Business

The value of celebrity endorsements

Sophie Ellis-Bextor and her Danz Spas hot tub Image copyright Danz Spas
Image caption Singer Sophie Ellis-Bextor has had her Danz Spas hot tub since 2011

The glamorous world of celebrities can seem a very long way away if you are a small business in the East Midlands with just four members of staff.

So you can understand why Daniel Thomas, founder of Nottingham-based Danz Spas, was somewhat surprised three years ago when he was approached by a representative for pop star Sophie Ellis-Bextor.

The singer was said to be looking to buy a hot tub, and was wondering if she and Danz Spas could come to a business relationship - she would be happy to endorse and promote the company, if it could offer her a good deal.

Mr Thomas, 26, was quick to realise that he had just been offered a fantastic opportunity.

"We knew that having someone like that associated with the name would do good things," he says.

"We're effectively a business nobody has ever heard of, and we're trying to convince people to spend £5,000 without ever seeing us. That's an incredibly hard thing to do.

"We thought that having Sophie would help with some of the credibility issues."

And so, in return for Ms Ellis-Bextor discussing how much she likes her hot tub in a video on Danz's website, and also praising the firm on her Twitter feed, she received a significant discount.

Mr Thomas, who launched the business when he was 18, says that having the endorsement from the singer helped the company see its annual turnover go above £1m.

Image copyright Wattpad
Image caption Literary website Wattpad managed to get a celebrity endorsement for free

He adds that while he thinks Danz Spas would have reached that mark without the pop star's help, "it would have been a lot harder and taken a lot longer.

'Influencers'

The nature of celebrity endorsements is changing, and high-profile celebrities are no longer out of reach for small companies, says Evan Morgenstein, chief executive of US-based firm Celeb Experts.

With offices in Los Angeles and New York, his company specialises in matching businesses with celebrities.

He says that if an endorsement deal is done correctly, it can have a huge impact on sales.

"The world we live in now is about influencers, and that's all a celebrity really is," says Mr Morgenstein.

While the traditional endorsement deal remains popular - whereby a celebrity accepts a cheque to promote a product - endorsements for small businesses are increasingly more informal. Just ask the owners of Bristol pub The Christmas Steps.

When New York hip-hop star Action Bronson played a concert in their city back in May, the owners - who also own Bristol music publication Crack Magazine - invited him to visit for a drink and a bite to eat.

Image copyright Getty Images
Image caption Action Bronson is a popular hip-hop singer who previously worked as a professional chef

Mr Bronson, 31, a portly former chef who is as famous for his food documentary videos as he is for rapping, initially said no, but agreed to join them after they offered him the meal for free.

The rapper ended up in the kitchen, cooking alongside the pub's chefs, and agreed to film a short promotional video for the venue.

"The people who went to the gig got wind that he'd been there, so the take that night [at the pub] was really good," says pub owner Thomas Frost.

"It's a new establishment, and getting the word out about the quality of your food and your produce can be difficult.

"It certainly helped. People still to this day say, 'You guys had Action Bronson here, right?'"

'Media savvy'

For some small firms, celebrity endorsements can even come for free.

The founders of Toronto-based start-up Wattpad, a social network for writers, were surprised and delighted in 2012 when Booker Prize winning Canadian author Margaret Atwood joined the service, and began enthusiastically endorsing it.

Image caption Margaret Atwood has joined and praised Canadian social media start-up Wattpad

Candice Faktor, Wattpad's general manager, says that it's had an enormous impact.

"Margaret's an innovator who is extremely social media-savvy," says Ms Faktor.

Ms Atwood now has 82,300 followers on Wattpad, to add to her 600,000 Twitter followers.

However, while a growing number of small firms may be waking up to the value of celebrity endorsements, it doesn't mean that they always work out.

Take Mont Blunt, an e-cigarette company run by Michael Friedman, a former Bear Stearns banker and 25-year veteran of Wall Street.

Image copyright MOnt blunt
Image caption Tara Reid is no longer working for Mont Blunt

Back in May, Denver-based Mont Blunt partnered up with Hollywood actress Tara Reid, best known for her role in the American Pie series of films.

Mr Friedman says: "Her agent contacted us when she heard about the brand. They were looking to get her exposure around that time, and we reached an agreement, including a royalty fee and a cash payment."

Yet Mont Blunt and Ms Reid parted company just a few months later after sales did not increase as much as expected.

"As the brand grew, we wanted to reach a different demographic," says Mr Friedman.

So instead of an actress, he is now on the lookout for a hip-hop star.

Mr Morgenstein cautions that a company should pick a celebrity who genuinely loves the product he or she is promoting.

"I'll take someone with a [social media] following of one million over someone who has a following of 10 million, if that person... authentically loves the product.

"That's the sweet spot. Just to get people who you pay because they have a huge audience? That's a huge mistake."

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