn't, successful.
  7. Stock Analysis

    Has Urban Outfitters Lost its Way? (URBN)

    Urban Outfitters just made a bold move. Will it pay off?
  8. Savings

    Your Flex Spending Dollars: How to Use Them All

    Your flexible spending account is about to expire. Don't throw money away; here's how you can spend every cent (or roll it over).
  9. Savings

    Are Wine Clubs Worth It?

    Some points to consider, before committing to a membership for yourself – or as a gift. The right club can also help you save money over the holidays.
  10. Stock Analysis

    Kohl's: Should You Stock Up or Sell? (KSS)

    Many traders are bearish on Kohl's, but long-term investors might want to take a closer look for this simple reason.
  1. Marginal propensity to Consume (MPC) Vs. Save (MPS)

    Historically, because people in the United States have shown a higher propensity to consume, this is likely the more important ... Read Full Answer >>
  2. Is a financial advisor allowed to pay a referral fee?

    A financial advisor is allowed to pay a referral fee to a third party for soliciting clients. However, the Securities and ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center