Celebrity Endorsements a Reputation-Loser?

The discussion on National Radio’s ‘Afternoons‘ programme with Jim Mora yesterday regarding celebrity endorsements was interesting.

Panellists Scott Yorke and Michael Deaker had differing opinions as to the Financial Markets Authority (FMA) might pursue former news anchor, Richard Long, over his involvement as ‘frontman’ for failed finance company Hanover Finance in terms of lending his reputation and name to the campaign.

Might the FMA have to pursue the copywriter, the ad agency, a voice-over artist as well as Long, for example? And might the perceived risk in terms of loss mitigate involvement if it’s low?

Not only did Yorke feel anyone investing in financial products probably wouldn’t be swayed by a celebrity endorsement, he also noted that even if Long had undertaken extensive ‘due-diligence’ to satisfy himself as to the robustness of the company’s financial performance and status, it’s likely financial advisers at the time may indeed have advised him that it was sound. Fair comment.

However, Deaker held a different view – that celebrity endorsers do carry weight in the eyes and minds of possible investors or purchasers and therefore they – the celebrities – should be extremely careful as to which products or services, if any, they endorse.

I agree with Deaker, and so did Hanover investor Glen Stanton who said ‘Hanover was the only one that I invested the large amount in … [Long's endorsement] gave you a feeling of false security, definitely.’

It’s one thing to be an anonymous voice-over artist or actor engaged to promote a product. It’s quite another to leverage one’s reputation and status as a celebrity or public figure for the very reason that the association is likely to lend credibility and influence perceptions around credibility. That’s the point.

Adverts are not designed to inform, they’re designed to persuade, and many do push the envelope in terms of explicit or implied claims made.

The play on words used by the creatives who designed Hanover’s ad that preceded the weather segment on television was pure genius: ‘Hanover … with the size and strength to withstand any conditions’. In terms of advertising creativity it should have won awards as clearly, ‘withstanding any conditions’ alluded not only to weather conditions, but more importantly, financial conditions.

We all know it didn’t. No matter how creative its ad agency team, Hanover’s failure rubbed salt into the wound of thousands of investors who may have been influenced by Long’s endorsement but lost thousands.

Personally I doubt Long will be pursued for his endorsement under the new act as the rules as they are now didn’t exist when the statements were made. I’d be surprised if they could be applied retrospectively. However, I do think the fact that ‘celebrity endorsers’ may be held liable for any claims they make in the future will deter some from putting their reputation – and possible future financial wellbeing – on the line in the same way.

Only 14 percent of us trust claims made by companies in ads, yet around 90 percent of us trust ‘peer’ endorsements or recommendations. The trend for celebrity endorsements may well decline from 2012 onwards but the trend for peer recommendations will only increase … in part because of such high-profile celebrity endorsement failures.

Reputation by association is a powerful, double-edged sword.