Behind the Boom in Celebrity Brands

ALISON BEARD: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Alison Beard.

So you might not suspect this about me, but I am an avid reader of Us Weekly, the celebrity magazine. Amid all the business reading I do, it’s a true guilty pleasure. But over the past several years, I’ve noticed these two worlds converging somewhat. Musicians, athletes, actors, reality stars – I’m talking about Rihanna Ryan Reynolds, LeBron, the Kardashians – they’re all becoming serious business people and they’re making a whole lot more money from the products they sell, whether it’s makeup, gin, sports drinks, or shapewear than from the songs, games, shows, or films that made them famous.

When did this shift happen and why? And what does it mean for existing consumer goods companies and regular entrepreneurs?

Today’s guest is here to explain how social media and online retail have boosted celebrity brands, what makes a good or bad one, and the impact this trend is having on the broader economy. Ayelet Israeli is a professor at Harvard Business School.

She’s the co-author along with Jill Avery, Leonard Schlesinger, and Matt Higgins of the HBR article, What Makes a Successful Celebrity Brand? And she joins me now. Ayelet, welcome.

AYELET ISRAELI: Thank you so much for having me.

ALISON BEARD: So celebrity endorsements have been around for decades. Nike’s built a business around it. Why have celebrity-owned brands become so much more prevalent nowadays?

AYELET ISRAELI: We think that essentially several factors brought us here. Number one, the rise of what we call the creator economy or influencer marketing, where there are so many social media influencers and consumers have gotten used to engaging with them and seeking their authenticity and input around a lot of different topics. One of them is recommending products or services, and actually today’s consumers feel that this channel is more authentic. They believe it more than the traditional endorsements. So that’s kind of one factor, just the growth of what we call influencer marketing.

I think the second factor is that it used to be that in order to learn anything about a celebrity, you would need to follow Us Weekly or many other magazines, TMZ, all of that. And now with the rise of social media and the ability of everyone to connect and share every piece of their life, it feels like you’re more connected to these people who decide to share their life with you. So there is more of a direct line of communication than ever before.

Third, we know now that in this day and age, it’s just so much easier to launch brands because of the growth of e-commerce and direct-to-consumer branding. It’s easier to procure, to launch, to develop brands. So that kind of ability to do that makes it easier also for celebrities to do.

And I think the last piece of that is that what we typically see regular brands do or typical brands do, is actually use endorsements or influencers as part of their media strategy and as part of their paid marketing. Whereas celebrities, given the fact that they have this followership and this connection with consumers and followers, they can actually leverage these social media channels that are kind of free for them and thereby reduce the cost of getting to consumers, communicating with consumers, and having a huge advantage over existing brands.

ALISON BEARD: So that direct connection with consumers seems critical. You can market directly to them, you can sell directly to them rather than going through traditional retail channels. How has that sort of disrupted the broader advertising and consumer goods industries?

AYELET ISRAELI: We see more and more spend on influencer marketing, on TikTok. Things that didn’t exist a few years ago are now important channels and traditional brands are also figuring out how to use all of these different channels and social media strategies in order to develop their own ability to communicate with consumers. Always there is this challenge of how do I pick influencers? How do I attract influencers that are consistent with my brand, that deliver the message of my brand, that their listeners or their followers would actually be willing to accept or believe the message that they provide and actually turn that into sales?

ALISON BEARD: We have seen really successful celebrity brands in the past. I’m thinking as far back as the George Foreman Grill or Gwyneth Paltrow and Goop or Dr. Dre and Beats, are there any lessons that today’s celebrities have taken away from those earlier entrants in the category?

AYELET ISRAELI: One thing that these brands have in common was the true kind of fit between the celebrity and the product category of their brand. So if you think about Dr. Dre, it’s obvious connection to music, to the ability to listen to the tunes in a certain way, and that strong connection makes it really believable. Like, “Yeah, I can see Dr. Dre using this, I believe their endorsement of this.” It’s the same logic of the Michael Jordan Jordans with Nike where it allows consumers to have this special relationship with the product through their relationship with the celebrity almost.

ALISON BEARD: At the same time, I feel like there are reasons to be wary of a celebrity brand. Like why would Ryan Reynolds know more about making gin through his brand, Aviation Gin, than a beverage company like Diageo? Or why would Rihanna know more about lipstick to make Fenty Beauty than L’Oreal would? So how did these brands overcome that skepticism to be perceived as very high quality, very valuable, rather than gimmicky?

