Celebrity Endorsements

In the Beauty sector industry, L’Oreal ranks on the top amongst the other brands, and has also undertaken many celebrity endorsements (Wang W.S, 2006). To comprehend the influence of celebrity endorsement on “L’Oreal Paris” a methodical study is required. This chapter has been divided into two sections, the first begins with a brief description about celebrity endorsements, in addition the previous and the current scenario of celebrity endorsements, whereas the second section talks about the brand L’Oreal, its performance in the industry, the celebrity endorsements it has undergone, furthermore any risks it has faced while endorsing and lastly how has it been influenced by celebrity endorsements

 A key challenge that marketing agencies face today to get noticed in the highly competitive market is that of designing an “advertising execution”. There are many ways through which agencies can secure consumers, amongst them one form is celebrity endorsement (Robert van Der Veen analysis of celebrity endorsement as an effective destination marketing tool, 2004).The concept of “celebrity endorsement” has been increasing over the decades and now is a widespread advertising strategy. Celebrity endorsement since ages has been used as an effective source of marketing to promote products and services. (Nathan Klaus, and Ainsworth Anthony Bailey, Celebrity endorsement: an examination of gender and consumer attitudes, American Journal of Business, 2008 vol.23 no.2).

At present, one will find almost every advertisement involving a celebrity, these celebrities act as spokespersons so as to advertise and promote products, services and ideas. (Cited in Kambitsis et. al 2002, Rajakaski JJ, Simonsson R.2006). Now Celebrity endorsement is a well established form of advertising strategy, especially in the U.S where approximately twenty percent of all the television commercials present a celebrity or a famous person and in addition, approx ten percent of dollars spent on television advertising are consumed in celebrity endorsement. (Cited in advertising age Sherman 1985, Agrawal & Kamakura, 1995). The celebrities when are endorsed for a product they are expected to accomplish a number of objectives such as increasing the brand image, brand name, product creditability, and also the likability of the advertisement.(Brunett et all 1993 cited in Marin 1996). Firms use celebrity endorsement not just for increasing revenues but also its importance lies in the fact that how celebrity endorsement add value to company, brand and product.(Clinton Amos, Gary Holmes, David Strutton, Exploring the relationship between celebrity endorser effect and advertising effectiveness, International Journal of advertising , 27(2), 209-234, world advertising research center) Using celebrities for advertising helps the brand by acquiring better and more attention from the consumers, they add glamour to the product/brand and make it more credible, desirable and trustworthy. (Spielman, 1981 cited in Renton , 2006).According to Friedman and Friedman (1979) “a celebrity is an individual who is known by the public for his achievements in area other than that of the product class he is endorsing”. Famous people achieve a high degree of attention from the public and media. As a result of their celebrity status they create a positive image of the product they endorse.

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Murdoch argues that Belch and Belch has written  “Marketers recognize that people are more likely to be influenced by  a message coming from someone with whom they feel a sense of similarity, and that advertisers recognise the value of using spokes person who are admired: TV and movie stars, athletes, musicians, and other popular figure ” (Murdoch, Creativity in advertising).There are a variety of reasons why a firm might go for celebrity endorsement some reasons may be the experiences that the celebrity faced in his life may be similar to the message to be conveyed in the advertisement and if you are a fan of the celebrity you might trust them..(Kulkarni and Gaulkar,  2007). Hence, Choosing a celebrity should be done with at most care and importance since it is more than a marketing strategy as it is a decision that has an impact on the prospect of the brand. Choice of celebrity should be on the basis of factors like appeal, popularity, etc.(Naveen Blazey and Shashi Kanth Ganti, Goa institute of management Goa, Impact of celebrity endorsement on overall brand)

Celebrities endorsement are sometimes very expensive for the firm,  based upon the reputation and the status of the celebrity, their remuneration could run into millions of dollars depending on  the contract, overall it is an huge investment made by the brands for advertising(Agrawal & Kamakura,1995).In today dynamic market conditions, there is huge risk associated along with the celebrity endorsement, what if celebrity advertising does not affect the consumer purchasing decision, furthermore endorsement does not give economic returns after a high cost of celebrity advertising involved and does not affect the profitability of the brand, and in addition there are situation where the celebrity himself is in a controversy, and its effects on the firm.

