Executive summary of “Celebrity endorsements and branding strategies: event study from India”

Citation

(2015), "Executive summary of “Celebrity endorsements and branding strategies: event study from India”", Journal of Product & Brand Management, Vol. 24 No. 6. https://doi.org/10.1108/JPBM-09-2015-944

Executive summary of “Celebrity endorsements and branding strategies: event study from India”

Article Type: Executive summary and implications for managers and executives From: Journal of Product & Brand Management, Volume 24, Issue 6

This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefits of the material present.

Numerous studies have examined the impact of celebrity endorsement on consumer attitudes and purchase intention. Findings have confirmed that factors like credibility and attractiveness of the endorser are mostly responsible for any positive influence. Perceived “fit” between celebrity and brand has also been extensively addressed. Analysis has produced inconclusive findings where the effect of congruence is concerned. While some researchers claim that a close “match-up” generates higher advertising returns, others argue that better results can be achieved through “moderate incongruence”.

It is further suggested that the effectiveness of celebrity endorsement may also be determined by the type of branding strategy used by a firm. However, this has not yet been widely explored. In addition, the use of celebrities to endorse products could have different outcomes within different cultures.

Companies essentially follow one of three branding strategies:

1. Corporate: Whereby the corporate name is incorporated into all product brand names. The policy extends to all subsidiaries and levels of the firm. FedEx and Hewlett-Packard are organizations that utilize this strategy.

2. House-of-brands: High-profile corporations Unilever and Procter & Gamble favor an approach where individual brand names are used while the corporate brand name remains “in the background”.

3. Mixed branding: Capturing elements of both corporate and house-of-brands. Firms adopting this strategy might have in their portfolio, a set of “house or family brands” alongside certain products where the corporate brand name is used.

Different scholars assert that various advantages are offered by what a corporate branding strategy provides. Included are economies of scale and lower costs involved with advertising and building brand equity. Furthermore, evidence suggests that corporate branding is the only strategy to have a positive impact on a company’s intangible value. It was additionally found that this strategy strengthened the positive effect on the intangible value of advertising expenditure.

Limited research indicates that celebrity endorsement might have a more profound impact when a corporate branding strategy is followed. In one example, shareholder returns at Nike significantly increased when golfer Tiger Woods endorsed the brand. On the contrary, his endorsement had minimal impact on stock value of Fortune Brands. These two organizations, respectively, adopted a corporate branding strategy and a house-of-brands strategy. Another argument is that communication of celebrity endorsement to shareholders will be more effective in companies using a corporate branding strategy. The endorser is likely to reflect the personality of the brand better and therefore increase its visibility. A positive impact on consumer preferences then becomes more probable.

The inconsistent research findings about the effect of congruence between celebrity and brand prompts search for more comprehensive analysis of perceived fit. One approach advocates that matching a celebrity and brand triggers recall of associations within a consumer’s memory. Associations between the two entities are deemed “supporting” or “opposing” depending on whether or not they are consistent. Supporting and opposing associations accordingly indicate congruence or incongruence. That the dimensions where these associations should be activated are not specified is seen as a limitation of this theory.

Jaikumar and Sahay, therefore, believe that brand personality dimensions can be utilized to enhance this approach. Critics of the widely-deployed brand personality scale point to “category confusion” as an issue. However, the authors believe that this “spillover of traits” from category to brand helps provide a context which elucidates how consumers perceive both brand and celebrity. Based on earlier work, they also feel that fit between endorser and brand will help increase shareholder returns.

According to one view, celebrities have certain meanings which are symbolic within a specific culture. Endorsement results in such meanings being transferred to the brand concerned. Within individualist cultures, some studies found that celebrity endorsement has a strong, positive impact on stock market value.

The current study focuses on India, traditionally regarded as a collectivist society that is acknowledged as having developed individualistic elements too. It is hence now deemed to be “moderately collectivist”. Interdependence is a strong feature within collectivist cultures, and the opinion of others influences consumer purchase decisions. Celebrities can be especially significant in this respect. Consumers regard celebrities as credible when the symbolic meanings they have acquired echo society’s values. Using celebrity endorsers might, therefore, increase message credibility of organizations within collectivist cultures.

Earlier work argued that the impact on shareholder returns provides a true measure of managerial decision effectiveness. The authors subscribe to this view by investigating how announcements of celebrity endorsement influence the firm’s share price. Models are thus created to estimate what are termed “normal market induced returns” and “abnormal returns” where the stock price is higher or lower than expected. Abnormal returns are measured over an “event window” spanning a period prior to and following the announcement.

To test various hypotheses, Jaikumar and Sahay searched online for announcements of celebrity endorsements in India. Initial screening left 47 examples of such announcements between 2004 and 2013. Of these, 25 companies followed a corporate branding strategy and the remaining 22 a house-of-brands strategy. Analysis showed that mean abnormal return in the corporate branding sample was strong and positive. In contrast, average excess in the house-of-brands sub-set was insignificant. This supported the notion that market value gains from celebrity endorsements will be greater for firms using a corporate branding strategy.

Data also indicated that communication should be more effective for such firms. This was based on the finding that the parent brand was frequently mentioned in celebrity announcements for corporate branding but rarely cited when companies used a house-of-brands strategy.

Contrary to expectations, no evidence was found to support the claim that the impact on abnormal returns in India should be more positive when the celebrity–brand relationship is congruent as opposed to incongruent. This conclusion was reached following the application of the brand personality scale to different brands and celebrities within a survey involving 124 respondents. Findings were inconsistent, illustrated by the fact that celebrity endorser Kareena Kapoor was highly congruent with Procter & Gamble and highly incongruent with Wyeth India, despite both companies using a house-of-brands strategy.

The prediction that celebrity endorsements would generate higher returns in India was substantiated to some degree, indicating that the practice might be more effective within cultures identified as being more collectivistic in nature.

No difference was found when celebrities endorsed multiple brands or when the same brand was endorsed by multiple celebrities. Type of celebrity also appeared relatively insignificant. However, further research in these two areas is recommended.

In the authors’ opinion, house-of-brands companies can benefit by increasing awareness of the parent brand through communication, such as print and television advertisements. They also remind firms that investing heavily to assess celebrity fit is unnecessary given that congruence is seemingly unimportant within moderately collectivist cultures. Considerable savings can be made. The role-model status enjoyed by celebrities in India suggests that self-celebrity fit might be more significant along with the popularity of the endorser.

Future study could assess stock returns over a longer period and the impact of varying endorsement costs. Another suggestion is to examine whether poor awareness of the parent brand is partly responsible for inconsequential share price movements in the house-of-brands situation.

To read the full article, enter 10.1108/JPBM-06-2014-0640 into your search engine.

(A précis of the article “Celebrity endorsements and branding strategies: event study from India”. Supplied by Marketing Consultants for Emerald.)