AYELET ISRAELI: So we definitely see a pattern that the product actually has to be very, very good. And it’s either that it was actually developed by people with expertise in this domain, or the celebrity actually has domain knowledge to be able to produce this product. But if the product is not actually superior, consumers are no fools. Consumers might buy the first one, but then word of mouth is going to essentially kill the product if it’s not good. So that has to be there, but often it has to come through trial, which is a benefit of these celebrity brands relative to regular brands where we might expect that trial for them is actually cheaper because I have some affinity to this celebrity. So you might have more sales than a product that is the same quality, but from someone unknown because of the initial hype, because of the initial excitement by the celebrity. But then you will also lose sales very quickly once the word is out that the product is not good.

ALISON BEARD: So how do these celebrities go about developing the expertise they need or hiring the expertise they need to develop that kind of superior product that can beat those being offered by multinational companies?

AYELET ISRAELI: In our article, we basically looked more deeply into two main case studies: Kim Kardashian’s Skims product that started out as shapewear and is now kind of activewear, loungewear, bras. They even have men’s products. And the second one is Dave Chang’s Momofuku. Dave Chang is a well-known celebrity chef that started creating also CPG products that consumers can make at home like chili crunch or noodles or things like that.

He was known as a chef. He was known as particular tastes, flavors, things you would expect. And then he could lend this expertise very easily for people to believe that, “Okay, this is actually a good product, or he has credence there, or this is something that should be high quality.” And people tasted it and it was actually good.

And then with Kim Kardashian, the story is a little bit different, but what is interesting about the initial Skims product, the shapewear product, is this idea that it is actually a solution-based product, a need-based product. She and her friends had a real issue with the existing shapewear. One was the typical colors of the shapewear. So typically what is skin color is not necessarily skin color for many people. And she used to color it by herself with tea bags or with coffee. And then that was one challenge. And the other challenge was the particular cuts and shapes of the clothes that she likes to wear that perhaps show more or reveal more than typical clothing. The existing shapewear wouldn’t fit that either.

So there was a real need for a solution. And through that need, she developed a product. And of course then she had to work with experts to develop something that will actually work, but it came from something real that she needed and something real that she saw that there is a market for, and then collaborated with people that have the expertise to take it to the next level.

And I think with both of these cases, I believe also with the cases, the examples you mentioned, we have examples of people, of celebrities that are deeply involved with the product and deeply care about the quality of the product in a way that actually assures that it will be a better product.

ALISON BEARD: And how do they find the time? I feel like that’s what I’m always wondering. It’s like how do they do it when they’re also shooting films, but then they’re incredibly hands-on managers of these brands.

AYELET ISRAELI: So I think some people are incredibly hands-on and some people are not. But I think really the answer is that it’s not just them alone. They have staff, they find the right co-founders, collaborators. Dave Chang has a fantastic CEO that leads a lot of aspects of the business. Kim Kardashian has two co-founders, Jens and Emma Grede that actually have a lot of expertise in this field. So it’s not just them, but they are involved as much as possible to ensure the aspects of the product they care about. We know that up until this day, Kim Kardashian tries out all the different products that Skims create. And Dave Chang is incredibly involved in developing the products as well. Perhaps not in necessarily developing the whole go-to-market strategy, but yes, in the aspects that are critical to him, which is the flavor of the product and ensuring that the product is good.

ALISON BEARD: Okay. So you’ve talked about the celebrity product fit, strong social media following, developing a superior product, listening to consumers. I want to dig into a couple of those things more deeply. So on the social media issue, the person has to start with a very big following and an almost intimate relationship with those followers.

AYELET ISRAELI: So I would actually emphasize the second part of what you said more, the intimate relationship. So you can have a lot of followers, but they are not necessarily a followership and this kind of real connection, real engagement with the celebrity or with the social media influencer. I believe a lot of these principles can apply to celebrities that grew from being influencers. It’s not just the number of the followers, but it’s really this followership relationship. It’s really that a follower feels a true connection. Like they have a conversation like they know this person and they act upon what they see this person advertises on social media or see this person says on social media for this to actually work out. So you might have the exact number of followers of someone else, but that person, celebrity, or that influencer doesn’t create as engaging a relationship or their followers don’t feel as engaged, in which case it’s not going to work very well.

ALISON BEARD: But you do offer cases where celebrities who don’t have big social media followings and don’t post a lot have been successful. I’m thinking about Scarlett Johansson with her beauty brand Outset or George Clooney with Casamigos tequila. So it doesn’t seem like social media is a totally necessary ingredient?

