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

Abstract

We present a new methodology to estimate dynamic discrete choice models with aggregate data; the estimation allows for a multi-dimensional state space, but still retains signicant computational benets. We specically build upon the literature pertaining to the dynamic single-agent models with conditional choice probabilities by including both observed and unobserved population state variables in estimation. We demonstrate that the approach performs well in accurately recovering the estimated parameters via Monte Carlo simulations, and that it compares favorably with the current state-ofthe-art methods. We illustrate with an empirical application to assess the impact of dynamics in the digital camera market.

Celebrity endorser attractiveness, visual attention, and implications for ad attitudes and brand evaluations: A replication and extension

“…Using a sample of 101 celebrity endorsement announcements, Ding et al (2011) find that endorsements of technology industry products coincide with significant positive abnormal returns around the announcement dates. Analyzing the specific endorsement of Tiger Woods for the Nike brand, Chung et al (2012) demonstrate an additional profit of $103 million and a price premium of 2.5 per cent for golf balls through Tiger Woods endorsing the brand. They conclude that the additional sales of US golf balls alone recovered roughly 57 per cent of Nike's $181 million investment in the endorsement contract.…”

Spreading Good Words: The Mediating Effect of Brand Loyalty between Role Model Influence and Word of Mouth

“…Pringle (2004) has reported a substantial rate of return by using the celebrity endorsement strategy, that is, 27 times its costs. From an economic perspective, consistent findings are found on the link between stock market value and celebrity endorsements (Chung, Derdenger, and Srinivasan, 2013;Ding, Molchanov, and Stork, 2011;Elberse and Verleun, 2012;Garthwaite, 2014;Popescu, 2014). However, a direct relationship between the use of sports celebrities in commercials and positive outcomes (such as positive word of mouth and brand loyalty) has yet to be confirmed before organizations engage in these high investments related to the expenses involving celebrities (Grohmann, Battistella and Radons, 2013).…”

Matching with the stars: How brand personality determines celebrity endorsement contract formation

“…Agrawal and Kamakura (1995), Mathur, Mathur, and Rangan (1997), and Elberse and Verleun (2012) show that contract announcements and celebrities' achievements influence abnormal stock returns, although other studies reach different conclusions under different conditions (Louie and Obermiller, 2002;Ding, Molchanov, & Stork, 2011). Elberse and Verleun (2012) and Chung et al (2013) find that endorsements by top-performing athletes, such as Tiger Woods (who endorsed Nike), can lead to higher sales even if the celebrity is the subject of a scandal. These studies also implicitly assume that firms can unilaterally select a specific celebrity.…”

“…Firms spend $50 billion annually on celebrity endorsements (Crutchfield, 2010) due to their positive impact on stock prices (Agrawal & Kamakura, 1995), sales (Chung, Derdenger, & Srinivasan, 2013) and consumer attitudes (Ilicic & Webster, 2013). Commensurate with these benefits is the high monetary cost of a celebrity endorsement, such as Pepsi's $50 million contract with Beyoncé, roughly one-sixth of the firm's ad expenditure (Sisario, 2012).…”