L’Oreal Paris:

L’Oreal was established in 1909, previously known as L’Aureale (Latin meaning: Golden crown). It began producing hair dye products in Paris and due to its success it quickly started branching out in other countries along with diversifying the product range whilst including soaps, shampoos and hair preparations. In 1974, L’Oreal undertook many dermatological and pharmaceutical activities, For instance a joint auxiliary undertaking between L’Oreal and Nestle which concentrates on medication of diseases and infections. In December 2003, an research and development centre was established. In 2004 acquisition of Mininurse and Yue-Sai, two Chinese brands had taken place, furthermore L’Oreal group had been ranked by Interbrand, as the 49^th global brand for leading international branding consultancy. In 2005 L’Oreal had set up its first research centre in Shanghai, which mainly dealt with the issue on the texture of Chinese skin hair and other varied needs of the Chinese. Today L’Oreal has over 50,000 employees, a research team of 3,000 employees, 30,000 active patents and 130 branches all around the world (Datamonitor, L’Oreal Paris).

L’Oreal Group has divided its products under a) Luxury goods which includes brands like Giorgio Armani, Ralph Lauren, Cashrel, Lancôme exacta b) Consumer goods- Brands that come under this group are L’Oreal Paris, Maybelline New York etc. c) Professional products and d) Active cosmetics. L’Oreal Paris characterizes professionalism, and due to research and development technology it has always maintained its high quality. This brand has targeted those consumers which are willing to pay higher prices for good quality products.

The most important strategy that L’Oreal Paris has adopted to diversify its operations is by undertaking tactics such as expanding its distribution and advertisements, especially in countries like India, where the current brand ambassador is the Hindi film actress Sonam Kapoor. On the other hand, in other international countries during the mid May, 2009 L’Oreal Paris has increased it celebrity endorsements by endorsing three new celebrities Elizabeth Banks, Freida Pinto and Evangeline Lily. These new Hollywood celebrities were announced as the ambassadors during the Cannes film festival, and now they will join the L’Oreal Paris hall of fame with the previous L’Oreal Paris ambassadors such as Penelope Cruz, Jennifer Aniston, Beyonce, and Scarlett Johansson (Datamonitor, Loreal paris). According to C’esar Zamudio, 2008 Currently L’Oreal Paris has 14 ambassadors of different ethnicities and professions (Zamudio, 2008)

1.2 Purpose of the study

This research is undertaken to realise and comprehend the appealing concept of brand endorsement and also its influence on the L’Oreal Paris and the consumer purchasing decision. The purpose is also to reach a conclusion whether celebrity endorsement which is a huge investment does actually give a positive return to L’Oreal Paris

1.3 Aims and objectives

An Aim is set up in order to achieve the goals and to solve the purpose of the study undertaken. The aim of this Study would be to examine the vivid concept of celebrity endorsement, and how does it affect the brand and the consumer purchasing behaviour, furthermore how brands handle the risk factor.

Objectives:

• To identify, analyse and discuss relevant literature, about the use of celebrity endorsement and its effects on the consumer purchasing behaviour
• To indentify some theoretical framework able to model the influence that celebrity endorsement plays on the brand itself
• To Design a methodological approach that would enable the collection analysis of primary and secondary data.
• To show the findings of this research within the context of the state of the art literature.
• To critically reflect the influence of celebrity endorsement on consumer purchasing behaviour and also on the L’Oreal Paris.

