IMPACT OF SCANDALS OF BRAND ENDORSERS ON BRAND EQUITY

By

FARAZ FAISAL

Thesis submitted to the Lahore School of Economics

in partial fulfillment of the requirements for the degree of
MBA
2015

[Word count]

Supervised by: Ms. Samra Chaudary

RESEARCH COMPLETION CERTIFICATE

I Certify that Faraz Faisal, id No. 10U549 Session 2010 to 2014 has carried out and completed
the research project entitled Impact of Scandals of Brand Endorsers on Brand Equity under my
supervision for requirement for the award of Degree of Masters in Business Administration by
Lahore School of Economics.
Research supervisor
(Samra Chaudary)
PhD Scholar
Teaching Fellow
Lahore School of Economics

ACKNOWLEDGEMENT
I would like to express my gratitude to all those who helped me during the whole of my project. I
gratefully acknowledge the help of my supervisor; Ms. Samra Chaudary (PhD Scholar) who has
offered me valuable suggestions in the academic studies. In the whole of final project, she has
spent much time to help me and provided me with inspiring advice. Without her patient
instructions, insightful criticisms and expert guidance, the completion of this project would not
have been possible.
In the end, my gratitude also extends to my family and friends who have been assisting,
supporting and caring for me all of my life.

TABLE OF CONTENT
CHAPTER 1: INTRODUCTION........................................................................................
1.1SIGNIFICANCE OF THE STUDY................................................................................
1.2 GAPS AND CONTRIBUTIONS...................................
1.3 RESEARCH QUESTION(S)..........................................................................................
1.4 ORGANIZATION OF THE STUDY..
CHAPTER 2: LITERATURE REVIEW..............................................................................
2.1VARIABLE.................................................................
2.2 VARIABLE..................................................................
2.3 VARIABLE ......................................................................
2.4 VARIABLE ...........................................................................
2.5 THEORETICALFRAMEWORK...................................................................................
CHAPTER 3: DATA AND METHODOLOGY ..
3.1 SAMPLE SIZE .....................................................................
3.2DATA COLLECTION...........................................................
3.3MEASURES........................................................................................
3.4 OPERATIONAL DEFINITIONS...........................................
3.5 METHODOLOGY ......................................................

1. Introduction
Celebrities have always been a significant part of advertisement, playing an integral role to
develop reputation and placement strategy of the product. The image and aura of these celebrity
endorsers also impact the reputation of the advertised product for targeted consumers. It is
expected for celebrity endorsers and bran ambassadors to be a glamorous personality that were
worth being idealize and followed. It is a general perception that if these celebrities are caught in
any scandal, this will not only reduce and degrade their reputation but also of the brands they are
associated with.
Considering this association between the product reputation and celebrity endorsement,
respective paper seek to identify the impact of these celebrity brand endorsers on the advertised
brand if they are caught or involved in a defamation scandal. Chapter 2 of the paper will present
a detailed Literature Review of the problem, followed by Chapter 3 that will define data and
methodology to evaluate the credibility and reliability of the hypothesis. Chapter 4 will present
an overview of the obtained results on the basis of which Final Chapter will be developed that
will focus on discussion and Conclusion. In discussion section, an alternative perception of
negative scandals of celebrities will also be discussed where negative publicity turns out a source
of recognition for the bran and the celebrity.
1.1.

Research Questions
How does scandals of brand endorsers impact the reputation of the brand?

2. Literature review
Aaker (1996) conducted his research titled Measuring brand equity across products and
markets focusing on Brand equity as Independent variable and dependent variables included
brand awareness, brand loyalty, brand quality and brand associations (Aaker 1996). According to
Ferrel and Hartline (2008), in his research titled Marketing strategy, text and cases extends the
same argument as Aaker (1996) by creating a correlation between the variables brand awareness
and brand loyalty that tend to upgrade consumers' familiarity with the brand as recognized
brands are approached all the more frequently by consumers. Brand quality relates to the risks
perceived in making buy decision. Brand associations allude to brand image, functional benefits,
and attributes. In addition, according to Aaker brand association is a branch of brand identity
where identity alludes to 'what the organization needs the brand to remain for in client's mind'
(1996).
In addition, brand personality consists of individual traits that are engraved in the heart of a
brand. These traits indirectly track its way in consumers' memory, in this manner, creating
personal relationships. As it was mentioned earlier, Regarding Aaker's (1996) personality traits,
"trustworthy" unequivocally relates to reputation of a brand. Much the same as human-human
relationships where trust surpasses every single other component expected to have an
affectionate relationship, consumer-brand relationship likewise relies heavily upon trust. For
instance, if trust is softened up peer-peer relationship, admiration and reputation is immediately
dropped for that human; likewise, brands are dealt with the same path as people.

