Podcast Summary
Celebrity endorsements risks: Celebrity endorsements can positively impact sales and consumer perception, but the potential risks, including negative publicity and reputational damage, must be carefully considered.
Celebrity endorsements can significantly impact consumer perception and sales for a brand. However, there is a risk involved, as a celebrity's actions or scandals can also negatively impact the brand's reputation. For instance, the Jared Fogle scandal at Subway is a clear example of how a celebrity endorsement deal can go terribly wrong. Despite Jared's initial success in promoting Subway as a healthy fast food option through his dramatic weight loss story, his subsequent scandal involving child pornography charges led to a major backlash and a significant drop in sales for the brand. This serves as a reminder that while celebrity endorsements can be an effective marketing strategy, it's crucial to carefully consider the potential risks and the long-term impact on the brand's reputation.
Subway Spokesperson's Impact: The relationship between a company and its spokesperson can significantly impact its growth or reputation, as shown by Subway's association with Jared Fogle's arrest on child pornography charges.
The authenticity and fame of Subway's spokesperson Jared Fogle significantly contributed to the company's growth from 1998 to 2011. However, Fogle's arrest on child pornography charges in 2015 led to a major scandal that negatively impacted Subway's reputation. Repugnance, or visceral disgust, can influence market transactions, and the association of Subway with Fogle's crimes made it difficult for consumers to ignore. The case illustrates how a company's relationship with a spokesperson can have profound consequences, both positive and negative. The notion of repugnance is complex and context-dependent, and its effects on markets can be unpredictable. While some things, like spitting in someone's coffee, are universally repugnant, others, like kidney exchange or horse meat consumption, are culturally contingent. Repugnance is a moving target that shifts over time, as evidenced by the changing attitudes towards slaveholding and life insurance.
Subway scandal impact: The Jared Fogle scandal led to a decline in Subway's patronage compared to control groups, suggesting that consumers' reactions to negative news can significantly impact business outcomes.
The Jared Fogle scandal, in which the former Subway spokesperson was exposed for child pornography crimes, had a significant impact on Subway's patronage, according to a study by Cornell Health Economist John Colley and his colleagues. The researchers used data from the Simmons National Consumer Survey to estimate the effect, as Subway is a privately held company without publicly traded stock or quarterly earnings reports. They found that after the information shock, Subway experienced a decline in patronage compared to control groups, specifically McDonald's, Whataburger, and Jack in the Box. This suggests that the public's reaction to the repugnant news led to a decrease in sales for Subway, despite the fact that Jared Fogle had no direct involvement in the food quality or management. The study highlights the role of repugnance in markets and how consumers' reactions to negative information can influence business outcomes.
Impact of negative news on consumer behavior: People's habits and preferences around certain products are strong and difficult to change by negative news, but firms should still be transparent and provide evidence to maintain consumer trust.
The impact of negative news on consumer behavior may not be as straightforward as we might assume. A study on the effect of a scandal on subway patronage found that despite the emotional and repugnant response to the news, there was no significant change in patronage. This suggests that people's habits and preferences around certain products, such as food, are strong and difficult to change. However, it's important to note that other research shows that people do respond to negative information about firms when it's relevant to the product. The absence of a detectable impact of a scandal on a sandwich chain's patronage raises the question of whether the company may have been overestimating the extent to which the endorser was responsible for their increased sales. It's not uncommon for firms to tell a story that sounds appealing but lacks empirical evidence. Therefore, it's crucial to approach such claims with a healthy dose of skepticism and to rely on data and evidence to make informed decisions.
Celebrity endorsements and social hierarchy: Celebrity endorsements create memorable content and attract consumers due to our desire for social hierarchy, but the risks of associating a brand with a disgraced celebrity are significant and ethical implications are complex.
Despite academic skepticism and high costs, the use of celebrity endorsements in advertising continues due to our inherent desire for social hierarchy and status. Companies believe that associating their brand with high-status individuals creates memorable content and attracts consumers. However, the risks are significant, as celebrities' behaviors may not align with a brand's values. Adidas' decision to sell Kanye West-designed shoes after their partnership ended, rather than burn them or donate them to charity, was a pragmatic solution to minimize backlash and maintain consumer appeal. However, the ethical implications of selling products associated with disgraced individuals remain a complex issue.
Celebrity endorsements: Celebrity endorsements can significantly influence consumer decisions and build confidence, but impact varies greatly depending on the celebrity and nature of the endorsement
Celebrity endorsements can significantly influence consumer decisions, even if the consumer spends less time looking at the product itself. A recent study by neuroscientist Zab Johnson and his team found that when consumers see a celebrity looking at a product, it builds confidence and surety around the product, which can lead to increased sales. However, it's important to note that the impact of celebrity endorsements can vary greatly depending on the celebrity's reputation and the nature of the endorsement. For instance, Oprah Winfrey's endorsement of a book led to a significant increase in sales, not just of the recommended book but also of other books by the same author. On the other hand, firms like Geico have opted for animatronic or clay mascots as spokespersons to avoid the risks associated with human endorsers. Ultimately, while celebrity endorsements can be effective, it's crucial for firms to carefully evaluate the potential risks and benefits before making a decision.
Celebrity endorsements: Celebrity endorsements can carry risks and uncertainties, as seen in John Cauley's offer to Freakonomics Radio, and the potential consequences can be unpredictable.
Key takeaway from this episode of Freakonomics Radio is that celebrity endorsements, while seemingly harmless, can be a risky business. The science behind celebrity endorsements can be complex and unpredictable, as seen in the case of John Cauley's offer to the radio show. Although Cauley seemed like a good person, the potential risks and uncertainties of celebrity endorsements led the radio show to decline the offer. The episode also touched upon the political duopoly in the United States and encouraged listeners to share their thoughts on the topic. The Freakonomics Radio is produced by a team of dedicated individuals and can be found on various podcast apps or at Freakonomics.com for transcripts and show notes. The episode was produced by Zach Lipinski, and the theme song is "Mr. Fortune" by the Hitchhiker's Hour Composer, Louis Guerra.