Celebrity Brand Endorsement Is Worth Billions. What Could Go Wrong, Kanye?

Celebrity Brand Endorsement, What Else? George Clooney made an estimated $40 million endorsing Nespresso, while Beyoncé signed a multi-year contract with Pepsi worth $50 million, making the $26 million deal that Taylor Swift signed with Coca-Cola in 2013 look … a little flat.

And as Harry Styles and Gucci bring vibrant colour to a new collection, Lionel Messi and Kylian Mbappé will be facing off in the World Cup Final, the Argentine kitted out in Adidas and the Frenchman wearing Nike.

Using celebrities and athletes to promote your brands has been around for centuries. The gladiators in Rome were commissioned to endorse brands of olive oil. And now with social media, David Beckham and Kim Kardashian bring their enormous fan followings to a proven profit-making tactic for both the celebrity and the brand. So, what could go wrong?

In the last few weeks, designer clothing brand Balenciaga announced that it would no longer be working with Kanye West. Adidas, Gap, and Foot Locker soon followed. Meanwhile, NFL Quarterback Tom Brady and supermodel Gidele Bundchen are accused of defrauding investors who lost money in the crypto exchange, FTX. And former England and Manchester United footballer David Beckham is under the spotlight for accepting an estimated £150m as a brand ambassador for the World Cup in Qatar and faces criticism from human rights and LGBTQ+ activists.

So how can both brands and celebrities best navigate the potential power and the pitfalls of endorsements? Giana Eckhardt is Professor of Marketing at King’s Business School in London, and a leading expert in the field of consumer behaviour and branding. Her advice is simple. “The brand can look to past behavior to ascertain future risk on implosion (especially online behavior). People will let you know who they are. Look no further than Donald Trump as an exemplar. But the same is true for Kanye West, who has a long history of erratic tweets, for example.

For David Dubois, Associate Professor of Marketing at INSEAD and co-Director of the school’s campus and online programme, Leading Digital Marketing Strategy, companies should avoid being overly reliant relying a single individual. “Celebrities are only humans. Companies need to pool the risks by thinking about alliance with many influencers, rather than one. They just need to understand the tactical use and value of celebrities, rather than using them at a strategic level which can be too dangerous.

Understanding and managing brands that are also people such as Martha Stewart has been a focus of the research by Giana Eckhardt with Susan Fournier, Senior Associate Dean at Boston University Questrom School of Business, and has been published by the American Marketing Association. In their article, ‘Managing the Risk in Human Brands’, the authors acknowledge that, “Human brands are risk-laden because people present increased chances for undesirable events such as illness or misconduct, and these reputational challenges can diminish returns.”

Nike won’t have any regrets signing with Michael Jordan in 1984, for what was then a five-year deal worth $500,000 a year. But according to Forbes, Adidas may lose $650 Million after dropping Kanye’s Yeezy Line.

“When considering endorsements and marketing partnerships, the key consideration is whether who the celebrity is as a person is aligned with the brand to be endorsed,” explains Giana Eckhardt. For example, if the celebrity is an adventurer (Richard Branson), so should be the brand. When these are in alignment, authenticity of the endorsement is highest, and as such, the partnership can be mutually enhancing for the brand and celebrity.”

Despite the furore over David Beckham’s $150 million 10-year deal as an ambassador for Qatar, Dr. Rajesh Bhargave, Associate Professor of Marketing at Imperial College Business School emphasizes the importance of brand alignment. “There are two sides to every story, and David Beckham probably sees it as ‘I’m here to support the World Cup and football. I grew up playing football, that was my childhood just like so many other kids around the world.’”

But Bhargave says that the rules of engagement are different when the celebrity presents themselves as someone who cares a lot about certain causes. “Then they have to be consistent with that going forward. If I was famous footballer, I would be more cautious because I don’t want to be tiptoeing all the time.” He points to the example of Michael Jordan who preferred not to take public political stances and instead focused on basketball. “Republicans buy sneakers too.”

