Celebrity Endorsement Strategy: Nike and Federer Case Study

Introduction: Celebrity Marketing and the Nike–Federer Example

Legendary art director George Lois once mused that "enlisting a celebrity to sell cat food, an airline, off-track betting, an analgesic, or a lube job would seem to be a delusionary strategy fraught with irrationality. But let's face it, it's a star-struck world."

As Gilligan (2004) points out, "Marketing strategies are different for different cultures." Marketing depends on many factors such as cultural aspects, religious aspects, living conditions of individuals, and the overall trends in society at a particular time. In fact, marketing by definition means to make a product as attractive as possible in order to persuade a target audience to buy it. Many industries therefore promote their products by hiring the services of influential celebrities who advertise the products in question.

A case in point is Nike's employment of the famous tennis player Roger Federer to market their products in Switzerland. Federer is an internationally renowned personality, celebrated not only for his tennis achievements but also for his involvement in charitable and community efforts. Nike, too, is a famous organization, and it hoped to leverage its branding by associating its image with that of Federer.

The aim of this paper is to assess whether companies like Nike profit from hiring celebrities to brand their products. Nike's hiring of Federer serves as the recurring touchstone for analyzing the use of celebrity endorsement strategy, from choosing the right celebrity to evaluating the final results of the strategy.

Nike is a U.S.-based multinational firm dealing in sportswear and equipment. It is one of the world's largest suppliers of athletic footwear as well as a major manufacturer of sports equipment and apparel. Its total revenue is estimated at around $19 billion, total operating income exceeds $2.5 billion, total net income is approximately $1.9 billion, total assets are around $14.4 billion, and total equity exceeds $9.5 billion. Nike also employs more than 34,000 people worldwide.

Nike is one of many companies that invest heavily in celebrity marketing. It is arguable whether the trend is declining today, but either way, companies go to considerable expense and effort to match the right celebrity to their product or service. The three core questions such companies ask are:

1. Do celebrity endorsement programs increase sales?
2. How should the value generated by celebrity endorsements be used?
3. Are customers connecting the brand with the celebrity?

The following sections explore those questions by analyzing the celebrity endorsement strategy from the initial selection of the celebrity through to the final assessment of outcomes.

Defining Endorsement Strategy and the Lure of Celebrity Marketing

The American Marketing Association (AMA) has defined marketing as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large." It can also be defined as "the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return." In this way, marketing is understood as a concept in which an organization seeks to maximize value for customers and shareholders in order to generate profit.

Industries generally spend millions of dollars researching customers' desires and the predicted state of the market (Brown, 2010). They also spend millions attracting clients to buy their products. One of the ways they do this is through celebrity endorsement, since celebrities are considered to lend greater credibility to a product.

Nike, for instance, wanted its Swiss clientele to buy their footwear. Organizations typically advertise through "branding" — the repeated association of a company's name with a desirable image. The image Nike chose to associate with its footwear was celebrity. Switzerland is a sports-loving nation proud of its soccer and athletics teams. Federer is a well-known tennis player who is particularly beloved by the Swiss not only for his sporting achievements but also for his philanthropic interests. The Swiss are generally inclined to purchase products endorsed by him, and Nike took advantage of that fact.

Of all the market segments attracted to celebrities, none are more so than teenagers. To teens, celebrities are far more than pop singers, fashion models, musicians, or athletes — they are icons, heroes, and role models. Celebrities can determine or destroy trends, and they can become the voice of the teen demographic in a powerful way, making them an important tool for teen-oriented marketing. Adolescent-based marketing therefore leverages celebrities heavily (Zollo, 1999).

In particular, boys aged 12 to 15 are among those most captivated by celebrity athletes. Zollo (1999) discovered this when he tested a Nintendo TV spot for the company's "Ken Griffey Jr. Presents Major League Baseball." The company intended to measure whether the execution interested boys. What they found instead was that the boys were drawn in by the celebrity association — more than anything else, it was the athlete's name that attracted them to the game, even though Griffey Jr. did not appear in the commercial himself; his father did.

Michael Jordan is an all-time favorite who has become indelibly linked with Nike. Other products associated with Jordan include Gatorade, McDonald's, Coca-Cola, Wilson, Wheaties, and Hanes. In basketball, other prominent endorsers include Grant Hill, Penny Hardaway, and Kobe Bryant.

Music, sports, and fashion are the fields that attract the greatest amount of celebrity marketing activity. Among teens, athletes and musicians are the preferred celebrities, followed by supermodels (preferred by girls) and then TV and movie stars (Zollo, 1999). Sports stars, music stars, and models remain adolescents' top choices, and since celebrity marketing tends to succeed best in the adolescent sphere, these figures generally remain the endorsers of choice as well.

The Four Stages of Finding and Hiring a Celebrity Endorser

The entire process of considering, finding, and hiring a celebrity is done incrementally and thoughtfully, occurring in four distinct stages.

In Stage 1, no definitive action is taken. The company becomes cursorily acquainted with the celebrity and decides whether or not to move forward. The process frequently stops here, with company and potential endorser parting on friendly but non-business terms. At this stage, there are no selection criteria, no analysis of contract renewal, and only ad hoc negotiation — if any at all.

In Stage 2, the company cautiously proceeds to test whether the celebrity may be a good fit and whether the celebrity is interested. Negotiations are mentioned casually, and objectives and measurements are tentatively formulated. Some parameters are constructed for stated objectives, and celebrity characteristics are carefully aligned with business objectives.