1.4 Research Methodology

• Collection of primary data will be done through questionnaires, in order to reach the aims and goals of the research.
• Secondary data will be collected through reading various journals and books related to the concept of celebrity endorsement
• Furthermore, data will be collected through reading newspaper articles, magazines, advertisements, magazines and articles from the database
• The conclusion will be depicted from the findings gathered from the primary and secondary data.

1.5 STRUCTURE:

 CHAPTER 1: INTRODUCTION: Introduction of this study has stated the research aims and objective, and the purpose of this study.

CHAPTER 2: LITERATURE REVIEW: The literature review explains the aims and objectives of the previous researches and defends their view point from the research.

CHAPTER 3: METHODOLOGY: The methodology explains how the research will be carried out. In this study from qualitative and quantitative research methods, quantitative research method will be made use of.

CHAPTER 4: DATA ANAYSIS: The data collected through the research method, will be analysed through various computer programming techniques in order to arrive to a result.

CHAPTER 5 CONCLUSION: The findings and suggestions to readers will be stated which is on the basis of the result of the study.

CHAPTER 2: LITERATURE REVIEW

2.1. INTRODUCTION

This section of literature review will deal with the synopsis of pertinent theories, models, subject matter and also illustrate previous findings. To start with introduction of the topic will be done followed by a detailed explanation of celebrity endorsement and sponsorship furthermore explanation of consumer behaviour and the factors or attributes affecting the consumer attitudes and the intension to purchase and lastly how celebrity adds value to the endorsed products.

In the process of celebrity endorsement there are some risks and failures also involved, so such factors will also be discussed in brief. The literature review will comprise of:

• The illustration of celebrity endorsement process
• Factors that influence the consumer purchase intentions
• Differentiating the varied marketing tools.

2.2 CELEBRITY ENDORSEMENTS:

The Celebrity endorsement issue gained apt importance after the Second World War, previously in 1666 where the sellers use to aggressively exhibit there endorsers. From the beginning of the twentieth century, people used to find celebrities in newspaper and magazines. (Segrave.2005).The endorsement process is time consuming and is worth a million dollar and is constituted by three important participants: Firms, celebrities, and the middle men. Busler (2002) states that in 2001, celebrities received around $800 million as their endorsement fees. Fees are still rising in this industry for instance in the sports industry, during 1997, Michael Jordan used to earn $47 million in a year which made him the h8ighest paid athlete , following ten years Le Bron James signed a contract worth $90 million with Nike additionally, he also discontinued using middlemen and commenced his own firm.(Arango 2007). Therefore the role of all the three participants can be understood, as the firms carry out celebrity endorsements so as to increase their profits, celebrities accept it on order to earn and increase their popularity, while the middlemen take some commission for coordinating the celebrity and the firm (Agrawal and Kamakura 1995).

The continuous development in this industry led FTC regulating it, where the FTC worked out a set of guidelines, which has to be followed whilst undertaking celebrity endorsements (Atkin and Block 1983). Since 1980’s the contract fees have sky- rocketed (Segrave 2005). In 1986, Sylvester Stallone and Paul Newman were paid approx $1 million a year( Segrave 2005).  In 2007 the athlete Tiger woods’ was highest paid which amounted to a total of $100 million (Arango 2007).

A celebrity has a distinct personality and reputation. Along with appearing in an advertisement, they are very talented and have exceptional skills in performing an undertaking, which makes them famous amongst the public besides gaining more respect and adoration. According to Pringle H and Binet L, “Celebrities are those, who are famous and familiar amongst the regular people and are used by brands to add value to their advertisements by considering their image and reputation” (Pringle H, Binet L, 2005).

