By RYAN SAGER
In the end>, Gilbert Gottfried didn't know quack about Aflac -- or about keeping his Tweeter shut when a bevy of indefensible and unfunny tsunami jokes popped into his head over the weekend. The incident makes you wonder why Aflac hired Gottfried in the first place, and not just because he's long been known for offensive humor. The real question is about celebrity endorsements in general: What do we really know about how (or if) they work?
The basic idea of the endorsement is pretty simple. People like celebrities. If those celebrities say that they like a product, people will like that product, too. As we all learned in grade school, that's the transitive property (it also works, if memory serves, for cooties and coolness).
But does it really work? Can celebrities, like magic, transfer their popularity from themselves to the products for which they choose to shill? Are the benefits of celebrity cool contagious? And are they worth the risk?
Two new studies one on celebrity endorsements and one on celebrity-owned objects may shed some light on these questions.
Remarkably, given how much money is spent based on celebrity endorsements (celebrities appear in roughly one-fifth of ads, according to market researchers, and a single company like Nike might spend around half a billion dollars a year on endorsements), there's been very little academic research on the effect of these ads on sales. Most studies have focused on what the announcement of a celebrity endorsement does for the stock prices of the companies in question. The evidence is far from conclusive: Most studies show a small boost to stock prices, but some show no boost at all. But even if stock price goes up, all this tells us is that the market thinks endorsements work.
What about what really matters, sales? A new study, conditionally accepted for publication at the Journal of Advertising Research, looks at stock market valuation and sales data for a raft of athlete endorsements. The authors, Anita Elberse and Jeroen Verleun, find that while stocks go up roughly a quarter of a percentage point, on average, with a celebrity endorsement, sales for products endorsed by athletes go up by an average of 4%. What's more, these sales boosts can be recharged by a career triumph -- a Grand Slam for Roger Federer, an Olympic Gold Medal for Michael Phelps. (A caveat: The sales benefits diminish with each win, while the stock-return effects stay constant; investors, it seems, are more impressed with an athlete's staying power than consumers.)
So, what accounts for this celebrity effect? Endorsements could be a signal of quality -- but the modern consumer is sophisticated. They know money's changing hands. At a deeper level, we seem to crave connection to the famous and the powerful.
Shedding some light on this urge is a study forthcoming in the Journal of Consumer Research by George E. Newman, Gil Diesendruck, and Paul Bloom, which looks at why people are willing to pay exorbitant amounts of money for objects once owned by famous people, such as President Kennedy's golf clubs or even Saddam Hussein's Rolex.
Part of the appeal of such an item, of course, might be the belief that it could be resold, but that's circular reasoning. Why does the next person want to buy it?
The paper zeroes in on the idea of contagion. In an instinct perhaps rooted in fear of germs, we seem to have an inborn belief that objects can impart the "essence" of those who have handled them or owned them before us. In a famous experiment, it was found that people would be extremely reluctant, for instance, to try on a sweater worn by Hitler. Contagion works the other way, too: Studies have found that people are more likely to purchase an item if it has come into contact with an attractive salesperson.
In the study, the researchers tested how much people would be willing to pay for various objects that had been handled by either a celebrity the participants admired or someone famous they considered evil. The researchers found that for likeable celebrities, the more handling of the object (that is, contagion), the more it was worth to people. In contrast, with evil celebrities, the more the person touched the object or used it, the less people wanted anything to do with it.
That is, people don't want evil people literally rubbing off on them -- even if we're talking about a sweater or a lock of hair or a cufflink.
For all the upside of endorsements, we've seen its downside in cases like Tiger Woods's fall from grace. Celebrities like Woods and Gottfried may not quite be Hitler, but companies are probably right that consumers aren't eager to wrap themselves up in their tattered images.