Celebrity Advertising: What Is the ROI?

Using famous people in advertising campaigns has many advantages for companies, including improved product recognition and an automatic association of the company’s brand with the values the celebrity represents. Historically, however, it has been difficult to calculate the return on investment (ROI) from using a famous face. Now, new research conducted by Ana Rumschisky, a marketing professor at the IE Business School in Madrid, has demonstrated that using celebrities in advertising has a measurable impact on the prices companies can charge for their products, among other variables. According to the study, consumers are prepared to spend up to 20% more on the same product as a result of who is representing it.

For her study, titled “The value of using famous personalities in advertising communications: A quantitative analysis of prices for a fashionable product,” Rumschisky chose to focus on a wristwatch made by a prestigious international brand. She created an advertising campaign with two representatives, one of whom was an anonymous model and the other a well-known personality. Half of the 513 Spanish college students between the ages of 18 and 25 selected for the study were shown the advertisement with the anonymous model while the other half were shown the celebrity version. The famous person chosen for the experimental campaign was Jesús Vázquez, a Spanish television host with a high degree of popularity among the country’s younger viewers.  

Universia Knowledge@Wharton interviewed Rumschisky about her findings.

Universia Knowledge@Wharton: What are the benefits that a brand can reap when it comes to using a famous person in its advertising campaigns?

Ana Rumschisky: A famous personality can help focus and retain consumers’ attention on the advertising. Using a celebrity improves the reception of the [branding] message, helping it to overcome the “noise” in the communications process. A famous personality brings with him a meaning that contributes clarity to the message. This approach saves advertisers time when it comes to conveying that message to the consumer.

[For example,] some previous research has noted that non-famous models can offer [consumers] information about demographics, gender, age and social status but that those cues are relatively imprecise. Famous people can offer all of those cues with a special precision. More importantly, famous people offer a range of meanings about personality and lifestyle that anonymous models cannot convey to consumers.

Other researchers [in this area] believe that when consumers use products tied to famous personalities, they derive added value in terms of imaginative aspiration and entertainment. This can be enough to tilt the scale in favor of the brand rather than its competitors. The famous person becomes a model — a “standard” guiding the consumer, who wants to be and look like that person.

Previous studies of this hypothesis showed that this model of aspiration takes place largely for famous people who consumers believe have achieved fame based on their own merits — especially global sports personalities. Famous people whose fame consumers consider to be “borrowed” [i.e., offspring and spouses of famous people] provoke the contrary effect; that is to say, they produce a certain feeling of rejection.

UK@W: What aspects should advertisers keep in mind when choosing a famous person?

Rumschisky: The correct way to choose a famous person is going to depend, first of all, on whether there is a congruency between that person and the brand that you are advertising. This is essential for the strategy to work out.

On the other hand, it is absolutely essential to analyze the condition of the brand that you are going to advertise in order to achieve that congruency. The point of departure in any communications campaign for a brand is to have the maximum amount of information about that brand. The famous personality must always be a means rather than an end in itself; the brand must anchor itself conceptually in a solid way before a company can consider the use of a famous personality.

Credibility, trust and the [widespread] perception by consumers that the famous person is an “expert” are the key variables for selecting a celebrity representative. The famous personality must be attractive not only in physical terms but also in terms of his or her level of regard and familiarity [among targeted consumers]. It is essential for the famous person to awaken sympathy among the audience. If the famous person is disliked, the advertising message will lose effectiveness.

Fame, along with familiarity, lead to a more positive reception by consumers.

UK@W: In your research, you analyze the repercussions that choosing a known personality can have not only on product recognition but also on the price of the product that is advertised. What conclusions did you reach?

Rumschisky: The research shows that a famous person is capable of raising the price of the product that he or she advertises when it comes to products that college students consider to be attractive and appropriate as gifts.

For men, famous people have a direct impact [based on their fame alone] of 8% on the price of the product, as well as an indirect impact [based on their personal attributes] of 11%. So the total value that the famous person contributes, among young men, is to raise the price [these men are willing to pay] by more than 19%.

For women, the impact is not as great, but it is nevertheless significant: For watch prices, for example, the direct impact of the famous person is 5.4%. There is also an indirect impact of slightly more than 8%…. As a result, the total value that the famous person contributes among young women is to raise the price [that those women are willing to pay] by more than 13.4%.

The famous personality increases the price in an indirect way through a causal chain based on the observed qualities of the personality, and the qualities that the personality transmits to the product that he or she advertises. In a direct way, the famous person increases the price by the mere fact that he or she is someone famous.

