Can You Quantify the Economic Worth of Celebrity Endorsements?
Tim Derdenger, Tepper School Associate Professor of Strategy and Marketing, speaks about his research on the economic impact of celebrity endorsements.
Within the sports marketing context, I study the impact of celebrity endorsements, particularly using data from the golf industry, looking at whether or not celebrity endorsements increase product sales. In this line of research, we use data from U.S. golf ball sales to analyze the impact of celebrity endorsements on their respective endorsed products.
Nike signed Tiger Woods to two five-year contracts each worth $100 million, and in our research, we found that with Tiger Woods endorsing Nike golf balls, Nike recouped 60% of that investment back in just U.S. golf balls sales. If we extrapolate out to all international sales and all the other product lines that Nike offered, it was a win-win for both Tiger Woods and for Nike.
Recently, a new brand of golf equipment was launched in 2014 called PXG Parsons Extreme Golf, and they had signed roughly five well-known golfers. And so the question that we're trying to really address is, does the signing of these golfers to their ambassador line or celebrity endorsers increase awareness of this new product? One of their players just won a tournament in early March and received over $2.1 million worth of free exposure to its brand by having its player play its equipment, be televised during the weekend rounds on network television — increasing this awareness of these products to consumers.
And so given this, we wanted to analyze how firms should manage this unplanned exposure with the planned paid advertising of TV commercials. And what we found is that firms should try to smooth awareness early in their product lifecycle to keep awareness high. And when it starts to depreciate, the firm would want to offset that with an increase in advertising expenditure.