Wishing on a Star : Celebrity Endorsements Draw Big Bucks--but Do They Work?

Americans are celebrity-smitten. Gossip sheets such as the National Enquirer and TV shows such as “Hard Copy” thrive on our insatiable hunger for news about the stars--never mind if the stories are true.

That’s why many marketers have long held an unwavering belief that celebrities are sure bets to sell products. The thinking goes something like this: If Michael Jackson can sell 10 million records, he can certainly sell 20 zillion Pepsis. And if Michael Jordan can fly on the court, the recently retired basketball star must be worth the $36 million he earns endorsing products off the court.

But does it work? That point has been debated in the marketing field at least since comedian Bob Hope first pinned the Texaco star to his chest and Ronald Reagan hawked Chesterfield cigarettes more than 45 years ago.

Today, though, the debate is taking on more urgent financial tones. The sums that consumer product giants are paying celebrity endorsers have soared to record levels, even as an unprecedented number of the highest-paid stars have had their names dragged through the media mud bath.

Jackson was on an international tour sponsored by Pepsi this summer when the father of a 13-year-old boy accused Jackson of molesting his son. Jordan was Nike’s top spokesman when he was linked to sizable gambling debts. Actor Burt Reynolds was the Florida Citrus Commission’s sole spokesman when his divorce from Loni Anderson suddenly turned ugly. Two years ago, Earvin (Magic) Johnson was the most highly paid spokesman for Converse shoes when he announced he was retiring from basketball because he had contracted the AIDS virus.

Although few marketers are immune to celebrity worship--and some swear by it--there is considerable evidence that their increasingly risky bets on famous names rarely do much to help business.

Executives close to Frito-Lay quietly concede that the recent, multimillion-dollar signing of Chevy Chase as pitchman--on the eve of his swiftly canceled Fox talk show--has failed to give a boost to Dorito sales. And even Michael Jackson was unable to thrill consumers with a line of offbeat L.A. Gear sneakers that cost the company millions of dollars in losses a few years ago.

Consumers are growing skeptical about celebrity endorsements. In one recent survey of 2,000 consumers by Total Research Corp. of Princeton, N.J., most respondents said they would not buy a product just because they liked the celebrity pitching it. Another survey by the Athletic Footwear Assn. revealed that celebrity endorsements ranked as the least important factor cited by consumers for buying a particular brand of shoe.

“Celebrities are a tremendous waste of money,” said Bob Garfield, editor at large for Advertising Age. “The consumer no longer believes that a celebrity pitching a product is anything other than the direct result of millions of dollars exchanging hands.”

How many millions? While Jordan earned $3.9 million on the court for the Chicago Bulls last year, his $36 million in endorsement fees was $1 million more than the 1993 budget for the city of West Hollywood. One Hollywood celebrity broker estimates that marketers will spend 25% more to lure top stars in 1993 than in 1992. The amount could grow another 25% next year, he said.

The jockeying for celebrity endorsers escalated from a footrace to a space race 10 years ago, most celebrity brokers say, when Pepsi spent $5 million for Jackson. That was roughly five times the amount any celebrity had ever been paid for a product endorsement.

Indeed, Pepsi has spent the past decade trying to appeal to youth by building its brand with the help of celebrities--from Jackson to Madonna to its most recent signing of singer Billy Idol.

But Jackson is Pepsi’s most highly publicized celebrity endorser. Over the past decade, Pepsi has sponsored three Jackson concert tours while paying him endorsement fees of $20 million. During that time, Pepsi has picked up two market share points on archrival Coca-Cola--each point worth an estimated $500 million in annual sales.

The match-up helped enrich Jackson--while linking Pepsi with the younger generation whose business it so badly desired. By all rights, it was a match made in marketing heaven.

Or was it?

This summer, the parents of a 13-year-old boy filed a civil lawsuit charging Jackson with molesting their son. News reports followed about Jackson’s alleged overnight stays with young boys, and Pepsi’s $20-million investment seemed to lose some of its fizz.

Pepsi has since remained low-key in its support for Jackson--even though no criminal charges have been filed against the pop star. Jackson has denied all allegations of sexual abuse and said they stem from a failed extortion attempt by the boy’s father.

Although Pepsi has not dropped Jackson, it has done little to publicly back him, and company executives quietly concede that his current international tour will likely be their last dance with the star.

“We’re not his mother,” said Becky Madeira, Pepsi’s vice president of public affairs. “We’re not going to stand by him through thick or thin.”

Perhaps more than any other company, Pepsi has closely aligned its products with big-name celebrities. “We’re a fun advertiser that wants to keep our finger on the pulse of pop culture,” said Rick Rock, vice president of media at Pepsi who arranges all the celebrity deals. “Celebrities are one way to do that.”

But Pepsi has been burned on several occasions by its links to mega-stars. In 1989, it was forced to drop a new U.S. campaign featuring Madonna--at a cost of millions of dollars--when consumers confused her Pepsi TV commercial with her extremely provocative “Like a Prayer” music video, the religious imagery in which enraged some religious groups.

Onetime Pepsi hawker Mike Tyson, the former heavyweight boxingchampion, never again appeared in a Pepsi ad after news reports surfaced in 1988 that he had punched his then-wife, Robin Givens. Tyson later was convicted of sexually molesting beauty pageant contestant Desiree Washington in a hotel room and sentenced to a six-year prison term in 1992.

