Boosting your business with celebrity endorsements

Economists attribute this to the ‘visibility effect’, by drawing the attention of investors to a firm, the celebrity on the board increases interest and demand for the firm’s shares. Institutional investors, supposedly the most hard-headed investors, are said to be especially star-struck when it comes to placing their money.

The study’s authors admitted that when they started their research, they wondered what a sport star or actor could possibly contribute to a board discussion of cashflow statements. However they were surprised by what they found, after scrutinising 700 celebrity appointments to corporate boards from 1985 to 2006, the academics found boards that include celebrities enhanced shareholder value over one, two and three-year periods.

‘The selection of such an individual to a board provides an opportunity for the firm to increase its visibility through the prominence and status associated with a celebrity director,’ the study says. ‘Further, such an individual can provide important networking connections or help to balance investors’ perceptions and attitudes towards the firm in a more positive direction. This enhanced visibility can ultimately lead to increased share valuation.’

It’s the kind of finding that drives some people crazy. A world that valued reality over reality television would not mindlessly reward celebrity. Celebrities, talented or not, are a quick way into the minds and wallets of consumers. Some have proved enduring: Delia Smith and Jamie Oliver in cooking, David Beckham in sport. But with the raft of talent and reality television shows, new celebrities are born and die every week. Identifying which have legs and which don’t is a challenge for businesses looking for endorsement opportunities.

Pages: 1 2