IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v32y2013i2p271-293.html
   My bibliography  Save this article

Economic Value of Celebrity Endorsements: Tiger Woods' Impact on Sales of Nike Golf Balls

Author

Listed:
  • Kevin YC Chung

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Timothy P. Derdenger

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Kannan Srinivasan

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

Abstract

In this paper we quantify the economic worth of celebrity endorsements by studying the sales of endorsed products. We do so with the use of two unique data sets consisting of monthly golf ball sales and professional golfer (celebrity) rankings. In particular, we examine the impact Tiger Woods had on sales of Nike golf balls. Our identification of the causal effect of a celebrity is grounded in the celebrity's random performance over time. Using two different approaches, reduced form and structural, we find that there are substantial celebrity endorsement effects. From our structural model, we determine that endorsements not only induce consumers to switch brands, a business stealing effect, but also have a primary demand effect. We determine 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 effect. Moreover, having Tiger Woods' 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.

Suggested Citation

  • Kevin YC Chung & Timothy P. Derdenger & Kannan Srinivasan, 2013. "Economic Value of Celebrity Endorsements: Tiger Woods' Impact on Sales of Nike Golf Balls," Marketing Science, INFORMS, vol. 32(2), pages 271-293, March.
    • Handle: RePEc:inm:ormksc:v:32:y:2013:i:2:p:271-293
    DOI: 10.1287/mksc.1120.0760
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.1120.0760
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mksc.1120.0760?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Steve Berry & Oliver B. Linton & Ariel Pakes, 2004. "Limit Theorems for Estimating the Parameters of Differentiated Product Demand Systems," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(3), pages 613-654.
    2. Ackerberg, Daniel A, 2001. "Empirically Distinguishing Informative and Prestige Effects of Advertising," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 316-333, Summer.
    3. Gary S. Becker & Kevin M. Murphy, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 941-964.
    4. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    5. Mark Armstrong & Robert Porter (ed.), 2007. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 3, number 1.
    6. George E. Newman & Gil Diesendruck & Paul Bloom, 2011. "Celebrity Contagion and the Value of Objects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 38(2), pages 215-228.
    7. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
    8. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 28, pages 1701-1844, Elsevier.
    9. Christopher R. Knittel & Victor Stango, 2014. "Celebrity Endorsements, Firm Value, and Reputation Risk: Evidence from the Tiger Woods Scandal," Management Science, INFORMS, vol. 60(1), pages 21-37, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Scott M. Kaplan, 2022. "Putting a price on popularity: Evidence from superstars in the National Basketball Association," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1357-1381, July.
    2. Guhl, Daniel, 2019. "Addressing endogeneity in aggregate logit models with time-varying parameters for optimal retail-pricing," European Journal of Operational Research, Elsevier, vol. 277(2), pages 684-698.
    3. Zamudio, César, 2016. "Matching with the stars: How brand personality determines celebrity endorsement contract formation," International Journal of Research in Marketing, Elsevier, vol. 33(2), pages 409-427.
    4. Borghesi, Richard & Naranjo, Andy & Ryngaert, Michael, 2022. "What are the odds? Underdog brands are consumer favorites," Economics Letters, Elsevier, vol. 221(C).
    5. Bazi, Saleh & Filieri, Raffaele & Gorton, Matthew, 2023. "Social media content aesthetic quality and customer engagement: The mediating role of entertainment and impacts on brand love and loyalty," Journal of Business Research, Elsevier, vol. 160(C).
    6. Niu, Baozhuang & Yu, Xinhu & Li, Qiyang & Wang, Yulan, 2023. "Gains and Losses of Key Opinion Leaders’ Product Promotion in Livestream E-commerce," Omega, Elsevier, vol. 117(C).
    7. Stefan J. Hock & Sascha Raithel, 2020. "Managing Negative Celebrity Endorser Publicity: How Announcements of Firm (Non)Responses Affect Stock Returns," Management Science, INFORMS, vol. 66(3), pages 1473-1495, March.
    8. Patrick Rooney & Jonathan Smith, 2019. "The Impact Of Highly Publicized Campus Scandals On College Outcomes," Contemporary Economic Policy, Western Economic Association International, vol. 37(3), pages 492-508, July.
    9. . Abhishek & Arvind Sahay, 2013. "Role of Culture in Celebrity Endorsement: Brand Endorsement by Celebrities in Indian Context-A Review, Synthesis and Research Propositions," Working Papers id:5432, eSocialSciences.
    10. El Hedhli, Kamel & Zourrig, Haithem & Becheur, Imene, 2021. "Celebrity endorsements: Investigating the interactive effects of internalization, identification and product type on consumers’ attitudes and intentions," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).
    11. Marco Caiffa & Vincenzo Farina & Lucrezia Fattobene, 2020. "All that glitters is not gold: CEOs' celebrity beyond media content," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(3), pages 444-460, July.
