Abstract
Firms that choose to include celebrity endorsements in their advertisements are required to pay large sums in advance for these appearances, even though there is no guarantee of future sales of the target product. As such, managers require a method to evaluate the monetary value of including celebrity endorsements in advertising. In this study employing two experimental designs, we provide a rigorous and predictable framework to measure the potential marginal contribution of celebrity endorsements, which can serve as an objective standard for managers when calculating celebrity appearance budgets. Implications for researchers and practitioners are also discussed.
Highlights
Introduction and Literature ReviewThe celebrity-endorsement strategy has been widely adopted in the field of product advertising since its inception (Bailey, 2007; Biswas, Biswas, & Das, 2006; Ding, Molchanov, & Stork, 2010; Erdogan, 1999; McCracker, 1989; Seno & Bryan, 2007)
Source credibility theory suggests that the effectiveness of a celebrity endorsement originates from their trustworthiness, while the source attractiveness theory states that the effect is based on their likability, familiarity, and similarity
The current study utilizes conjoint analysis to measure the effectiveness of celebrities on consumer attitudes toward advertising, and provided an analytical model to demonstrate the calculation of a reasonable payment for celebrities
Summary
The celebrity-endorsement strategy has been widely adopted in the field of product advertising since its inception (Bailey, 2007; Biswas, Biswas, & Das, 2006; Ding, Molchanov, & Stork, 2010; Erdogan, 1999; McCracker, 1989; Seno & Bryan, 2007). Existing research on celebrity endorsement has predominantly addressed four issues: why the celebrity endorsement strategy is effective, how marketers select appropriate celebrities, when negative events happen to the celebrities leading to a risk image problem of endorsing products, and how to assess the economic value of celebrity endorsement. Researchers have examined the economic value of celebrity endorsements by calculating the impact on a firm’s financial performance. Recent research conducted by Elberse & Verleun (2012) utilize the intervention model to examine the impact of celebrity endorsements on the sales of specific brands rather than on a firm level. The current study utilizes conjoint analysis to measure the effectiveness of celebrities on consumer attitudes toward advertising, and provided an analytical model to demonstrate the calculation of a reasonable payment for celebrities. We offer conclusions and identify opportunities for further research
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