The endorsement dilemma

Marketers must seek watertight celebrity contracts

Film actor Amitabh Bachchan's recent comment on his brand endorsements has sparked a fresh debate on the role of celebrities in advertising. During a discussion earlier this week at the Indian Institute of Management, Ahmedabad, Bachchan said that he stopped endorsing Pepsi after a schoolgirl from Jaipur asked him why he pitched a product her school teacher said was "poison". But the actor had stood by the brand during its darkest period - the pesticides-in-cola controversy of the early 2000s. Naturally, therefore, questions are being asked whether it was too late for him to discover his conscience after peddling the brand for eight long years, till 2006, and becoming richer by over Rs 24 crore. Some people are putting the blame at the door of desperate marketers who resort to celebrity endorsements as a short cut for appealing to increasingly advertisement-weary consumers. By one estimate, more than 18,000 advertisements are aired on a TV channel in a month, and the celebrity factor often helps break through the clutter. But over-dependence on a celebrity has clear dangers.

Does that mean a fickle endorser is just another business hazard that the marketer has to live with? Not really. There are two reasons. One, in a knowledge-driven global marketplace, increasingly, the real competitive advantage of firms is not tangibles or "visible" assets such as capital, land or factories; it is intangible assets like intellectual property, talent, customer relationships and, most importantly, the brand. According to a study by London-based Brand Finance, these intangibles account for almost two-thirds of the value of the top 5,000 listed companies across markets. So obviously, anything that impacts the value of such intangibles has a huge bearing on business strategy, and therefore cannot be swept under the carpet. Firms challenge claims and damages to their intangibles, whether it is a breach of intellectual property or misuse of brand names by business rivals and outsiders. Why should brand sabotage from within be any different?

Two, celebrities have a huge following, and willy-nilly consumers see them as the personification and custodian of the brand they endorse. Elsewhere, if a celebrity breaches his or her public persona, invariably the brand suffers and marketers are quick to dissociate the brand from the endorser. And they are able to do it because the contracts explicitly spell out such separation conditions. In contrast, marketers in India are often seen to be drawing soft contracts with celebrities that enable them to be less responsible towards the brand and its ethos. The dangers are obvious. Experience from developed markets like the US or European countries points to more robust celebrity contracts that bind them to "good brand practices" long after the cheques stop coming. Needless to say, everyone is entitled to her views. But if you're an important cog in an enterprise's value chain, there cannot but be costs and consequences of any viewpoint that has a bearing on the enterprises' value. For transnationals like Pepsi, with headquarters in one continent, manufacturing in another, and customers in yet another, the glue that binds them comes from intangibles like intellectual property and brands. Any assault on them, by design or default, has to be dealt with firmly.