Risk of reputational damage: can celebrity endorser crises spread to companies?

How should companies deal with celebrity endoser crises? Associate Professor Daniel Laufer explains.

Many companies are delighted when famous All Blacks like Richie McCaw agree to become endorsers for their products. In many cases, this results in a significant increase in sales for the companies. However, what happens when celebrity endorsers make headlines for the wrong reasons? Israel Folau’s homophobic comments on social media generated an enormous amount of negative publicity for the rugby player. How should a company respond if a star athlete who endorses its products is involved in a crisis?

A good example of a celebrity endorser crisis involved Whitakers and Nigella Lawson back in 2013. Nigella Lawson was in the news because of allegations of drug use. As Whitakers’ high profile celebrity endorser, the company had to assess the situation. Should it keep Nigella Lawson or drop her as the company’s celebrity endorser?

Whitakers decided to keep Nigella Lawson as its celebrity endorser, and she has proven to be very effective for the company. However deciding how to deal with this type of situation is complex, and many companies face a dilemma in how to respond after a celebrity endorser crisis.

One factor to consider is the severity of the celebrity endorser’s crisis. If the crisis is of a relatively minor nature, the company should consider keeping the celebrity endorser. For example, Nigella Lawson admitted in court to only occasional use of drugs. She also mentioned that this took place during very difficult periods in her life, including a nasty public divorce with her ex-husband Charles Saatchi. As a result of the situation, the public perceived Nigella’s crisis to be of a relatively minor nature, and people also had sympathy for her as a result of the circumstances.

Unlike Whittakers’ case with Nigella Lawson, in certain situations the severity of the crisis is so great that a company needs to sever ties with the celebrity endorser in order to minimise the potential damage to the brand. A good example is Jared Fogle, a former celebrity spokesperson for the fast-food chain Subway. Fogle was well known in the USA for his weight loss, which he attributed to eating at Subway. Fogle was a very effective celebrity spokesperson for Subway, and he worked with the company for a number of years. Unfortunately for Subway, in 2015 the focus of the public shifted from Fogle’s weight loss to accusations against Fogle of child pornography. As a result of the crisis involving Fogle, the company quickly severed ties with its well-known celebrity spokesperson to protect the brand from a spill over effect.

In addition to the severity of the celebrity endorser’s crisis, it is also important to consider the nature of the crisis. When a company hires a celebrity endorser, it hopes that certain positive attributes from the celebrity are transferred to the brand. For example, in the case of star athletes and sportswear companies like Nike and Adidas, a celebrity endorsement creates a situation whereby the public links the success of an athlete to the brand. When a crisis by the celebrity endorser is related to his or her performance as an athlete, the company should consider dropping the celebrity endorser. For example, many companies dropped Lance Armstrong after he admitted to using performance-enhancing drugs as a champion cyclist. This was the correct decision because when an athlete uses performance-enhancing drugs his achievements are tainted. This can also tarnish a brand associated with the athlete as well.

If, on the other hand, the crisis is unrelated to the performance of the athlete, the company can be more forgiving. In fact, in many cases the company can continue working with the celebrity endorser. A good example is Colin Kaepernick and Nike. Colin Kaepernick was a football player in the NFL in the USA who generated controversy by kneeling during the playing of the national anthem. Kaepernick kneeled to protest against police brutality against minority groups.

Not everyone was supportive of Kaepernick, and a large segment of the public in the USA condemned his protest. Many people believed that Kaepernick’s actions showed a lack of respect to the country. Some people even questioned his patriotism, and President Trump criticized Kaepernick as well.

Despite the controversy, Nike decided to feature Kaepernick in a new campaign, “Believe in something. Even if it means sacrificing everything. Just Do it.” Nike’s decision to continue its relationship with the athlete was positively received by the stock market. This despite calls by people to boycott Nike because of the company’s continued association with Kaepernick.

In the case of Kaepernick, the crisis generated a considerable amount of free publicity for Nike. The nature of Kaepernick’s crisis was also related to Nike’s advertising campaign around sticking to one’s beliefs, even if they are controversial. This is a powerful message that particularly resonates in an individualistic society such as the USA.  Kaepernick’s crisis represented an opportunity for Nike, and instead of dropping the athlete, it featured him more prominently in the company’s advertising.

A celebrity endorser crisis can also be a crisis for a company working with the celebrity. Therefore, a company needs to assess the severity of the celebrity endorser crisis and the nature of the crisis before deciding whether to sever ties.  The stakes for a company are very high. For many companies, the revenue from products linked to a celebrity endorser can be very significant. A good example is David Beckham who generates millions of dollars’ worth of revenue from the sale of sportswear for Addidas. By carefully assessing the situation, the company reduces the likelihood of keeping a celebrity endorser that should be dropped, or unnecessarily dropping a celebrity endorser that should be kept.

Read the original article in the New Zealand Herald.