Celebrity Endorsement Can Be Good For Brands, But It's A Complicated Relationship

(MENAFN- The Conversation) The UK's advertising watchdog has banned online adverts for two nutrition brands, for their failure to disclose a well known businessman's financial interest in the companies. Huel and Zoe had run adverts featuring testimonials from the entrepreneur and podcaster Steven Bartlett, who also appears on the popular BBC show Dragons' Den.

The Advertising Standards Authority ruled that revealing Bartlett's commercial relationship with the companies was key for customers to make an informed decision about the product. Not to do so, according to the regulatory body, was “misleading” . The two companies had argued in response that the average consumer would understand the commercial relationship and that explicit disclosure was unnecessary.

The controversy certainly highlights the sometimes blurry world of celebrity endorsements. Research has shown just how damaging such partnerships can be for both businesses and celebrities when things go wrong – and what they can do about it.

For most celebrities, whether they're actors, athletes, musicians, chefs or models, chances are that some business would like to be associated with them and their popularity. And evidence does suggest that celebrity endorsements can have a positive impact on brand recognition, consumer behaviour and sales.

Big companies know this, and are often prepared to spend huge amounts of money seeking fame and influence. For example, McDonald's once spent more than US$8 million (£6 million) launching a meal with branding linked to the Korean boy band BTS. And Nike has been successfully linking itself to elite athletes for decades, becoming one of the world's most ubiquitous and valuable brands in the process.

But it's not always a smooth process. When celebrity associations don't go to plan, brands can be exposed to financial risk and reputational damage. Evidence collected over 25 years shows that a celebrity scandal can result in a decrease in stock prices for brands they endorse.

Back in 2009, firms linked to the golfer Tiger Woods lost up to US$12 billion as share prices dropped over 2% after revelations emerged about his personal life . Companies including Nike, General Motors, Gatorade, Gillette and TAG Heuer were faced with difficult decisions about how to mitigate the damage.

Research also suggests that brands should be prepared to terminate their relationships with celebrities. But in practice, there is a high degree of uncertainty about how to respond to these issues.

Another study indicates that a high proportion (59%) of companies faced with such situations actually decided to do nothing, preferring to wait for the whole thing to blow over.

Of course, complications can occur in the opposite direction too. And some contracts contains “reverse moral clauses” which allow celebrities to suspend or terminate their contracts if a company they are linked to is involved with some kind of political, social or environmental scandal.

For example, Lady Gaga ended a partnership with Target when the retailer received criticism over donations to a political action group perceived as being anti‐LGBT. (Target responded that it was committed to the LGBT community). And Canadian singer The Weeknd cut ties with H&M after it was accused of racist marketing. (H&M apologised .)

These potentially complex relationships may be behind a noticeable shift in the world of celebrity endorsements – when famous people, rather than being the face of someone else's company decide to set up their own brands.

Hollywood actors Ryan Reynolds and George Clooney for example, are said to earn more money from their alcohol brands (Reynolds makes gin while Clooney prefers tequila) than they do from acting. And retired tennis superstars Serena Williams and Maria Sharapova generate significant revenue from their clothing and skin care lines.

Kim Kardashian – who once said ,“I'm an entrepreneur, ambitious is my middle name,” – launched a clothing brand which four years later was valued at US$4 billion . YouTubers KSI and Logan Paul combined their online popularity with astute marketing tactics to run a highly successful energy drink brand.

These entrepreneurial moves demonstrate the profitable power of fame in business. And by setting up their own brands, the risks of attaching your famous name to a company that becomes problematic or controversial is reduced.

Name recognition and huge social media mean celebrities can call more of the shots and enjoy greater creative autonomy . And there is evidence that consumers have a more favourable attitude towards brands which are celebrity-owned brands versus those that aren't.

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