Will brands use endorsements in 2010?

Rohantha Athukorala

Being a marketeer most of my life, when the Tiger Woods saga hit the media the thought that went through my mind was that an organization has only two types of investments - research/development and brand building. Every other cost is recovered immediately when a consumer purchases a brand.

However, one of the key components of brand building-endorsements is in question today with the Tiger-gate scandal. I guess time will unfold how the business world will react to this new development, just like the financial crisis that hit us last year but let me throw light to this strategy-endorsements and how it can be managed by organizations given my experience of managing one of the most controversial celebrities -Susanthika when I was leading the Dettol brand in Sri Lanka.

The Promise

The task of a brand is to sell a promise. The logic being, at the end of the day, people are prepared to surrender money in exchange for a promise that a brand can deliver. For instance if we take a brand like Surf, the brand promises a modern day mum who’s kids clothes are covered with dirt that these clothes will be spotless when washed with Surf.

With this in mind at the launch stage of the brand if it used an ideal mum to endorse the brand then, it naturally catches the eye of the customer and thereby influencing trial. This is how endorsement helps a trigger consumer purchase.

Tiger Woods saga

If we take Tiger Woods as an endorsee, it is no doubt that this personality is any marketeer’s dream when having to drive brand strategy. Clean cut, hardworking aspirational personality and conquered the American dream even after being an Afro American.

What better brand icon can a organizations brand be signatured with. Nike invests $30 million to get this brand grain wrapping. Accenture invests $20 million for Tiger, Gillette $15 million and Electric Art $8 million. The annualized earnings exceed a $100 million which gives us an idea of the importance that marketeers assign for this strategy in the market place. A point to note is that we need know what happens to a consumer psychologically, when a company uses endorsement as a strategy?. Let me give clarity to this.

How endorsements work

The underlining psychological theory in endorsements is called “The Balance Theory”. How this works is when a typical consumer has a positive attitude towards a brand which is lower than to a celebrity, then the ideal setting exits for an endorsement to be used as a strategy.

For example if we take Tiger Woods the positive attitude that people had towards Tiger was higher than the positive attitude that the target consumer had towards a brand like Gillette with the Tiger endorsement, Gillette received a rub off from the higher positive attitude that Tiger enjoyed. Thereby a consumers achieved an attitudinal balance in their mind psychologically that increases the propencity of a consumer picking up a Gillette from a supermarket shelf. This is the essence of Balance Theory.

The multimillion dollar question that is being asked by Managers of celebrities is, does the celebrity experiences a loss of positive attitude post an endorsement. Yes it is, and that’s why a payment is demanded by an endorsee.

Greater the Attitude gap that the endorsee has to fill, greater the value of the contract deal. It is reported Cadbury had to pay a fat pay check to get Amitharb Batchan to endorse Cadbury’s in India, post the quality issue. Kumar Sangakkara endorsed Airtel when it was launched in Sri Lanka when people had no imagery of the brand. Hence this explains the inner workings of Endorsement when used by an organization.

Problem with endorsement

Let me now discuss the problems associated with endorsements. There are situations where an incident like Tiger-gate that causes the attitude score to decline towards a celebrity. In such an event if action is not taken by a company the brand will suffer the same loss due to the concept of ‘Balance Theory’ that I explained if action earlier. This is the logic that Accenture announced the axing of the Tiger deal on December 13, 2009. Gillette has already reduced the engagement of Woods in its marketing programme whilst AT &T currently evaluating the decision but there has been a significant reduction of face time on TV.

Reality of Tiger

The above decisions annul the Woods engagement makes good business sense given that the latest Gallup poll reports that Woods favourable rating has fallen from 88 percent in 2005 to 33 percent. This is a staggering 53 percent drop that is extremely damaging for a brand if used as an endorsee even though Tiger Woods has a reputation of being one of the best athletes that Golf has seen with over 14 championship victories and a 1 $billion dollars under his belt with endorsement earnings.

Another important piece of statistics that organizations must note is that unfavourable ratings for Tiger Woods has jumped from 8 percent in 2005 to 57 percent today which means that if Tiger comes on TV endorsing a brand this unfavourable attitude will flow to the brand too which is suicidal from a business sense. This is why from November 29, channels have experienced a zero share of voice from any brand that had woods in. It’s a harsh reality but from a psychological consumer analysis point of view it’s the best that a brand can do.

Next steps

The most ruthlessly rational thing that Tiger Woods should do is to get back to the game of Golf and win a few championships to restore the ratings by consumers. However, it’s a choice between keeping his family in tact versus the reputation of the world which is very tough call to make given that Tiger Woods has a strong family upbringing where his dad trained him during the formative years of Golf. The last week award of the PGA Player of the year 2009 sets the stage for the comeback of woods in my view.

From an organization perspective the decision to move forward will hinge on three aspects. The balance monies left to be used in the contractual agreement and the time duration left.

Secondly, his importance to the brand and thirdly the legal obligation if the contract is to be annulled. In fact the organizations can request Woods to get permission from an organization prior to making any public statements or appearances. These are tough decisions that should be made so that one can manage the situation given that today information is viral and it cannot be controlled.

Future of endorsements

Whilst the above is the reality, companies like Nike are taking a different perspective which is good for the business of endorsements. The spokesperson for Nike Beth Gast made a very bold statement saying “Tiger Woods is the best golfer that the world has seen and the greatest athlete in the world.

We look forward for his return to Golf. He and his family have Nike’s full support”. But a point to be noted is that this kind of bonding exists rarely in the harsh business world. For instance Tiger dons the famous Nike swoosh even when appearing on sponsorship deals of American Express, General Motors, Tag Heur watches which is a high order endorsement which is psychologically called high order classical conditioning.

A buzz that’s going around the business world currently is should an organization hinge ones future brand reputation on a single celebrity endorsement. Rolex watches users a safe strategy where multiple brand endorsees are used so that the risk is reduced in the event of a tiger-gate scandal. It is a good strategy but can be costly on a brand budget.

A recent study done in India has revealed that 57 percent of the people believe that celebrity brand endorsements makes a brand stand out and drive top of the mind awareness which increases the propencity for a brand to be picked up by a consumer which is the essence of business.

This brings the link between Endorsement and business. However a point to note is that this same research study reveals that only 33 percent of the consumers will trust the brand more due to a celebrity endorsee which means that Kathrina Kaif’s endorsement of Pantene shampoo in India to reduce falling hair will not drive trial. Which means that endorsements together with other elements of the marketing mix is what actually will drive brand purchase.

Way forward for Sri Lanka

Given the issues faced by organization when using Endorsements as a strategy, let me sketch out a way that one can insulate a organization when using this strategy.

* Do research on the concept of the ‘Balance Theory’ before selecting a celebrity. There after, agree that if the favourable score drops below a certain point an exit clause exits. This will make a decision of annulling more logical.

* Use the celebrity advertising together with strong brand value advertising so that the brand does not hinge on the celebrity solely.

* Have an acceptable behaviour clause in the agreement as a safety net. Some companies employ professional councillors when top celebrities are picked to guide them in handling fame and the media.

* Beauty brands be careful when using beautiful faces. Todays face is replaced by a new one tomorrow by a consumer. Which means a fat marketing budget must exists like what Lux manages very effectively.

* Use multiple endorsements like what Nike does with Roger Federer, Nadal, Woods and Karka.