The Trouble with Celebrity Endorsements

Celebrity spokespeople are expensive and risky, and they don't always pay off

By Steve McKee

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Tiger Woods is one of the greatest athletes of all time. He's also a product-endorsement gold mine. I have no trouble believing that Tiger actually prefers to use most of the products he endorses, including his Nike (NKE) equipment, Titleist (FO) golf balls, Gatorade sports drink, Gillette razors, American Express (AXP) card and Tag Heuer (LVMH) watch. But Buick (GM)? That's a stretch. Yet GM has paid Woods millions of dollars to stand up for the brand.

Tiger may be the endorsement champ, but he's not alone. Michael Jordan—Nike, Gatorade, Hanes (HBI), McDonald's (MCD), Chevrolet—Bill Cosby (Coke (KO), Jell-O (KFT), Del Monte (DLM), Ford (F), Kodak (EK)—and Peyton Manning—Sony (SNE), MasterCard (MA), DirecTV (DTV), Gatorade—have all been at the top of the heap of celebrity endorsers. And there are hundreds of other examples of famous endorsement deals, from Karl Malden for American Express to Brooke Shields for Calvin Klein to William Shatner for Priceline (PCLN).

Most advertisers can't afford the millions of dollars it takes to ink a celebrity endorser. But if your company falls in that category, take heart. Celebrity endorsers aren't only pricey, they're risky. Before you take the plunge on an international, national, or even local celebrity, ask yourself a few tough questions.

Are you being smart, or just lazy?

"Borrowed equity" is the term used to describe the value of a celebrity spokesperson. The premise is if Endorser A wears Product B and drinks Product C, maybe consumers will want to, too. But borrowed equity is just that—borrowed. It may rub off on the brand endorsed, but in the long run it belongs to the celebrity.

In some cases the match between person and product is strategic, such as Jordan's natural tie to Nike or Cosby's comical personality for a fun product like Jell-O. That's also the case for Wilfred Brimley's grandfatherly tone for healthy Quaker Oats (PEP) and Dennis Haysbert's imposing frame and booming voice for the "Good Hands People" at Allstate (ALL).

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