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

Posted: 13 Nov 2013

See all articles by Kevin Chung

Kevin Chung

University of Wisconsin - Madison

Timothy Derdenger

Carnegie Mellon University - David A. Tepper School of Business

Kannan Srinivasan

Carnegie Mellon University

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.

Keywords: endorsements, competitive analysis, entertainment marketing

Suggested Citation

Chung, Kevin and Derdenger, Timothy and Srinivasan, Kannan, Economic Value of Celebrity Endorsements: Tiger Woods' Impact on Sales of Nike Golf Balls. Marketing Science, Vol. 32, No. 2, 2013; 271-293; DOI: 10.1287/mksc.1120.0760. Available at SSRN: https://ssrn.com/abstract=2328572

Kevin Chung (Contact Author)

University of Wisconsin - Madison ( email )

4110 Grainger Hall
975 University Ave
Madison, WI 53706
United States

Timothy Derdenger

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Kannan Srinivasan

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,110
PlumX Metrics