THE ECONOMIC VALUE OF CELEBRITY ENDORSEMENTS: A LITERATURE REVIEW

ABSTRACT.Research on the increasing relevance and presence of celebrity endorsements, the mechanisms by which celebrity endorsements impact the market, and the link between stock market value and celebrity endorsements has yielded fairly consistent findings over the past decade. Applying new conceptual and methodological approaches, this study advances to the next level research on celebrity endorsements' consequences on advertising effectiveness, the employment of celebrity endorsers as an advertising scheme, and the impacts of celebrity endorsement announcements on the market value of the firm. The theory that I shall seek to elaborate here puts considerable emphasis on celebrity endorsement persuasion effects, the potential advantageous influence of celebrity endorsements on sales and market shares, and the effect of celebrity endorsements on the brands and on products presented in the advertisements.JEL codes: M37; A13Keywords: economic value; celebrity endorsement; advertising effectiveness1. IntroductionCompanies negotiate with celebrity endorsers with the hope that a celebrity's possible success will be shifted to the firm's name (the performance of the celebrity is successfully transferred to the company's value). (Nicolau and Santa-Maria, 2013) A corporation's decision to employ a celebrity endorser arises from a tactical planning process goaded by previous and predicted future sales (celebrity spokespeople are an essential aspect of current advertising). (Garthwaite, 2014) Any concern on a specific kind of celebrity may prevent generalizations to the broader community of celebrity endorsers. Sales can be anticipated to profit from celebrity endorsements. (Elberse and Verleun, 2012)2. The Mechanisms by Which Celebrity Endorsements Impact the MarketBy allowing budget and availability restrictions the celebrity will be singled out who best constitutes the suitable symbolic features. Good-looking celebrities are more successful in backing an attractiveness associated product or a low implication product. The categorization of the product, source reliability and source attractiveness can affect the success of the celebrity endorser and the correspondence between the brand and/or product with the celebrity. Firms have restricted supervision over the celebrity's personality which can generate significant risk and gain circumstances. Celebrity endorsers are generally costly and there is a possibility that the celebrity and/or her unanticipated conduct eclipse the product. (Roozen and Claeys, 2010) Endorsements by celebrities may supply information crosscuts that can indicate the relevance of a candidate to electors at little or no expense (a celebrity endorsement may enhance overall elector involvement). Supporters who think a candidate is of more significant relevance following a celebrity endorsement will tend to donate to the candidate's campaign committee. The data supplied by a celebrity endorsement, which may be not directly associated with strategy, may be extremely relevant during a primary election, where candidates are practically ideologically alike. (Garthwaite and Moore, 2013)Celebrity endorsements come at a considerable expense to firms, and the utilization of celebrity endorsements is a potentially hazardous policy. The net current value of a celebrity endorsement justifies all cash flows related to it, and should be displayed in announcement-day stock returns. Celebrity endorsement is focused partly on enlarging the customer base. (Table 1)The stock market does not respond significantly to (in)compatibility between a celebrity and an endorsed product. The firms publicizing celebrity endorsements do not undergo positive abnormal returns. Enhanced attention, image refining, or brand shifting are beneficial features of celebrity endorsements. The celebrity outshining the brand, the potential for public polemic, and the loss of widespread acceptance are possible threats in the utilization of endorsements. …