The Press, September 2009

Every night we see them on TV. Famous people, more often than not sports stars, hucking some sort of product or service. Some are painful, some entertaining but is it smart marketing or a waste of precious promotional dollars?

If there was a world championship of celebrity endorsers, the likely winner was in New Zealand last week for the Winter Games in Queenstown. 22 year old American Shaun White dominated the snowboarding competition at the Winter Games, days after cleaning up at the Burton New Zealand Open. The ‘flying tomato”, as the flame-haired White is sometimes called, is also a pro-skateboarder with a growing reputation.

In a niche sport that pays meagre prize money, White is earning a solid income. At around $13 million in 2008 according to Forbes Magazine, he out-earns most of New Zealand’s richest sportspeople. It was reported earlier this year that Sir Russell Coutts was our top earner on $15 million, trailed by the likes of Ryan Nelson ($9 million), Brad Butterworth ($8 million), Scott Dixon ($6 million) and Michael Campbell ($4 million).

Endorsements have been the key to White’s financial success, bettered only in the action sports world by famous skateboarder Tony Hawke. White is backed by companies like Burton Snowboards, Oakley Sunglasses, the Target retail chain and computer company HP.

White has succeeded through the smart use of his personal brand. He hasn’t tried to grab as many advertisers as possible, or do outrageous things to court controversy. In fact White reportedly turns down a lot more offers than he accepts, and could be earning more in the short term if he was less fussy.

There is a virtuous cycle to his approach. The brands he chooses to endorse influence people’s perception of him, affecting his brand and therefore his future value. He understands the need to align himself with products that reflect well on his own ‘brand’. And the stronger people’s perception of him the more likely his endorsers are to get increased sales.

Being from a minor sport, White is of course a long way behind the words superstar sports celebrities. Tiger Woods earned $180 million in the year to June 2008, English soccer player David Beckham ($85 million), golfer Phil Mickelson ($70 million) and Formula 1 driver Kimi Raikkonen ($65 million).

That a significant amount of this money is made up of company endorsements would suggest it is seen as an effective strategy. However a recent academic study questions this. A Massey University study published in January studied the effect of endorsement announcements in the USA on a company’s stock price. They showed a slightly negative effect on stock prices across those studied, suggesting there is ambivalence about the effectiveness of such promotional activity.

One issue is that while a company can back a famous sports person for their talent, you have to take all other aspects of their behaviour with it. Celebrity endorsement is basically a transfer of value from Brand A (the celebrity) to Brand B (the advertiser). Advertisers hope the positives of Brand A will transfer in the customer’s mind to their Brand B and motivate purchase.

Which means that while the clean-cut persona of a star like Dan Carter reinforces his sporting talent and enhances the value his sponsors get, negative behaviour has the opposite effect.

There is the famous example of the cricketer Shane Warne, having endorsed a smoking cessation product for $200,000, was caught on film puffing away after a match. Or the Australian national rugby league, who chose Brett Stewart and Greg Inglis as two of their stars to promote the league, only to have both suspended in 2009 for drinking and violence incidents.

It can work back the other way also. Sir Colin Meads’ reputation as a legendary All Black was tarnished by his endorsement of the failed Provincial Finance. Many Kiwis lost money in a finance company Sir Colin told us was “solid as.” While he was in no way to blame for Provincial’s incompetence, some of that negative feeling must rub off on him.

It is not just bad behaviour that can reduce the value of endorsement though. Marketing expert Jack Trout says the more aligned the public’s perception of the star and the product being promoted; the more likely it is to sell. He points to Tiger Woods’ endorsement of Nike golf balls which had a positive effect on sales, while a similar promotional role didn’t deliver the same result for the Buick car brand. Consumers saw it as credible Woods using Nike balls, but perceived Buick as a promotional gig for a rich guy who could afford far more prestigious wheels.

Using well known people to grow awareness of your brand can be a sound strategy, but it has to be handled carefully. They must appeal strongly to your target market, the image they project has to align with your company’s messages, and you need to be confident they will act with integrity.

This delicate balance can be achieved and produce results. After winning the Winter Olympics gold media in 2006, Shaun White was besieged by commercial offers, but resisted the temptation to appear in ‘cheesy’ advertisements that would have been lucrative but done long term damage to people’s perception of him.

Thus he has remained real and authentic in the eyes of his youth market, which has helped him build a strong portfolio of sponsors and earn good money. And avoid that groan factor of seeing another painful celebrity endorsement on TV.

Subscribe to our blog