Abstract
Product endorsement is employed by many firms and most studies have proceeded based on management perspectives and ignored the strategic effects (or indirect effects). However, as a non-price competition, product endorsement behaviour’s strategic effects are valuable to be considered and convenient to be captured by industrial organisation perspective. So, this paper’s purpose is to reveal the strategic effects of product endorsement by industrial organisation perspective. First, the results of this paper show that celebrity endorsement decreases the rival’s benefits. Second, under a unique endorser, the lower efficiency (measured by marginal production cost) firm’s celebrity endorsement improves price difference and dispersion, which are direct effects of product endorsement. The higher efficiency firm’s endorsement promotes the producer surplus, consumer surplus and social welfare, which are called indirect effects. Finally, celebrity endorsement has trigger effects. If one firm launches celebrity endorsement, the rational reaction for its rivals is also to engage in a similar behaviour. This paper expands the celebrity endorsement issue from management to economics perspective.
Highlights
To improve their brand or demand, many firms select product endorsement according to consumer-based viewpoint
The purpose of this paper is to offer an analysis about celebrity endorsement from industrial organisation theory (IOT) perspective for that some valuable conclusions such as the strategic effects of product endorsement cannot be obtained by management framework
They are convenient to be used to explain the impact of celebrity endorsement on purchase motivating. This impact is difficult to be measured and observed. Those celebrity endorsement theories mentioned above have fundamental differences: Source Credibility Theory (SCT) assumes that consumers can be influenced by people who have common features with themselves; Source Attractiveness Theory (SAT) implies that people are more like to be influenced by famous and successful one; while Meaning Transfer Theory (MTT) shows that Meaning can be transferred between different individuals and objects
Summary
To improve their brand or demand, many firms select product endorsement according to consumer-based viewpoint. Elberse & Verleun (2012) addressed the value of celebrity endorsement and find 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 All those studies are based on management with the conclusion that celebrity endorsement promotes loyalty and purchase willingness and consumption promoting effects, which are the direct influence of endorsement. Different from the existing papers, especially those in management perspective, this study considers endorsers as profit-maximising economic agents and they make optimal decisions just like consumers and firms. Besides revealing the direct influence of celebrity endorsement, this paper aims to investigate its indirect effects by combining economics perspective with management. Some conclusions and discussions are outlined in the final section
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
