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Celebrity Endorsement

Consumers’ willingness to pay for celebrity endorsed products

Written by M. Kheder

Paper category

Master Thesis

Subject

Business Administration>Marketing & Sales

Year

2018

Abstract

Thesis: Celebrities and celebrity endorsements Celebrities are defined as individuals who have public recognition and use that recognition to promote products, brands or services (Jain and Roy, 2016). In the sports world, celebrities are defined as the use of publicly recognized famous athletes or coaches to promote the popularity of products, brands or services (Stafford et al., 2003). Celebrity endorsement is an advertising tool, where celebrities aim to promote products, brands or services. This tool is gradually being widely used by advertisers. The popularity, reputation and high status of celebrities are the key factors for celebrity endorsements (Jain and Roy, 2016). Endorsement means that celebrities will transfer their values ​​to the product, which means that the product or brand will be linked to the celebrity (Pradhan et al., 2016). Johannes Knoll and Jörg Matthes (2017) claimed that celebrity endorsements can draw attention to products, brands or services. Individuals who follow a celebrity are also interested in celebrity advertisements (Wi and Lu, 2013). This is because the popularity of celebrities makes consumers more motivated to evaluate endorsed products (Petty et al., 1983). Friedman (1979) mentioned that consumers' buying intentions increase with celebrity endorsements. In addition, these companies have gained more attention, recall rates and increased brand equity. According to Pradhan et al. (2016), it is very important to find a well-known person who can represent the characteristics of consumer needs. Once the company has determined a known image suitable for marketing the product or brand, it is necessary to design the campaign in such a way that their value is transferred to the product and clearly perceived by consumers. The realization of these factors is to maximize the recognition of celebrities (Pradhan et al., 2016). Therefore, it is very important for the company to choose the right celebrities to recruit. This is the so-called showdown. In order to promote successful celebrity endorsements and maximize the effect of celebrity endorsements, companies must choose the most suitable celebrity for the brand or product promoted. This is called a battle. This is because celebrities will represent promotional products. Essentially, a celebrity’s values ​​must match the product or brand he or she advertises (Byrne et al., 2003). Choi et al. (2005) pointed out the importance of choosing the right celebrity for the target market. Therefore, not only is it important to choose the right celebrity for the promotional product, but the selected celebrity also needs to be the celebrity most suitable for the target market. In some cases, using local celebrities is more effective than using foreign celebrities (Choi et al., 2005). 2.3 The impact of celebrity endorsements on consumers' willingness to pay The strategy of celebrity endorsements is feasible, and it is very useful for building credibility, promoting products and improving brand awareness. Almost 20% of all advertisements broadcast on American television are products endorsed by brands and celebrities (Albert et al., 2017). According to statistics, Nike spends nearly 480 million U.S. dollars each year for athletes to endorse its brand (Slater, 2018). Celebrity endorsements have endless benefits for companies, products and consumers. According to Wadhera & Chawla (2015), celebrity endorsements can promote product sales and help attract new consumers for companies. They inspire the confidence of consumers and actively stimulate their willingness to buy. The increase in brand value is clear and direct. Once the celebrity signs an agreement to endorse the product, the company gains the legitimacy factor with the power of the celebrity name (Wadhera & Chawla, 2015). Signing a celebrity endorsement contract will cause the stock price to rise by 25% immediately when the news is made public, thereby increasing the legitimacy of the company, even though the products are the same. According to research, advertisements using admired celebrities tend to attract viewers' attention more easily than other standard traditionally designed advertisements (Wadhera & Chawla, 2015). Therefore, one of the many positive results of celebrity endorsements is to refresh the brand image, enhance consumer awareness, gain attention, and add a new dimension to the brand image. According to a study, consumers tend to have better memories of products or services endorsed by celebrities, even if they are not true fans. The human brain is used to recognize celebrities in the same way it recognizes and values ​​people it actually knows. Affected by this, consumers tend to position products endorsed by celebrities at a higher level (Lim et al., 2017). Therefore, it has a psychological impact, leading to an increase in consumers' willingness to pay. In addition to the many other existing benefits of celebrity endorsements, when celebrities vouch for or promote products, awareness and familiarity and trust will increase. These are the indispensable variables in the consumer's purchasing decision-making process. If the brand is promoted by celebrities they love, they will have more sympathy for the brand (Dwivedi et al., 2015). In addition, there will be a psychological impact that makes consumers subconsciously believe that buying products promoted by celebrities they admire will help them imitate the ideal characteristics of celebrities. This increases their willingness to pay, thereby boosting sales. 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