    12. Christopher R. Knittel & Victor Stango, 2014. "Celebrity Endorsements, Firm Value, and Reputation Risk: Evidence from the Tiger Woods Scandal," Management Science, INFORMS, vol. 60(1), pages 21-37, January.
    13. Lin, Hsin-Chen & Bruning, Patrick F. & Swarna, Hepsi, 2018. "Using online opinion leaders to promote the hedonic and utilitarian value of products and services," Business Horizons, Elsevier, vol. 61(3), pages 431-442.
    14. Natalie Bragança Düsenberg & Victor Manoel Cunha de Almeida & João Guilherme Barbosa de Amorim, 2016. "The Influence of Sports Celebrity Credibility on Purchase Intention: The Moderating Effect of Gender and Consumer Sports-Involvement," Brazilian Business Review, Fucape Business School, vol. 13(Special I), pages 1-21, November.
    15. Abhishek & Sahay, Arvind, 2013. "Role of culture in celebrity endorsement: Brand endorsement by celebrities in Indian context," IIMA Working Papers WP2013-07-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    16. Timothy P. Derdenger, 2018. "Examining the impact of celebrity endorsements across consumer segments: an empirical study of Tiger Woods’ endorsement effect on golf equipment," Marketing Letters, Springer, vol. 29(2), pages 123-136, June.
    17. Raja Kali & David Pastoriza & Jean‐François Plante, 2018. "The burden of glory: Competing for nonmonetary incentives in rank‐order tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 102-118, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Griffith, Rachel & Dubois, Pierre & O'Connell, Martin, 2014. "The Effects of Banning Advertising on Demand, Supply and Welfare: Structural Estimation on a Junk Food Market," CEPR Discussion Papers 9942, C.E.P.R. Discussion Papers.
    2. Simon P. Anderson & Federico Ciliberto & Jura Liaukonyte & Régis Renault, 2016. "Push-me pull-you: comparative advertising in the OTC analgesics industry," RAND Journal of Economics, RAND Corporation, vol. 47(4), pages 1029-1056, November.
    3. Olivier Gossner & Jakub Steiner & Colin Stewart, 2021. "Attention Please!," Econometrica, Econometric Society, vol. 89(4), pages 1717-1751, July.
    4. Lint Barrage & Eric Chyn & Justine Hastings, 2020. "Advertising and Environmental Stewardship: Evidence from the BP Oil Spill," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 33-61, February.
    5. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, November.
    6. Serafin Grundl & You Suk Kim, 2019. "Consumer mistakes and advertising: The case of mortgage refinancing," Quantitative Marketing and Economics (QME), Springer, vol. 17(2), pages 161-213, June.
    7. Serafin J. Grundl & You Suk Kim, 2017. "Consumer Mistakes and Advertising : The Case of Mortgage Refinancing," Finance and Economics Discussion Series 2017-067, Board of Governors of the Federal Reserve System (U.S.).
    8. Richard E. Just & Rulon D. Pope, 2017. "The many conditions under which monopolistic advertising can differ from the social optimum," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(3), pages 421-440, July.
    9. Nelson Sá, 2015. "Market concentration and persuasive advertising: a theoretical approach," Journal of Economics, Springer, vol. 114(2), pages 127-151, March.
    10. Dhaval M. Dave, 2013. "Effects of Pharmaceutical Promotion: A Review and Assessment," NBER Working Papers 18830, National Bureau of Economic Research, Inc.
    11. Anna E. Tuchman & Harikesh S. Nair & Pedro M. Gardete, 2018. "Television ad-skipping, consumption complementarities and the consumer demand for advertising," Quantitative Marketing and Economics (QME), Springer, vol. 16(2), pages 111-174, June.
    12. Leonardo Bursztyn & Davide Cantoni, 2016. "Tear in the Iron Curtain: The Impact of Western Television on Consumption Behavior," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 25-41, March.
    13. Chen He & Tobias J. Klein, 2023. "Advertising as a Reminder: Evidence from the Dutch State Lottery," Marketing Science, INFORMS, vol. 42(5), pages 892-909, September.
    14. Chan, Tat Y. & Narasimhan, Chakravarthi & Yoon, Yeujun, 2017. "Advertising and price competition in a manufacturer-retailer channel," International Journal of Research in Marketing, Elsevier, vol. 34(3), pages 694-716.
    15. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2018. "Deceptive Advertising with Rational Buyers," Management Science, INFORMS, vol. 64(3), pages 1291-1310, March.
    16. Simon P. Anderson, 2005. "Regulation of Television advertising," Virginia Economics Online Papers 363, University of Virginia, Department of Economics.
    17. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 18, pages 567-614, Elsevier.
    18. Wang, Shinn-Shyr & Stiegert, Kyle W., 2006. "The Duopolistic Firm with Endogenous Risk Control: Case of Persuasive Advertising and Product Differentiation," Staff Paper Series 496, University of Wisconsin, Agricultural and Applied Economics.
    19. Wesley R. Hartmann & Daniel Klapper, 2018. "Super Bowl Ads," Marketing Science, INFORMS, vol. 37(1), pages 78-96, January.
    20. Elizabeth Schroeder & Carol Horton Tremblay & Victor J. Tremblay, 2021. "Confidence bias and advertising in imperfectly competitive markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 885-897, June.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:32:y:2013:i:2:p:271-293. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.