For a celebrity, signing an endorsement deal can prove to be a golden ticket, a quick way to juice their earnings beyond what their talents alone can provide.
Just take a look at Tiger Woods, Phil Mickelson and LeBron James, the three highest-paid athletes in America in 2010. The trio actually earned seven times as much from endorsements -- almost $168 million -- as from their winnings and salaries that year, according to Sports Illustrated.
For a company, the benefits of hiring a celebrity endorser range from lifting a brand's image to actually revving up sales. A celebrity face can boost sales by 4% annually, according to a study published in the Journal of Advertising Research. For the companies tracked in the study, that played out as $10 million in additional sales. Shareholder returns also benefit, with stocks of brands with celebrity firepower slightly outperforming those without, the study notes.
"A celebrity always has a set of attributes, which can be a shorthand way to telegraph what your brand is about," Rick Wise, the chief executive of brand consultancy Lippincott, tells MSN moneyNOW. "It can be a way to humanize your brand, especially one that's very business oriented," such as consulting firmAccenture (ACN), which hired Tiger Woods to stand for the firm's integrity and performance.
But there's a dark side to hiring celebrities. After all, they're people just like us, prone to mistakes and misjudgments. When that happens, the celebrity "may bring unwanted negative attributes to a brand," Wise notes.
When that happens, all bets are off. Some companies dump their endorsers faster than Paula Deen can butter a biscuit, while other stand by their celebrities. Sometimes a celebrity can spur opposite reactions from marketers. Woods lost Accenture after his marital scandal erupted, although Nike (NKE) chose to stick by the golfer.
Read on to see 12 celebrities who lost big deals after a scandal.
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