Do celebrity endorsements work?

For someone who has always been skeptical of celebrity endorsement, I have to say I’m surprised by research done by Kevin Y.C. Chung, Timothy P. Derdenger, and Kannan Srinivasan. Upon examination of the co-movement in celebrity quality and brand sales over time, namely Nike golf balls and Tiger Woods, econometric analysis reveals that Tiger Woods’ endorsement induced consumers to switch brands, increased primary demand, and led to a price premium for Nike.

They determined that, from 2000 to 2010, the Nike golf ball division reaped an additional profit of $103 million through the acquisition of $9.9 million in sales from Tiger Woods’ endorsement. Moreover, his endorsement led to a price premium of roughly 2.5%. As a result, approximately 57% of Nike’s investment in Woods’ $181 million endorsement deal was recovered just in U.S. golf ball sales alone.

via MSI

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