The qualities conveyed by the product [itself] can also raise the price independently of the presence of a famous personality. In this case, the increase would correspond to the indirect component contributed by the famous person. We can verify that the presence of a famous person is going to guarantee and improve the perception of those qualities. Not all of these variables increase the price with the same intensity.

UK@W: Why is the impact of the famous person less on women than on men, when it comes to influencing price? (Of the total sample, 322 were women, and 191 were men.)

Rumschisky: In our first descriptive analysis of the data, we observed different behavioral patterns between the sexes. There is a greater diffusion of responses among the men. In fact, unlike the women, five of the men assigned no value when it came to [assessing the price of] watches. There was less diffusion in the responses of women in that regard, and their starting prices [when they viewed the advertisement without any famous personality in it] were already 22% higher than those of the men.

Our interpretation [of this finding] is that in the case of the product that we studied, which is associated with fashion and gift-giving, women have a higher level of information. So, the range of that valuation is lower and, in some ways, the famous person contributes less information about the product to women, and as a result, does less to increase its price [among women].

On the other hand, as our research moved forward, I decided to exclude [from our findings] the five responses from those males who assigned no value [at all] to the watch in the absence of a famous person. Clearly, those individuals who are unwilling to pay any price at all for a watch would have a hard time paying a higher price [for it] after a famous person starts advertising it…. If we had to guess, those responses revealed anapproach to valuing watches that was different from the logic of the general population, and so we eliminated them from our sample.

UK@W: What other variables, apart from the fact that the model you’ve chosen is – or is not – famous, should you take into account when choosing a person for different segments of the public?

Rumschisky: You have to take into account that our research is based on knowing the additional price that Spanish college students would be ready to pay for a product that has a clear emotional meaning for them — in this case, a wristwatch.

One of the hypotheses of the [study] was that the price of a product tends to increase when young people consider it to be an appropriate product for giving as a gift, and when they consider it fashionable.

For both men and women, these two variables are among the most important when it comes to increasing the price of a product. Nevertheless, there are other variables that appear to be even more important in raising the price among both sexes.

Men believe that a product that is suitable as a gift is worth an additional price of 8.6%, and one that is fashionably attractive is worth an additional 7.6%. Nevertheless, when men identify themselves with the product or consider that the personality who advertises it is someone “modern,” there is a greater impact on price increases — 14.6% and 11.1%, respectively.

Women raise their price by 4% when the product is suitable as a gift and by 6.2% when they think that the product makes them look stylish. The variable that has the most influence on women when it comes to increasing the price of the watch is whether they consider it to be “sexy”; that raises the price by 10.1%. There is less impact [on price] — only 5.8% — when women have confidence in the personality who advertises the product.

We can conclude that the qualities of the object and the characteristics of the [famous] personality have a quantitatively different sort of influence. Men and women are influenced by different characteristics and with a different intensity.

The research succeeded in isolating and evaluating the variables that have the most influence when it comes to increasing the price of a stylish product, whether or not it is advertised by a famous personality. If, indeed, a famous person [reinforces] those variables, there will always be an additional impact on price, compared with [using] an anonymous model who can communicate the same variables. As a result, the only difference in price between the [product promoted by the] famous person and the anonymous one would be derived from the pure fame of the celebrity.

UK@W: Can you use the model developed for your research for other types of products?

Rumschisky: I was able to quantify the additional price that a famous personality is capable of adding to a stylish product among Spanish college students. The advertisers of fashionable products for targeted segments similar to what we researched can quantify and evaluate the margins contributed by the famous person they’ve signed up for their advertising campaigns, and they can calculate the return on their investments.

The information that the research contributes about the differences in behavioral patterns among young men and women can also be used by advertisers, especially when it comes to strategies that enable them to differentiate between the segments they target, starting with the gender variable. The [data about] differences in the behavior of women when it comes to the prices of the products that we have investigated is rich, and would be important for an advertiser when it is time to plan his or her marketing mix, in which the price will have to take into account such findings.

Nevertheless, when it comes to continuing to investigate the effects of famous people on the prices of the products they advertise, it seems relevant to repeat the quantitative test [that we made] for other types of products, as well as for other target markets of different ages. It would be helpful to research products that are more functional, and target markets that have other characteristics. That way, we could compare the results so that we could wind up creating a general model for making predictions.

Where Consumers Diverge From Others: Identity-Signaling and Product Domains

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