When it comes to advertising, the celebrity endorsement can be one of the riskiest yet most profitable spends a private company makes on marketing. If your consumer base is known to follow a particular celebrity, or group of celebrities, getting an endorsement could result in a serious windfall (think Shark Tank effect).
Though the potential for profit is real when your company's product or service is put in front of a celebrity's fan base, the legal risks are also very real, and the potential to flop thanks to a "promoted" tag, or lots of other reasons, are not insignificant. That's not even considering the fact that celebrities are notoriously unreliable, and their drama could result in your company's reputation tanking.
Paying for Eyeballs and Credibility
Generally, a celebrity endorsement should accomplish two things: 1) It should get eyeballs on your product or service; and 2) It should bolster the credibility or reputation of your product. For example, if your company makes undergarments, getting Michael Jordan to endorse your product in a commercial is a great idea, as he's someone people look up to as a sports hero. Also, being that he's a rather active person, he would reasonably know when undergarments are comfortable.
But getting Air Jordan himself might not be so easy, or realistic (affordable), for your company. Looking for local celebrities, or less major celebrities that will still have clout with your consumers, is a great way to save some money without sacrificing the quality of your endorsement.
Are You Getting Your Money's Worth?
One big problem with endorsement deals is getting your money's worth out of it. Typically, requiring an endorsement contract to contain terms that are contingent on certain results will come at a serious cost. Structuring endorsements deals to motivate the endorsers can often result in a positive win-win relationship, and continuing endorsement, but motivation means more money out of your company's pocket.
But, even if you have the right celebrity lined up, and enough money to spend on the endorsement, it might be worthwhile to insist upon some protections for your company in case of celebrity scandal or controversy involving your new brand spokesperson. On that note, you should be mindful that your endorsement deal provides you with an adequate method of continued contact, should you need to cancel the deal or engage in some damage control.