International Management Group

The Economic Value of Celebrity Endorsements

Anita Elberse Associate Professor Harvard Business School Soldiers Field, Boston, MA 02163, USA Phone: +1 617 495 6080 Email: aelberse@hbs.edu

Jeroen Verleuni Analyst Barclays Capital London, E14 4BB, United Kingdom Phone: +44 20 303 43979 Email: jeroenverleun@gmail.com

July 2011

Forthcoming in the Journal of Advertising Research

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Work on this paper commenced while Jeroen Verleun was an MSc Finance student at VU University Amsterdam and has continued while he was employed at Barclays Capital. The research was carried out independently from his employment at Barclays Capital; the firm is in no way affiliated with the research and results in this manuscript. All the opinions expressed here are those of the authors and do not reflect those of Barclays Capital.

The Economic Value of Celebrity Endorsements

ABSTRACT

What is the pay-off to enlisting celebrity endorsers? Although effects on stock returns are relatively well documented, little is known about any impact on sales—arguably a metric of more direct importance to advertising practitioners. In this study of athlete endorsements, we find there is a positive pay-off to a firm’s decision to sign an endorser, and that endorsements are associated with increasing sales in an absolute sense and relative to competing brands. Furthermore, sales and stock returns jump noticeably with each major achievement by the athlete. However, whereas stock-return effects are relatively constant, sales effects exhibit decreasing returns over time. We outline implications for practitioners.

Keywords:

celebrity endorsements, advertising strategy, allocation of marketing resources, return on marketing investment, sports industry.

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INTRODUCTION

What is the pay-off to enlisting celebrity endorsers? Although the use of endorsers has become a common practice in the world of advertising – by some estimates, 14% to 19% of advertisements that aired in the...