Like it or loathe it, celebrities are an ingrained part of our consumer culture.

Many companies have reaped the rewards of having some of the biggest names in the world endorse their brand giving them the cutting edge over their competitors. Successful pairings like Nespresso and George Clooney and Qantas and John Travolta have elevated these brands by bringing on board a celebrity who oozes the brand ethos and perception.

But what happens when your cash cow celeb is caught doing the wrong thing? How do, or should, brand owners react? Without a doubt, no one is more relevant to this topic at the moment than Tiger Woods.

It all began in 2009 with his highly publicised separation from wife, Elin Nordegren, after she learned he’d been cheating on her. The fallout of this scandal reportedly cost Woods a whopping $22 million in sponsorship deals, including the severance of ties with sports drink Gatorade.   Other companies such as Proctor and Gamble, which used Woods to promote its well-known Gillette brand, discontinued its relationship with him at the end of the contractual period.

But it wasn’t all doom and gloom for the golfing prodigy.

For brands that weather the storm, the long term incentive to keep the celebrity profile on board may perhaps be outweighed by the short term losses of a few aghast fans.

Woods’ biggest sponsor, Nike, weathered the storm and stayed loyal to him despite his marital infidelities.  However, it reportedly came at a cost to the shareholders of Nike and other sports-related sponsors shareholders. A study by the University of California claimed that investors in Nike and the companies behind Gatorade and Tiger Woods PGA Tour Golf experienced a 4.3% drop in share value, equivalent to about $US6 billion.  

And now Woods has been arrested for driving under the influence of drugs and/or alcohol after being pulled over for erratic driving. He reportedly refused to take a breath test and his unflattering arrest mug shot, with all the negative associations it carries, is all over the internet. It is yet to be determined how major sponsors, including Nike and his latest equipment provider, Taylormade, will react.

This latest episode raises questions about the motivations for major sponsors to stay loyal to their celebrity, sever ties or distance themselves.

For brands that weather the storm, the long term incentive to keep the celebrity profile on board may perhaps be outweighed by the short term losses of a few aghast fans.  The forecasted financial losses and gains are undoubtedly the biggest driver in how a celebrity crisis is managed.  Another study by the University of California indicated that in golf ball sales in the US alone, Nike recovered approximately 57% of its endorsement investment.

There is also the trust factor associated with a successful brand.  If a consumer ultimately values and trusts the attributes of a Tiger Woods-endorsed product and feels that it improves their life or golfing game, will many people really be swayed to ditch their tried and trusted Tiger Woods products in the face of yet another scandal?

Associated with this is how a brand may use their celebrity.  The appeal of Woods for many brands was undoubtedly his story – introduced to golf by his father at the age of two and beating the odds to become the youngest winner of the US Masters at 21, thereby popularising golf in the mainstream audience. Being an unfaithful husband was not a factor in his success as a golfer and therefore the motivation for a sporting giant like Nike to keep him on may not have been undermined by his later infidelities.  

On the other hand, Nike’s dumping of seven-time Tour de France winner Lance Armstrong after it was revealed he was a drug cheat showed that continuing the endorsement relationship was at odds with the brand focus on Armstrong’s elite sporting achievements, which are now tainted.   

Another example of a star no longer matching a brand’s values is New Zealand rugby player Dan Carter, who was caught drink driving in Paris and was dumped by Jaguar Land Rover from his role as a brand ambassador. This would appear to be understandable given the company’s zero tolerance to drink driving and Carter’s indiscretion was at odds with Jaguar Land Rover’s values.

The lesson from these cases is that the benefits from an association with a celebrity can just as quickly turn negative for a brand.  Brands need to understand that if the basis for their celebrity relationship is compromised by a scandal, they must be prepared to act to protect the values they are presenting to their customers and clients.

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