There are many studies carried out on the concept of celebrity endorsements, to begin with there are researches relating to who can be the best spokesperson for an endorsement amongst celebrities, the CEO, consumers or should it be an expert of the particular brand, the results were sketchy as not much research has been carried out on this particular issue so a vague and a blend of results were found, according to Atkin and Block (1983) and Frieden (1984) the celebrities are right choice but are not always found to be effective, but Martin et. al (2008) states that consumers can be found most suitable, in addition Harper 2007 and Simpson 2007 ends saying that the celebrities possibly may not be the best suited endorser furthermore Kamins,1989 undertook a two sided study the results were that celebrity were found to be more congenial and authentic over non-celebrity spokesperson.(Kamins 1989)

 Agrawal and Kamakura (1995) and Mathur et al. (1997) argued on the effect of celebrity endorsement contracts on the profitability of a firm, Agrawal and Kamakura analyzed 110 celebrity endorsements contracts using event study analysis and found out that on an average the firms experience a 44% increase in their market value this will have a positive stock  return leading to increased  profits and furthermore  are considered as a worthwhile investment (Agrawal & Kamakura,1995).Whereas Mathur (1997), emphasized on the issue relating to comeback Michael Jordan to NBA in 1995, which brought McDonald’s (endorsed by Michael Jordan at that time) an approximate gain of $192 million, this figure is nearly equal to the price of 64 million McDonald’s meals (Mathur et al. 1997). Another research was on the basis of how celebrity’s persona influences the consumer’s attitudes and product evaluations, According Friedman and Friedman (1979) and Roa et. al (1999) states that if the product is socially or psychologically risky then the celebrity endorsements will increase the chance of believing in the advertisement. Kalhe and Homer(1985) says when the celebrities image is equivalent to the product endorsed then only the celebrities physical attractiveness augment to product evaluations(Kalhe and Homer. 1985). Amos, Holmes, Strutton (2008) dealt with a relationship between the effects of celebrity endorser and the effectiveness of advertising using the Kruskal-Wallis non parametric test, they found that any off putting information or events concerning the celebrity can have an adverse effect on the brand, these researchers also used the source credibility model for evaluating consumer perceptions of a celebrity endorser, which consists of three important constituents- celebrity trustworthiness, celebrity expertise and celebrity attractiveness, the findings were that if there is advertisement clutter the effectiveness of celebrity endorsement might condense, in addition larger influence of celebrity endorsement is found amongst the collage students.(Amos, Holmes, Strutton 2008). Endorsement effectiveness: According to Friedman and Friedman (1979) “celebrities are more effective than an expert or a consumer, as they help in easily remembering and recollecting the band name of the product as the ad”. (Friedman and Friedman 1979) . They also contribute to effectiveness of an endorsement by bringing in more depth, accuracy and polish to the meanings to be delivered and also to the advertisements, furthermore when celebrities deliver they do it with extra care along with offering a series of lifestyle and personality. (McCracken, 1989). Choi et al.(2005) states that domestic celebrities result in more effectiveness as they are constantly in touch with the existing cultural values compared to the international ones who might possibly more expensive and difficult to find to suit the brand (Choi et al 2005).

For effectual use of celebrities and for successful endorsements, following guidelines have been mentioned by Till (1998).

• If the celebrity is utilised constantly or consistently, to reinforce the relation between the brand and celebrity, the celebrity endorsement will be more effective.
• The ad should contain relevant and true facts about the product, additionally it should be straightforward and uncomplicated.
• Those celebrities are recommended who are not allied with any other brand and are precisely appropriate for the endorsed brand.
• This marketing tool will be more accurate for those products for which the user has incomplete information.

According to Shimp (2003), Creditability and attractiveness are the determinants of effectiveness of endorsers, Creditability consists of celebrity’s believability and dependability, while attractiveness involves physical attractiveness, respect and similarity between the endorser and public’s age, gender, ethinicity. For instance Omega (Swiss watch) endorsed by Anna kournikova as they found her attractive

Let us discuss celebrity performance, celebrity trustworthiness,celebrity expertise and celebrity attractiveness:

Celebrity performance: According to Amos, Holmes, Strutton. 2008, celebrity performance (acting success, athlete success, music success etc.) refers to any given point of time of the celebrities profession where they accomplish achievement.(Amos, Holmes, Strutton. 2008) There is an direct impact of the celebrities performance on their popularity which might fall or even rise in their in the entire profession (Agrawal and Kamakura 1995). If their performance fall short it is likely that a celebrity endorser’s effectiveness will deteriorate (Agrawal and Kamakura 1995). 

