Celebrity sells but comes at a price (1/27/2008)

If Elle McPherson was involved in a major scandal, would her underwear company falter? New research from Queensland University of Technology suggests it might.

Celebrity entrepreneurs may help sell more products but the risk involved may be too great for the companies behind the scenes, according to QUT business researchers Professor Per Davidsson and Erik Hunter.

The researchers have found that scandals involving celebrities with entrepreneurial links may negatively affect consumers' impressions of a company, more so than when a celebrity is hired merely to endorse a product.

Professor Davidsson and PhD researcher Mr Hunter are conducting the first study into the role of celebrity entrepreneurs and their impact on consumers' attitudes towards the new ventures they promote.

Professor Davidsson said celebrity entrepreneurs included people such as Oprah and Paul Newman, and lingerie giants Elle McPherson and Kylie Minogue - people with a vested interest.

The pair from QUT's Brisbane Graduate School of Business said companies had used celebrities to endorse products for years but more recently celebrities appeared to be involved in entrepreneurial roles such as starting up and investing in new businesses.

"The major difference between the two is that consumers believe celebrity entrepreneurs are more involved with the product they endorse - that creates a real boost to their credibility," Professor Davidsson said.

The team's experiments indicated that consumers viewed a product more favourably when the company was being promoted by its own celebrity entrepreneur rather than by a celebrity endorser.

However, Mr Hunter said the advantages of celebrity involvement came at a price and a celebrity scandal could cause a harsh consumer backlash.

"When negative information concerning a celebrity surfaces, the company must decide how to respond - do they fire the celebrity or support them?" Mr Hunter said.

"Our findings show that neither firing nor supporting the celebrity entrepreneur prevented the brand image from damage.

"However, companies that only employ celebrity endorsers can avoid damage to their brand and even improve their image if they take immediate action and fire the celebrity in some cases of extremely negative publicity."

Mr Hunter - who arrived in Australia last month from Jönköping International Business School - said it was important to examine the phenomenon of celebrity entrepreneurship on behalf of marketers and entrepreneurs.

"In essence we are trying to establish two things: first we want to understand why a celebrity would choose to become an entrepreneur when they are doing very well as endorsers and second, we want to find out if celebrity entrepreneurs are more effective than celebrity endorsers in getting consumers to purchase products," he said.

Note: This story has been adapted from a news release issued by the Queensland University of Technology

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