In Stage 3, a well-defined selection process is in place, and a negotiation strategy is established. The company constructs a methodology to measure the effectiveness of celebrity endorsements, and feedback is communicated to stakeholders.

In Stage 4 — the most serious of all — the company actually hires the celebrity. Drawn-out negotiations are conducted regarding goals, the contract, and outcome measurements. Results are conveyed to stakeholders.

The seriousness and deliberateness of this process reflects the significance of the decision. An enormous amount of money is involved — more than one celebrity has become a millionaire exclusively through such deals. Beyond the financial stakes, the company's reputation rests on the celebrity's reputation. This is no minor decision, and so the company carefully assesses various factors before making its final selection.

An examination of Nike's project with Federer provides insight into how companies choose the celebrities they will use to market their products. Nike became interested in Switzerland as a prospective client base for several reasons. Switzerland has one of the highest household income levels in the world, measuring around $42,600 per capita, with a population of more than 7.5 million. More than two-thirds of its population lives in urban areas, and its terrain is predominantly mountainous, making it an excellent consumer market for durable footwear, boots, and skiing equipment.

Switzerland is also a sports-loving nation whose key sporting idol is the tennis player Roger Federer. Federer is so beloved by the Swiss that they are generally inclined to buy any products he endorses. Moreover, since Switzerland's mountainous terrain demands durable footwear, and Nike is well known for providing exactly that, the combination of factors made Switzerland a highly attractive market for Nike.

Federer was born in Switzerland, was a celebrated sports player, and was a beloved national icon. Nike and he seemed a perfect match, and Nike proceeded accordingly.

References

Ace, C. (2001). Successful Marketing Communications. Boston: Butterworth-Heinemann.

Applbaum, K. (2004). The Marketing Era. New York: Routledge.

Barnes, S. (8 June 2009). "Roger Federer, greatest of all time, ensures statistics back up unrivaled artistry." The Times (UK).

BBC Sport. (4 July 2009). "Is Roger Federer the greatest?"

Bloomberg Businessweek. (21 September 2007). "Nike Gains on Global Reach."

Brown, S. (2000). Imagining Marketing. London: Routledge.

Browne, K. (2010). Trolley psychology: choice unlocks the psychological secrets of the supermarket and shows you how to avoid spending more than you mean to. Choice, Australasian Consumers' Association, no. 4, pp. 60–64.

Chansarkar, B. (2002). Introducing Marketing Research. New York: John Wiley & Sons.

Daboll, P. (2010). Celebrities in advertising are almost always a big waste of money. Ad Age.

Dennis, C. (2002). Marketing the E-Business. London: Routledge.

Eckel, K. (2006). [Research on celebrity endorsement effectiveness and product quality.] Referenced in text.

Gilligan, C. (2004). Strategic Marketing Management. Oxford, UK: Butterworth-Heinemann.

Goldberg, M. (1997). Social Marketing. Mahwah, NJ: Lawrence Erlbaum Associates.

Halonen-Knight, E., & Hurmerinta, L. (2010). Who endorses whom? Meanings transfer in celebrity endorsement. Journal of Product & Brand Management, 19(6), 452–460.

Hardaker, G. (2001). Wired Marketing. New York: Wiley.

Herbig, P. (1995). Marketing Japanese Style. Westport, CT: Quorum Books.

Houston, F. (1994). Marketing Exchange Relationships. Westport, CT: Quorum Books.

Jago, R. (5 June 2009). "Roger Federer is the greatest, says Pete Sampras after record broken." The Guardian. London.

Kasper, H. (1999). Services Marketing Management. New York: John Wiley & Sons.

Lacobucci, D. (2001). Kellogg on Marketing. New York: John Wiley & Sons.

Lazer, W. (1971). Marketing Management. New York: John Wiley & Sons.

Lewis, B. (2000). Internal Marketing. London: Routledge.

Maddock, R. (1996). Marketing to the Mind. Westport, CT: Quorum Books.

McCalley, R. (1992). Marketing Channel Development and Management. Westport, CT: Quorum Books.

McCalley, R. (1996). Marketing Channel Management. Westport, CT: Praeger.

Nwankwo, S. (2002). Dynamics of Marketing in African Nations. Westport, CT: Quorum Books.

Partlow, J. (July 2003). "Nike drafts an all-star." The Washington Post.

Pelsmacker, P. (2004). Integrated Marketing Communications. London: Routledge.

Portland Business Journal. (23 October 2007). "Nike to buy Umbro."

Roger Federer Official Website. (28 May 2004). "Roger Federer Foundation to support children and young people in South Africa."

Rogers, S. (2001). Marketing Strategies, Tactics and Techniques. Westport, CT: Quorum Books.

Surfline. (22 February 2002). "Daily Grind — Nike buys Hurley."

Tennis Australia. (16 January 2010). "Stars rally for a common cause."

Times LIVE South Africa. (21 September 2011). "Mandela pips Federer."

TRU Teenage Marketing and Lifestyle Study (p. 179). Referenced in Zollo (1999).

Akturan, U. (2011). Celebrity advertising in the case of negative associations: discourse analysis of weblogs. Management Research Review, 34(12), 1280–1295.

Varey, R. (2002). Marketing Communication. London: Routledge.

Zollo, P. (1999). Wise Up to Teens: Insights into Marketing and Advertising to Teenagers. Ithaca, NY: New Strategist Publications.