Nike struck gold with the Jordan deal 38 years ago, but the sticker price of many celebrity endorsement deals is eye-watering. The star of the hit TV series Modern Family, Sofia Vergara signed deals with Pepsi, Head & Shoulders, and Quaker Oats among others in 2011 worth a reported $94.5 million, while Jay-Z inked a $20 million deal with Samsung and Academy Award winner Charlize Theron signed a $55 million 11-year contract with Dior for the J’adore perfume. These are prohibitive amounts for most brands, and INSEAD’s David Dubois advises companies not to lost sight of their key marketing priorities.

“The most critical factor is to balance reach and effectiveness. Most companies go for reach – high celebrities – which often comes at the expense of effectiveness when celebrity doesn’t transfer to the brand.” In Dubois’ experience, it’s better to go for lower-profile individuals that are closer to the brand DNA. “You can easily find out through basic social media analytics. These lower-profile individuals are closer to their followers, and therefore will make the endorsement/co-branding more effective.”

Cristiano Ronaldo is as of this month the most-followed person on Instagram, with over 513 million followers. That in part explains his $1 Billion life-time deal with Nike, which former Forbes Senior Editor Kurt Badenhausen reported may be a bargain for the sportswear giant.

Social media has certainly changed the stakes for both brands and celebrities, but Giana Eckhardt at King’s Business School sees both advantages and disadvantages. “Social media simultaneously gives celebrities and brands more control over their relationship with fans and consumers, as it allows them to communicate directly. But they also have less control, as the cultural meaning of brands and celebrities is determined by what others – close others or distant others – say and think about the brand, and what others say on social media cannot be controlled.”

For Eckhardt the key to success in the social media space is authenticity. “PR spin does not work there.”

David Dubois insists on the importance of developing a social media content strategy. “Everyone is a media powerhouse, so you need to turn yourself into a content powerhouse. This requires new operational, strategic, and organizational principles.”

So, if an MBA student raised their hand during class to ask what advise our experts would give to David Beckham or Kim Kardashian in the face of criticism for their endorsements what would they reply?

“I would say that it is too late for David Beckham to do anything,” replies Giana Eckhardt, who teaches Brand Management in the MSc Digital Marketing program at King’s Business School. “He already made his choice to be a part of the World Cup in Qatar and cannot get out of it now. If he gave a statement condemning the world cup by simultaneously getting paid from its sponsors, he would never get another endorsement deal.”

At INSEAD, David Dubois would encourage running a risk audit over different time frames. In the short term, they need to combine warmth, transparency, expertise and commitment in their messaging. In the long-term, they need to recalibrate their brand DNA through other engagement or rephrasing of the engagement.

Dr. Rajesh Bhargave teaches in various programmes at Imperial College Business School, including courses in Ph.D., Executive Education, MBA, and Pre-experience Masters. He notes the legal implications that might arise if David Beckham gives back the £150 million. “Each case is a little different, and it’s difficult because the moment they apologize for things it becomes harder and harder and they could be subject to losses.”

For Bhargave one of the key takeaways for students is that certain fundamentals of marketing are still the same. “We must speak to the consumer when the consumer cares. And it is true that what consumers care about is changing, society is changing. People are more passionate about certain issues, largely because of social media. Consumers are more aware, and everything has a trade-off. Both brands and celebrities must think two steps ahead.”

Giana Eckhardt recommends Beckham wait things out. “There are many non-human brands who are endorsing the World Cup in Qatar without getting the kind of criticism that Beckham is getting – Budweiser, Adidas, Visa, McDonalds, etc. If he just lays low the social media furor will die down. Ultimately, Beckham’s brand capital is bound to football, so in that sense, him endorsing the World Cup is in good alignment.”

There might not be a knighthood this year from King Charles, but for Eckhardt he will not lose any fans over this. “It will be forgotten by the time World Cup 2026 in the U.S. comes around.”