Case study: Celebrity endorsement in ads

The story
In 1996 Oprah Winfrey, the US’s highest- rated syndicated talk-show host, announced the launch of a book club designed to “get America reading again”. The plan was simple: Ms Winfrey would use her celebrity influence to convince her viewers to turn to literature, in one of the most highly publicised reading promotion programmes in history.

The structure was equally straightforward: Ms Winfrey would select a book and announce the title during a show, and then discuss it during a televised segment a month or so later.

The challenge
Oprah’s Book Club (the “Club”) faced immediate scepticism from literary commentators, who associated syndicated daytime shows with lowbrow offerings such as soap operas. Even members of Ms Winfrey’s staff questioned whether viewers would be interested in essentially being assigned homework and sitting through the television equivalent of a high-school English class. Their fears were supported by survey evidence that showed the percentage of Americans reading literature had fallen from 57 per cent in 1982 to 47 per cent in 2002.

Results for the endorsed author
Ms Winfrey’s endorsement led to lasting sales increases for the chosen authors. For instance, the first selection was The Deep End of the Ocean by Jacquelyn Mitchard, describing the destructive events following the kidnap of a three-year-old child. The novel had sold roughly 70,000 copies – impressive for a first novel, but hardly a blockbuster. In the month after its endorsement, sales increased by 700,000 copies and the book became a top bestseller.

The Club’s next two selections were older novels: Toni Morrison’s Beloved and Jane Hamilton’s A Story of Ruth. Each sold nearly 1m copies following the endorsement.

The improvement in sales is not limited to the endorsed book. Immediately after endorsement, sales of other titles by the same author also increase and the magnitude of this spillover benefit grows in the three months after the announcement. The effect is similar to a positive review in the New York Times.

Results for the book industry
The remaining strategic question is whether a set of celebrity endorsements can in fact expand the market. Analysis of data from Nielsen Bookscan, the premier point-of-sale-tracking data set in the publishing sector, reveals that the Club led to no increase in aggregate book sales.

Among booksellers involved in the research, following a book’s endorsement total sales
in that book’s category actually fell. A plausible explanation is that endorsed titles took longer to read because they were more challenging or longer than books that would otherwise have been purchased.

The lessons
At the broadest level, the Club can be thought of as a series of exceptionally prominent celebrity endorsements. The use of this marketing tool dates back at least as far as Pope Leo XIII’s 1899 endorsement of the Vin Mariani alcoholic beverage.

In some countries, as much as 40 per cent of ads use some form of celebrity endorsement. However, the manner in which they affect customer behaviour remains unclear. Hence, companies often fail to develop either their advertising strategies or their responses to those of competitors adequately.

Ms Winfrey believed her endorsements could expand the number of people reading. However, it seems higher post-endorsement sales primarily serve a business-stealing role. When a competitor’s ads steal sales rather than expand the overall market it represents an immediate threat to profits that requires a response. An endorsement announcement from a rival may require a company to increase its own marketing and promotions significantly.

The results are also informative for companies offering many products under one umbrella brand. When endorsements by Ms Winfrey increased sales of books by the same author, it showed how ads for one product can have a big impact on an entire suite.
- Financial Times, 5 Mar 2012