AYELET ISRAELI: I think then some of the advantages that we see social media providing such as this direct relationship with consumer and reducing the cost of customer acquisition are just not going to be there as much as when you have this direct relationship with consumers and you might need more support on other aspects of the brand. You don’t have as much brand awareness or as much demand generation through consumers talking about the brand as you would when you have this direct influencer relationship. And then you would have to figure out other ways to do this. So you might have to go directly to retail faster or have to spend more money on advertising campaigns compared to situation where there is this strong social media following.

ALISON BEARD: And we’ve talked a lot about good celebrity product fits. What is an example of a bad one?

AYELET ISRAELI: So one example was Hulk Hogan who was a-

ALISON BEARD: 1980s wrestling star?

AYELET ISRAELI: Yes. We have seen that some of his early forays into business or into celebrity brands were around food. So he had, for example, Pastamania, which was a fast food restaurant that closed very quickly. He had these cheeseburgers, a lot of foods like that that we have just not seen a lot of traction with. And there are probably many reasons it could have failed, but we believe that one strong reason is this real lack of connection. What is the expertise of Hulk Hogan with pasta or burgers other than he’s a person that eats them. And I think also in the time when he was active, there was a different relationship with celebrities than there is now. You didn’t have this direct channel and consumers were looking for other things than they are looking for now.

ALISON BEARD: At the same time, I feel like there are a couple examples now where the fit doesn’t necessarily seem obvious. I think of George Clooney and his tequila brand. Ryan Reynolds and his gin brand. How did they make that leap that I’m not an expert in this, but I’m still making it something you want to buy?

AYELET ISRAELI: George Clooney is more of a mystery to me because he also shies away from social media and does not play this game. Whereas Ryan Reynolds is really a marketing expert and he really, for all the brands he’s been involved with, he has so much to say. He connects with consumers, he advertises them on social media. He has always clever ways to bring it on. So I think that is more aligned with the other examples we’ve seen. Whereas George Clooney’s example is just completely different.

ALISON BEARD: It’s just the cool of Clooney rubs off on a tequila.

AYELET ISRAELI: And his charm. It’s the Clooney charm.

ALISON BEARD: What are some ways that you see celebrities really interacting with their followers to improve the products, to get from sort of that minimum viable one that they’re able to launch really successfully to one that really is superior and beats the competition?

AYELET ISRAELI: So one thing we’ve seen is influencers and also celebrities, but influencers actually talking to their followers and asking them about the product and seeking their feedback before they even use the brand. So even giving them access to beta products, asking them what are they interested in, what type of designs, what type of fabric. So really engaging the community almost to co-create something the community is interested in.

ALISON BEARD: Speaking of co-creation, are we in a world now where companies or even entrepreneurs are now thinking, “I need to move beyond trying to get a celebrity or influencer to endorse my product. I actually need to, from the beginning, partner with this person to make it and launch it”?

AYELET ISRAELI: Not all brands need a celebrity, but a celebrity is definitely an unlock into this idea of how can I reduce my customer acquisition cost? So one thing we’ve seen starting around 2010, there was an era of direct to consumer brands and their whole kind of philosophy was we can cut out the middlemen. So we’re not going to sell through retail, we’re going to sell direct to consumers. We can do that thanks to e-commerce, thanks social media. It’s really easy to procure product, to create brands, and to sell online. So why not do that? But then when you cut out the middlemen, you actually have these activities that retailers use to do for you, like generating demand and generating awareness that you suddenly have to do. So in the early days of direct to consumer, we’ve seen brands doing this really successfully on Facebook and other websites where it was relatively cheap for them to advertise and to find consumers and to get these consumers to buy their products.

But quickly, many other brands, both incumbent brands and new brands started also advertising. And all of these costs increased so much that they’re out of control these days and it’s just not very sustainable to continue advertising for the current customer acquisition costs. And that’s a true concern for businesses of how am I going to acquire customers? How am I going to incur all these costs? And a celebrity could give you this ability to reduce these costs significantly if they are willing to work at selling your product through their channels that are not paid, for instance, their social media channels.

ALISON BEARD: But then you’re giving them a big cut of the profits.

AYELET ISRAELI: You would have to give them a cut of the profits, for sure. Not all celebrities are willing to work at selling. There is a shift. You said initially we’ve seen celebrity endorsement in many years, but that would just mean I’m wearing the product, which is a different activity than engaging in selling a product.

ALISON BEARD: So what advice do you give companies and startups that are interested in partnering with celebrities? Does it start with an endorsement or influencer relationship and then build from there?

