The Economic Value of Celebrity Endorsements

Anita Elberse, Jeroen Verleun

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What is the pay-off to enlisting celebrity endorsers? Although effects on stock returns are relatively well documented, little is known about any impact on sales—arguably a metric of more direct importance to advertising practitioners. This study of athlete endorsements finds there is a positive pay-off to a firm's decision to sign an endorser, and that endorsements are associated with increasing sales in an absolute sense and relative to competing brands. Furthermore, sales and stock returns jump noticeably with each major achievement by the athlete. However, whereas stock-return effects are relatively constant, sales effects exhibit decreasing returns over time. Implications for practitioners are outlined.