Tiger Woods has been in the news in these last few weeks, though not in the way he has been in the past. As his personal travails have mounted, his endorsements have dropped off. Now comes a study by two professors at UC Davis, looking at the companies that sponsor Tiger.
They find that the collective market value of these firms dropped $10-$12 billion between November 27, the fateful day when Tiger drove into a fire hydrant outside his house, to December 17 (thirteen trading days later).
Note that Tiger is not the first high profile athlete whose market impact has been studied. A study of Michael Jordan's announcement that he would return to basketball (after he retired and tried baseball for a year) resulted in an increase of 2% in market value of his sponsor firms. In fact, an earlier study of firms endorsed by Tiger Woods in his glory days found that Nike and American Express gained about 1% in market value around the endorsement dates.
As an interesting aside, the UC Davis study also found that three firms, Tiger Woods PGA Tour Golf, Gatorade, and Nike, fared worst during the period after the Woods scandal came to light. Accenture, a consulting firm, showed no signs of loss in value. I would take this as an indication that Accenture has been wasting its money all these years, using Tiger Woods as a spokesperson.
On a more general note, I think this incident points to both the upside and downside of using celebrity endorsements. While there is a commercial benefit, it has to be weighed off against the potential cost of celebrities behaving badly and affecting the sponsor's reputations. For firms like Nike, both the benefits and the costs are large, since their customers are more likely to be swayed by celebrity endorsements and misadventures, but the net effect is likely to be positive. For firms like Accenture, I really do not see the net plus of using celebrity endorsements. As a business, it is unlikely that I pick my management consultant, based upon an endorsement by Tiger Woods.