The endorsement minefield

For luxury brands, e-commerce is a vital source of growth and social media an important means of driving traffic to their retail sites. Structural reasons are now accelerating this trend. In China, for instance, the government has increased the tax-free allowance on personal international e-commerce purchases from RMB 2,000 to RMB 5,000 per year (USD 280 to USD 700). A rising Customer Acquisition Cost (CAC) is forcing brands to find less expensive ways to recruit and retain customers, and relevant brand endorsements are one way to achieve this. The COVID-19 pandemic has also demonstrated the value of authentic endorsements when consumers are in lockdown. Chanel used its “friends of the House” to entertain followers and hosted a live Instagram gig with Angèle – bringing pleasure to thousands of homes and retaining interest in the brand at the same time.

First come, first served

In the pre-internet world, only basketball fans were interested in how many points a promising US college player scored. Now, as Instagram increasingly defines the bankability of up-and-coming talent, the potential to appeal to a young, affluent and large audience is expanding fast. In the US, the state of California recently passed a law that enables college athletes to enter into sponsorships and endorsement deals. This is major news for brands, knowing that the most talented athletes can have millions of followers before they even begin their professional career, and can therefore send huge amounts of referral traffic to online platforms.

Sports or interests that were once niche can now attract a large, non-endemic audience. The recent Netflix phenomenon Cheer, which showcases the competitive cheerleaders at Navarro College in Corsicana, Texas, turned already social media-savvy youngsters into global stars, far beyond cheerleading communities. Companies such as RewardStyle, the billion-dollar monetization platform, were quick to spot this potential. They recruit Campus Ambassadors whose job it is to pick up on talent before anyone else. Once brands have found an inspirational individual, the next step is to help them develop their personal brand while accelerating their digital marketing skills. Red Bull is frequently cited as a brand that gains maximum traction from endorsement marketing.

Long-term endorsement is the new standard

In India, as per data from GroupM ESP Properties, the number of celebrity-led endorsements increased from 650 in 2007 to 1,660 in 2017. TV ad spends with celebrity endorsers more than quadrupled, from INR 15.5 billion in 2007 to INR 66.6 billion in 2017. However, endorsement does not start (and end) with a film, an ad or a series; it is the ability for the brand to hold the attention of a celebrity’s followers in a relevant way. Prerna Singh, VP Talent & Short Films at Eros International Media, gives this insight: “Studios over the years have invested in creating shoulder/ancillary content which has sometimes managed to get even more traction than the film itself. Shoulder content is often created along with the film but not exactly during production itself (…). The star (is) a 24×7 influencer. The star is also the focal point of a well-strategized digital campaign whose sole goal is to earn engagement “

Proof of this, brands such as L’Oréal are implementing longer-term endorsement strategies that are more meaningful for both the celebrity (or the talent) and the brand. YSL Beauty is working with Dua Lipa for its Libre fragrance, producing a seamless narrative that blurs the line between song, product and experience.

Community rules

Fashion lovers were among the first to launch forums and platforms such as “Who What Wear” that identify the clothes and accessories celebrities are seen wearing, and where to buy them; a lucrative business that has spilled over into watches. Online watch magazine Hodinkee started its Watch Spotting feature in 2011. Today’s watch spotting is a sophisticated business that involves more than red-carpet appearances. Korean drama and K-Pop fans make real-time posts about the watches their favourite actors and singers wear. In reaction videos, videocasters ask communities to spot brands and products they cannot name. Reddit threads are full of screenshots of users wanting to know the name of a watch. The community has become a powerful force.

With 24/7 endorsement and longer-term affiliations, the risks are paradoxically higher for brands that commit to a talent in the making. Most contracts now include a morals clause. In India, this type of clause states that a brand can terminate an endorsement agreement if the celebrity has “committed any act or does anything which might tend to bring him into public disrepute, scandal or ridicule, or which might tend to reflect unfavourably on the brand”.

Towards new e-commerce models?

The UK’s Advertising Standards Authority has ruled that anyone with over 30,000 followers is considered a celebrity and must therefore comply with the same advertising rules as traditional celebrities, particularly with regard to product endorsements. Recent controversy surrounding Xiao Zhan, which sparked an online feud between fans and detractors of the singer/actor, points to the need to create a stronger framework for brands that have to move fast and sign up a rising star before someone else does. As Business of Fashion notes, by “leaping to partner with the most popular idols of the day, (brands) inadvertently place themselves in the firing line for vicious online battles between fan factions and as a target in modern Chinese “culture wars” that they seem ill-equipped to deal with or respond to.”

The last couple of months have shown that top celebrities want full ownership of their image… and products. Not satisfied with putting their name to a range of products at a leading brand, many famous faces want to replicate Rihanna’s success story with Fenty Beauty. An alternative can be to offer a celebrity or talent a share of profits rather than a fixed fee. This way the celebrity is betting on herself, while making sure the relationship with the brand is sincere. At a time when e-commerce possibilities are becoming increasingly sophisticated, stars and brands are, paradoxically, developing authentic friendships. A reminder that when it comes to business, honest relationships and great products are still the best endorsement of all.