AYELET ISRAELI: One thing to look at that we talked about is this idea that it’s not just a number of followers. You actually need to see how much engagement they have. And there are currently tools to look into that. But you see there are average metrics of engagement such as comments, likes, reposting for different channels that you see kind of the convergence of number of followers, how many people actually engage with a posting. And that helps you understand is there a true followership or are there just a lot of followers for a particular celebrity? So that’s one that is important. Two, of course, what we talked about is this idea of fit. Is this celebrity credibly selling this product? People are looking for some kind of authenticity. Are we going to believe this or is this going to seem a very hard sell for consumers?

And then I think there has to be an element where the celebrity is willing to be involved in the product in some way. So if we’re talking about a situation where a brand already has a product, so it’s not necessarily involvement in development like we talked about in the Kim Kardashian or the David Chang case, but it has to be involvement in selling, involvement in talking to consumer, involvement in something that makes the connection seem more real, more organic, more believable to consumers.

ALISON BEARD: And I imagine that it’s also really important to think about the risks of a particular personality.

AYELET ISRAELI: Certainly.

ALISON BEARD: Adidas and Kanye West come to mind.

AYELET ISRAELI: Certainly. So of course celebrities can go out of fashion. There are lots of PR crises that are possible with celebrities. And of course you need to take that into account as you think about your own brand health of who might be a good fit, and also if there is going to be a scandal, how am I going to get out of this? And we’ve seen historically that if the brand in relationship of endorsements, the brand can easily cut off ties with that person. But if you are developing kind of a celebrity brand where the brand is so centered around this one persona, then this is going to be a little bit harder.

ALISON BEARD: I truly think that I hear or read about a new celebrity brand almost every day. Is the market getting too crowded?

AYELET ISRAELI: So I think we hear about a lot of celebrity brands, but I don’t know that we’ve seen so many successful celebrity brands. It goes back to this quote by the CEO of Warby Parker, and of course I’m paraphrasing, but it’s something like, it’s never been easier to launch a brand, but it’s also never been harder to actually sustainably grow that brand. So sure, you can create new products very easily, especially if you have access to capital, which a lot of these celebrities do. But then it’s not necessarily going to gain any traction. And surprisingly, one of the first issues is perhaps more obvious one, which is the product is oftentimes not that good and consumers are going to sense that very quickly.

ALISON BEARD: This is really my big question because I feel like this trend is happening in other areas too, like celebrity podcasting and celebrity children’s books. So what about businesses, entrepreneurs with no celebrity association? You have a great product, but you’re not a big name with a massive social media falling and millions of dollars already, and ways to get meetings with venture capitalists or other investments. How do you compete?

AYELET ISRAELI: One of the things that is helpful is brand storytelling. So you might not have the story of a celebrity, but you might have an interesting and compelling story for your own brand that you can leverage. And of course, these brands, I mean they’ve always had to work on PR and how do I get people excited and things like that. It is true that it will be harder for them to get attention, but oftentimes once they do, it seems more credible to some people. Again, I know it sounds obvious, but really start with a good product. I think oftentimes we forget that. If you don’t have a good product to begin with, then what are you doing?

And I also think there is this question of hype or fad versus longevity and brands that actually create value. And a lot of these things are sometimes just hype, just fad. Like, “Okay, I will buy a book that a celebrity wrote, even if it’s not a very good book, but am I going to buy another copy of that book?” And what we see with the examples I mentioned is that retention rates are really high. People are willing to buy multiple products from the Skims brand and from the Momofuku brand and from other brands. So there is this question of do people just buy one to feel connection with the celebrity or because they’re interested in a celebrity and they’re interested in listening to one episode or something like that, or is there a real ongoing relationship?

And really what we care about as marketers and business people is this relationship with consumers. We want them to come back, we want them to bring their friends. All of these aspects of that.

ALISON BEARD: Well, Ayelet, thank you so much for talking to us about celebrity brands. I will keep reading about it in Us Weekly and HBR.

AYELET ISRAELI: Thank you so much for having me.

ALISON BEARD: That’s Ayelet Israeli, professor of business administration at Harvard Business School and co-author of the HBR article, What Makes a Successful Celebrity Brand?

And we have more episodes and more podcasts to help you manage your team, your organization, and your career. Find them at hbr.org/podcasts or search HBR on Apple Podcast, Spotify, or wherever you listen.

Thanks to our team, senior producer Mary Dooe, associate producer Hannah Bates, audio product manager Ian Fox, and senior production specialist Rob Eckhardt. And thanks to you for listening to the HBR IdeaCast. We’ll be back with a new episode on Tuesday. I’m Alison Beard.