This article originally appeared in Forbes Magazine.
Fiascos like Michael Phelps' pot-smoking may play badly in the U.S., but they're much worse news across the Pacific.
A-Roid. Michael Phelps. Chris Brown. In just the last week, celebrity bad behavior has rippled down Madison Avenue as brands that spent millions on celebrity endorsements found their images tarnished. Kellogg (K) quickly dropped Phelps, and Wrigley has suspended all ad campaigns with Brown, having expected the R&B singer to chew Doublemint, not his girlfriend Rihanna, as rumors say he did. Those embarrassments hurt in the U.S., but they're even worse in China.
The pitfalls of celebrity marketing become apparent anywhere very quickly. In today's borderless world of the Internet and YouTube, any celebrity misstep is captured for posterity, and any brand that is truly global needs to think globally about this problem. Consumers outside of the U.S. are often far less forgiving of poor behavior. At a time when consumers are cutting back and brands need to stretch their marketing dollars farther than ever, the risks in celebrities may mean that marketing money should be spent elsewhere.
The Michael Phelps pot fiasco may blow over in the U.S., where attitudes about marijuana are comparatively relaxed, and where we now have a president who admits to having used cocaine. But brands like Omega and Visa (V) that support Phelps are finding their image in China truly damaged, because attitudes towards drug use are much more conservative there than in the U.S. As one 34-year-old Beijing woman said, "I've lost all respect for Phelps, even though he's a great athlete."
Identifying with James Bond works for Omega watches, no matter whether Bond is Pierce Brosnan or Daniel Craig. That's because the Bond image is carefully cultivated around a fictional persona. Identifying with a 23-year-old who parties too much is hardly as dependable.
In China Christian Dior got hit harder than any of Phelps' brands when its celebrity endorser, Sharon Stone, made cruel remarks about the millions of victims of the Sichuan earthquake last year, saying they deserved what they got because of China's treatment of the Dalai Lama. Her remarks sparked immediate protests, and Dior suffered a major setback in one of the world's strongest-growing cosmetics markets.
Of course, celebrity endorsements do work sometimes, for instance for Nike (NKE) with Michael Jordan and Tiger Woods. Those relationships work because they make sense. People wear Air Jordans because they think they'll help them play basketball just a little bit like Mike. People use Nike golf gear to hit that ball a little bit straighter and farther, a little more like Tiger does.
In contrast Tiger's endorsement of Buick doesn't work in China, because Chinese consumers have trouble believing that he would ever really drive such a car. I've heard consumers say they picture him behind the wheel of a Bentley or a BMW, but certainly not a Buick. It's too downscale.
Liu Xiang, China's star hurdler, is perhaps the country's most visible celebrity, and brands such as Nike, Visa, Cadillac and the Chinese milk producer Yili have jumped at the chance to have him endorse their products. But for all his star power, does his endorsement work? My firm, the China Market Research Group, conducted interviews with several hundred consumers in six cities and found that Chinese consumers were confused about what brands Liu Xiang actually represented.
Nike was a lock, since people could make the connection between a star athlete and Nike products, but Visa, Cadillac and Yili, among others had single- and low-double-digit recognition rates as brands Liu Xiang represented. Furthermore, fewer than 20% said that an endorsement by Liu Xiang would make them buy products from any of the companies except Nike.
To make matters worse, an injury to his ankle caused Liu Xiang to back out of last year's Beijing Olympics entirely, after reaching the starting line in his opening heat. That gave his sponsors, as well as China in general, real heartache. Too much money had been spent on an athlete who competes on the world stage only once every four years. Liu Xiang had done nothing wrong, but his sponsors earned very little return on a very large investment.
It is surprising that brands still rely so heavily on celebrity endorsements, considering the risks involved. For every Michael Jordan or Tiger Woods, there are 10 Michael Vicks (the dogfight-loving football player) or O.J. Simpsons, and ill-conceived remarks such as Sharon Stone's can quickly flush advertising dollars and years of brand positioning and equity down the drain. In markets like China, where brands are just starting to build emotional connections with consumers and trust with brands is low, the damage can be irreparable.
The inability of Chinese consumers to even identify who is endorsing what, as in Liu Xiang's case, or to care if they do know, calls the whole concept of celebrity endorsement into question. We have found that for most products, age groups and regions in China, in-store displays and digital marketing are far more effective at getting consumers to buy. Usually those in-store displays and promotions can be launched for the fraction of a cost of a celebrity contract. In this tough economic period, marketers should look for value, just as consumers do.
If your company insists on picking a celebrity, choose one who actually fits the brand, and consider how his or her actions will play not just in the U.S. but around the world.
Shaun Rein is the founder and managing director of the China Market Research Group, a strategic market intelligence firm focused on China.