Celebrity Trustworthiness: Trustworthiness refers to the amount of confidence that the consumers put on the celebrity for the message delivered by them which is believed to be most convincing (Ohanian 1990). According to Griffin (1967) “Favourable disposition, acceptance, psychological safety and perceived supportive climate are favourable consequences of trust” (cited in Chao et.al.2005). It is always found that a message coming from someone whom you trust, you tend to believe in the message more and bring about an effectual attitudinal change; on the other hand non trusted spokesperson influence tends to be lower. (Mc Ginnes and Ward 1980). The trustworthiness factor is an important element that constitutes the effectiveness of a celebrity endorsement.

Celebrity Expertise: According to Erdogen (1999) “celebrity expertise is the extent to which the spokesperson is observed to be an informant of valid assertations (Erdogen, 1999).  Ohanian 1990, states that “investigating source creditability in settings involving persuasive communication generally indicates that a receiver’s perception of the source’s expertises positively influences source effectiveness furthermore, a respondent’s action’s in response to the source’s perceived level of expertise and the target person’s level of agreement with those recommendations and lastly subjects exposed to a source perceived as highy expert exhibit more agreement with the source’s recommendations than did those exposed to a source with low expertise “( Ohanian 1990).

Celebrity Attractiveness: It is multi-dimensional in nature, along with just the physical attractiveness it consists of other factors such as personality and ability (Erdogen 1999). This factor constitutes an important part in the effectiveness of an endorserment. The physically more attractive celebrities are normally seen as more approving on different personality attributes then non attractive corresponding person (Kalhe and Homer 1985, Eagly et. al. 1991). Joseph (1982) found out from his study that attractive spokesperson has more optimistic influence on the product then the non attractive ones. Baker and Churchill in 1977 concluded that even though attractive spokesperson had resulted in advertisement effectiveness but attractiveness did not have an impact on the purchase intentions of the consumer (Baker and Churchill, 1977).

Negative effects/ Potential risks:  Even though celebrity endorsement is said to bring in many advantages and profits not only to the firm but also to the celebrities, there are many risks and negative effects associated with celebrity endorsement. The persona of the celebrity itself endures the customers to purchase the product, what if the celebrity gets caught in any controversy, criminal activities or is undergoing a personal problem

The requirements or the must for a successful execution of celebrity endorsements starts with knowing where the brand is positioned currently which also includes where it wants to be in the future and how is it going to get there, then followed by developing a creative idea. After considering that celebrity endorsement is best and effective method for marketing communication, next critical thing to be thought about is selecting the appropriate celebrity. Furthermore the fame of the celebrity hastens up the message and in gain substantial return on investment is expected. (Pringle H, Binet L, 2005).

CELEBRITY ENDORSEMENT PROCESS: MEANING MOVEMENT AND THE ENDORSEMENT PROCESS

 McCracken’s meaning transfer process, has been divided in to three different stages, In stage ONE, he states that celebrities as compared to models and actors plays an extremely important role as they deliver a  variety of influential personality and lifestyle meaning which are extracted from the character they play in the movies, sports, military and other careers , Lastly the endorser comes in associate with the objects , persons and contexts, then the meaning is brought into the advertisement by the celebrity.

In stage TWO, after the celebrity is finalised, the source of promotion should be identified and the product to be promoted should be furnished with meanings, in addition to this all the seize only those meanings related to the product which are to be acquired from the celebrity i.e. through campaigns, representative properties related to the product are conveyed by means of celebrity. Lastly the link between the celebrity and product is highlighted.

