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.
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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.
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 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 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.)
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 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".)