In article titled Measuring customer-based brand equity, Lassar, Mittal and Sharma (1995)
evaluated the Brand association assuming it as an important part in defining brand equity, as
associations build client based brand equity. Variable used in their measurement is Customer
Based Brand Equity. According to the authors, client based brand equity is the driving power for
incremental financial gains to the firm. At the point when a brand is identifiable it postures
positive client based brand equity; in this way, if marketing activity of a brand doesn't get a
handle on reaction in an ideal way, negativity exists. Besides, Lassar, Mittal and Sharma (1995)
suggest identification and attachment additionally assume a part in enhancing client based brand
equity, as identifying with a particular brand involves associating with them through emotional
attachment. So as to avoid negative brand equity, brand associations should be judiciously
maintained as it can include or deduct value from the brand identity that consumers associate
themselves to.
Kaynak, Salman and Tatoglu (2008), in their research titled An integrative framework linking
brand associations and brand loyalty in professional sports discussed various theoretical
perspectives on brand association and proposed hypothesis of a few categorical divisions of
brand associations is suggested; this paper just discussed the classification of personality as main
variable. According to the researchers, the part of personality in brand association involves
human-like characteristics. Authors regard the part of brand as a person to describe brand
personality. According to them the 'brand can be perceived as being upscale, able, impressive,
trustworthy, fun, active, easygoing, formal, energetic, or intellectual' (2008). Recognizing brand
personality can be valuable in a few ways. Firstly, it can empower consumers to express their
own particular personality through personality of the brands-creating solid association. Secondly,
it makes consumer-brand relationship in light of positive personality traits. Ultimately,
personality can likewise provide differentiation and can 'positively influence perceived quality,
brand inclination and client loyalty' (Kaynak, Salman and Tatoglu, 2008)
Keller (1993), in his research titled Conceptualizing, measuring, and managing customer-based
brand equity suggests a more detailed concept of brand associations which include attributes,
benefits and attitudes. Attributes he suggests, has two divisions; product-related and non-product
related attributes. Here product-related attributes will be attributes that directly relate to
functional performance of the product. Then again, non-product related attributes include client
imagery and use imagery. Besides, Keller suggests these imageries additionally make brand
personality, which is described similar to Aaker's description of brand personality.
2.1.

Brand Reputation

Chaudhri (2008), in his research Indian ites industry: Emerging trends & challenges in global
perspective defines brand reputation as 'the general value, esteem and character of a brand as
seen or judged by individuals as a rule'. According to the research it is vital for brands to build an
in number reputation so as to thrive according to consumers; consequently, creating a skillful
brand identity with positive associations is essential (Chaudhri, 2008). Component, for example,
personality, attitude and symbolism put more emphasis on involving feelings and emotions of
consumers are firmly related to structuring brand reputation on the grounds that these intangible,
non-functional parts can make enduring memory.
Chernatony (1999) in his research titled Brand management through narrowing the gap between
brand identity and brand reputation explained that there is correlation between the variables -