 In the THRID stage, the representations of the celebrity are transferred to the product and also the meanings from objects, people and events surrounding them. With the use of products, celebrities create a self image before the audience that make these meanings accessible to the consumers, then the consumers understand the meaning and purchase accordingly (Mc Cracken Grant, 1989)

3. RESEARCH METHODOLOGY

3.1 INTRODUCTION

The literature review chapter discusses the literature in celebrity endorsement and its impact on the brand as well as the consumers. The next chapter of “research methodology”, is where a suitable method of research would be selected before carrying out the research. In this chapter description regarding the accomplishment of the research will be stated, furthermore the method selected, the approach, sample, and data collection will be depicted.

3.2 RESEARCH APPROACH:

This research is both a quantitative and qualitative research, according to Bryman and bell “quantitative research is a distinctive research strategy and in broad terms it can be said that it is collection of numerical data and as exhibiting a view of relationship between theory and research as deductive and as having a objectivist conception of social reality”.( Bryman and bell,2007).. In the research along with primary data, secondary data will also be given importance where all the journals, text books, press articles and the internet where all the topic related websites including the company’s website will be considered.  Primary research will be conducted using questionnaires and also interview.

Qualitative research tends to be more concerned with words rather than numbers and a feature of qualitative research is “inductive view” where there is a relationship between theory and research and the theory is extracted out of the latter (Bryman and Bell,2007) an inductive view approach will help in completion of the literature review. From the literature review a number of research questions were formed.

To start the research, the secondary data on celebrity endorsement and also its influence of this concept on brand and consumer behaviour was reassessed. The collection of secondary data involved journals, magazines, text books, press articles and the internet. In accordance to secondary data this research was found creditable for further investigation. Inductive approach has been chosen along with primary research and secondary data will help in completion of this research. Primary data will be collected with the help of questionnaire to obtain accurate results and contemporary data.

3.4 DATA COLLECTION

SECONDARY DATA

Secondary research helps in collection of data and understanding what has already been undertaken under this field. Examining the present and the past researches or studies will help in appropriate understanding of the concept under research. Collection of secondary data is comprised mainly from journals, press articles from news paper and magazine articles, books and reliable websites. Secondary data offers pertinent theories, models and concept based through which further research can be undertaken.

PRIMARY DATA

There are many ways through which primary data can be collected, for instance interview method, questionnaire etc. In this study questionnaire method is chosen. The questionnaire consists of both open-ended as well as close end questions

References:

• Nathan Klaus, and Ainsworth Anthony Bailey, Celebrity endorsement :an examination of gender and consumer attitudes, American Journal of Business, 2008 vol.23 no.2
• Agrawal J, Kamakura WA, July1995. The economic worth of celebrity endorsers: an event study analysis, journal of marketing Vol.59, pp.56-62
• Rajakaski JJ, Simonsson R.2006, The subject of celebrity endorsement :what it was and what it has become.ISSN:1402-1773-ISRN:LTU-CUPP-06/137-SE.
• Clinton Amos, Gary Holmes, David Strutton, Exploring the relationship between celebrity endorser effect and advertising effectiveness, International Journal fo advaertising , 27(2), 209-234, world advertising research center.
• Naveen Blazey and Shashi Kanth Ganti, Goa institute of management Goa, Impact of celebrity endorsement on overall brand)
• Mc Cracken Grant, who is celebrity endorser? Cultural foundation of endorsement process, journal of consumer research, December 1989, vol. 16.
• Pringle H, Binet L, How marketers can use celebrities to sell more effectively, journal of consumer behaviour, 2005, vol.4,3, 201-214, Published by John Wiley and Sons, ltd.
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• Segrave, Kerry. 2005. Endorsement in advertising. A social history. Mc Farland and company, Inc., USA.
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• Arango, Tim. 2007. Lebron, Inc- the building of a billion- dollar athlete. Fortune
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