How Much Should Managers Pay for Celebrity Endorsements?

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.