“Celebrities are people,” Rock said. “No sponsorship is risk-free.”

Obviously, many people in the marketing business believe firmly in the value of celebrity spokespersons. “It’s always a gamble, but celebrities usually sell products,” says Allison Cohen, president of the New York ad research firm Peopletalk.

Don’t tell Sprint executives, for instance, that celebrities don’t work. Nearly four years ago, the wittiness of “Murphy Brown” star Candice Bergen caught the eye of executives there. The long-distance phone company desperately needed an image that separated it from AT&T; and MCI.

Sprint claims that Bergen--who has filmed 75 spots over four years--has helped it attract new customers. Its market share has climbed almost two points since it brought on Bergen, a spokesman said.

“Let’s face it, long-distance is a boring category,” said Jorge Rodriguez, vice president of marketing at Sprint. “But because of our use of Candice, our advertising dollar goes further than if we were not using her.”

Yet advertising researchers say the real forces behind the use of celebrities are marketers with Hollywood tinsel in their eyes. They are mostly influenced by their egos, the skeptics say. They sign on celebrities so they can rub elbows with them and brag to their friends about it.

But the days of such unscientific marketing might be rapidly drawing to a close.

“When marketing executives go to see the Big Boss, they need more than ever to be able to prove why a certain celebrity is good for their company,” said Jim Alleborn, vice president of marketing at Total Research Corp. Since the Jackson episode, the number of inquiries to the firm has quadrupled, he estimated.

There is also an ongoing philosophical debate--even within the ad community itself--about paying the celebrity elite such vast amounts of money.

“I strongly object to marketers using their millions to enrich a group of people who are way outside the mainstream and who don’t necessarily stand for what’s best about America,” said Rinker Buck, publisher of the trade magazine Brandweek. “What we’re doing, ultimately, is asking our children to worship achievement that in the long run doesn’t add up to much.”

One consultant who specializes in marketing to children says kids are losing trust in celebrities--mainly because young people fear that their favorite stars will fail them.

“If Magic Johnson was the first shoe dropping, then the allegations against Michael Jackson are the second shoe,” said Marian Salzman, president of the New York-based consulting firm BKG Youth. “Kids now believe that heroes are time bombs waiting to be blown to pieces.”

Even those celebrities who are not considered superstars can be risks for corporate sponsors.

Burt Reynolds is no longer the box office draw that he once was, but the Florida Citrus Commission was tickled to sign on the widely recognized Florida resident last year to be its orange juice spokesman. It paid him more than $500,000 to appear in its ads.

Earlier this year, Reynolds became embroiled in a nasty divorce suit with his wife, actress Loni Anderson. Reynolds appeared on TV talk shows and spoke to the tabloid press about the alleged infidelity of his wife--as well as his own. He even admitted to having an affair with a cocktail lounge manager.

Consumers wrote the Florida Citrus Commission in droves. “There was an enormous uproar,” said Gene Richmond, the commission’s director of advertising. “This this was certainly not the image we wanted to project for our product.”

So, while Reynolds is still being paid by the commission, his ads were yanked and haven’t aired since August. The commission is working on new ads. “I think it’s safe to say the next campaign won’t feature a celebrity,” Richmond said.

The High Price of Fame

Marketers are paying celebrities record sums to endorse their products, despite research suggesting that consumers are more interested in the products than the pitchmen. This year, Michael Jordan and Candice Bergen rank America’s favorite endorsers, according to a telephone poll of 3,000 consumers.

ATHLETES

‘93 RANK ’92 RANK ENDORSER ENDORSEMENTS 1 1 Michael Jordan Nike, McDonald’s, Hanes, Gatorade, Ball Park Franks. 2 5 Joe Namath Flex-All 3 9 Larry Bird McDonald’s, Converse 4 3 Bo Jackson Nike, Lipton Tea, Pepsi 5 2 Magic Johnson Pepsi, Upper Deck, Nintendo Target, Tiger Electronics. 6 -- Joe Montana L.A. Gear, Hanes 7 -- Chris Evert Nuprin 8 10 Charles Barkley Nike 9 -- Shaquille O’Neal Reebok, Pepsi 10 7 Jimmy Connors Nuprin

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ENTERTAINERS

‘93 RANK ’92 RANK ENDORSER ENDORSEMENTS 1 3 Candice Bergen Sprint 2 2 Bill Cosby Jell-O, Coke 3 -- Cher Equal 4 3 Cindy Crawford Pepsi, Revlon 5 -- Burt Reynolds Florida orange juice 6 -- Regis Philbin Ultra Slim-Fast 7 -- Susan Lucci Ford 8 -- Sally Struthers Christian Children’s Fund 9 1 Ray Charles Diet Pepsi 10 8 Kathie Lee Gifford Carnival Cruise Lines, Ultra Slim-Fast

Source: Video Storyboard Tests

Selling Sneakers

When 30,000 consumers nationwide were asked what they considered the most important source of information for buying sneakers, celebrity endorsements finished dead last. Here is how consumers, ages 13 to 75, ranked the factors that swayed them to buy one brand over another.

Information source % who consider it important All advertising 69% Store displays 57% TV commercials 53% Friends 48% Observing others 41% Magazine articles 19% Salespeople 19% Newspaper articles 13% Mail-order catalogues 11% Celebrity endorsements 10%

Source: Athletic Footwear Assn.