Matching with the Stars: What Determines Celebrity Endorsement Contract Formation?
37 Pages Posted: 31 Mar 2014 Last revised: 31 May 2014
Date Written: May 2014
Celebrity endorsement research studies how the characteristics of firms and celebrities featured in promotional campaigns influence consumer attitudes and firm value. Before these campaigns are launched, firms and celebrities first negotiate at length to sign a celebrity endorsement contract. Current research has not investigated what determines the formation of these contracts - thus, firms lack advice as to their chances of landing a contract with their ideal celebrity. We fill this gap in the literature. Using two-sided matching theory, we conceptualize the celebrity endorsement negotiation process as a two-sided matching market, and develop an empirical model of endorsement partner selection that allows extant theoretical models - source credibility, match-up hypothesis, and meaning transfer theory - to be tested in the context of firms’ and celebrities’ mutual choices. We estimate the model using a dataset of 120 endorsement contracts in the beauty industry. We find that brand personality is a major driver of endorsement partnerships and that recognition - celebrities’ presence in the entertainment industry - moderates how appealing different contracts may be. For example, contracts between sophisticated, recognized celebrities and sophisticated firms can be up to ten times more appealing for both parties as compared to contracts with sophisticated, but unrecognized celebrities. Thus, our results serve as a blueprint for firms to determine their likelihood of landing a contract with different types of celebrities.
Keywords: Celebrity endorsements, brand personality, match-up hypothesis, meaning transfer, matching
JEL Classification: M3, M30, M31, M37
Suggested Citation: Suggested Citation