THERE have lately been financial scandals involving celebrities who did not just promote products and services. They indirectly invited customers too to invest in the companies they endorsed with offers of high returns on their money. The celebrities ended up with lawsuits against them for promoting scams resulting in financial losses for the gullible investors.
The defense of the celebrities involved is outright denial of any legal responsibility — I was just a celebrity endorser. (What do I know about your investment losses?) Is a product endorsement an implicit validation of the trustworthiness of the company itself? When more than a product is involved and investment opportunities are pushed, is there a need for a disclaimer? (I have nothing to do with the company’s credit rating.)
That the investment being endorsed turns out to be a Ponzi scheme of paying old investors with new investors’ funds only comes up when the checks start bouncing like trampoline jumpers. Can legal suits against the endorsers be far behind?
Endorsing celebrities have a higher social profile than the owners and operators of the business. What is the role of a celebrity endorser? How much due diligence is required of a celebrity before deciding to be a brand ambassador? Does she even use the product?
The logic for using celebrities for marketing is simple. Famous persons have a fan base that considers them as role models. Fans want to be like their idols and are drawn to perhaps buy products being promoted by their idols.
Celebrities need not have any special expertise on the product or service they endorse. The only attribute a celebrity offers to the consumer is the fact of her being well known in other fields like sports, entertainment, or even politics.
The celebrity is very different from an expert. An investment adviser in private banking for high-net-worth individuals offers an informed opinion to the customer. He first asks the client what level of risk she is willing to take. The “risk appetite” determines the offerings available to the investor.
The expert relies on know-how and research before giving advice. Another example is a medical practitioner who diagnoses the patient’s condition before providing a particular remedy. This may entail a series of tests. A second opinion can be sought too when the patient is uncomfortable with the proposed procedure.
The popularity of celebrity endorsements for products is evident in how they dominate billboards in our major thoroughfares. The celebrity does not even pretend to be familiar with the product being endorsed, whether it is a skin whitener or online betting.
Endorsements have already invaded social media. The endorsers in this case are called “influencers,” offering all sorts of opinions, often for a fee. So, products and brands have begun using them as well based on their base of “followers.”
Celebrity endorsements raise the awareness level of products, especially those that are new in the market. They define the appeal the product wishes to be associated with, whether it’s with the young and cool celebrity or the motherly type of a former actress.
Brand affinity is a phrase used for celebrity endorsers. The unknown product acquires some legitimacy from being associated with a popular personality known for her own brand attributes.
Can the reverse be true? Can a product mired in scandal as a scam also affect its endorser? Other products that a sullied endorser is associated with tend to break away from the now radioactive personality. It’s even in the contract for an endorser that any scandal is an automatic deal breaker that affects future fees and benefits provided by the product engagement.
The argument of the celebrity that she is “just an endorser” does not quite answer certain questions. Did she understand or even evaluate the product being endorsed? Was she incentivized by the proponents with commissions on business brought in by her? Has she perhaps been made a participant in the scheme and not just a hired talent?
It’s alright to follow celebrity endorsements of laundry detergents, casual clothing, and fast food. For more costly items like cars and investment opportunities, it’s best to disregard celebrity appeal altogether… and rely on research and expert advice.
Tony Samson is chairman and CEO of TOUCH xda