brand identity and brand reputation. According to the research, the Brand identity is influenced
by associations which include symbolic function mentioned previously. Chernatony (1999)
further realizes the importance of forming symbolic meanings as they assist consumers with
expressing themselves in a society. He claims that at the point when consumers' 'desired
symbolic meanings' or assumed personality traits are not consistent because of sudden behavior
of a brand, consumer-brand relationship can be debilitate causing a fall in the brand's reputation
(Chernatony, 1999).
Keller (2002) underlines the importance of trust by stating 'brands are meant to offer consumers
the basic expectation of trust'. Individuals place significant personal value on honesty in their
lives, along these lines brands ought to likewise incorporate honesty in their strategies keeping in
mind the end goal to bolster consumer honesty (Keller, 2002). Honesty, trust and sincerity are
qualities that can harm brands reputation if not integrated in the process of building brand
identity.
In his article titled Corporate brand reputation and brand crisis management, Greyser has used
brand reputation as primary variable in order to explain that there are various causes that lead to
damaging reputation resulting in losing trust and faith in brands. Greyser (2009) represents a few
hotspots for tarnishing brand reputation. Firstly, product failure can bring about damaging
reputation where brands functional benefits or product related attributes don't meet consumers'
requests. Secondly, social responsibility crevice can inject immorality or unreliability on
symbolic meanings of the brand. Finally, misbehavior and controversy or scandal of brand
endorser can jeopardize brands' identity by labeling brands' personality as dishonest,
untrustworthy or insensitive (Greyser, 2009). There are different causes, for example, poor
business results or controversial ownership that can bring about negative brand associations
influencing brand reputation. In any case, they all require brands to constantly maintain brand
identity and shield their brands from any outer source that can harm their reputation. This
includes the possibility of brands being uncovered of or erroneously blamed for acting
irresponsibly by the media.
Deephouse (2000) in his article titled Media reputation as a strategic resource: An integration of
mass communication and resource-based theories used brand reputation as primary variable and
media as a secondary variable to explain that media is a communication means that is utilized by
corporations to get introduction in the market and gain brand recognition. Media facilitates in
providing information about corporations and their brands to the public. Nonetheless, the media
is additionally known for sharing so as to gain its own recognition personal or false information
about brands-this is known as negative media scope. In spite of the fact that this may divert
attention to those brands as they say publicity, it can likewise destruct reputation of a wellstanding brand. Deephouse (2000) provides inside and out investigation of media reputation
where he defines it as 'the general evaluation of a firm displayed in the media' (Deephouse,
2000). The part of media is to provide information and this information shows up from various
sources. The study proposes three main wellsprings of information; organization press releases,
partners and media laborers (Deephouse, 2000). Respective paper discussed the media as a
mainstream source of information.
One such case was highlighted by Chung et al. (2013) in his research article titled Economic
value of celebrity endorsements: Tiger Woods' impact on sales of Nike golf balls. In this paper,
the values of celebrity endorsers was the primary variable. Main objective behind the research

was to show how this wellspring of media information has brought about ultimate harms to
reputations of various brands-one of the recent cases is Tiger Woods brand scandal.
H0: Brand reputation does not positively affect brand equity
H1: Brand reputation have positively affect brand equity

2.2.

Celebrity Crisis

Brand endorsements are conveyed to attract more attention support of a brand however not
generally things go as arranged. This by and large happens when a celebrity endorsing a certain
brand commits an indiscretion which then gets to be public learning, resulting in a negative
impression of the celebrity that carries onto the endorsed brand also, affecting its brand
perceptions and financial performance.
Chung et al. (2013) in his research article titled Economic value of celebrity endorsements:
Tiger Woods' impact on sales of Nike golf balls. In this paper, authors discussed and analyzed
the implications of the infidelity scandals surrounding Tiger Woods; showing it as an
extraordinary case of how things turn out badly between a brand and its celebrity endorser. The
scandal involving the golfer is said to have taken a toll around 12 billion dollars in misfortunes
for offer holders of companies endorsed by Woods and brought on a considerable lot of the
golfer's commercial patrons to move in an opposite direction from him (Chung et al. 2013).
Accenture, the organization which had built its entire campaign around Tiger Woods taking into
account his prosperity separated its ties with Tiger Woods and released an announcement saying
the golfer "is no more the right representative".
In their article titled Does gender impact the perception of negative information related to
celebrity endorsers?, the authors Edwards, S. M., & La Ferle, C. (2009) explained that negative
information about celebrities has unfriendly effects on their endorsed brands (Edwards & La
Ferle, 2009), it is all the more important that the administration settles on the right decision as to
the future course of action after the celebrity crisis breakout which would from that point
determine their brand's viewpoint in the public eye and possibly its destiny as well. A percentage
of the ordinarily taken administration actions are removal of the celebrity, issuing of a public
conciliatory sentiment or outright denial of the allegations made. Be that as it may, next to no
academic exploration has been carried out in this angle in spite of the fact that there are a few
articles and contextual analyses which have been created by crisis administration industry
professionals and specialists.
H0: Celebrity crises does not negatively affect brand equity
H1: Celebrity crises negatively affect brand equity

2.3.

Negative Impact

Meenaghan (1995) in his study titled The role of advertising in brand image development
states that "the source effect theory is in view of the belief that various characteristics of the

perceived wellspring of the communication have a beneficial effect on message receptivity"

(Meenaghan, 1995). This suggests that perceived characteristics of the sources influence the
source's persuasiveness message. The source credibility and source attractiveness models inform
exploration and reflection on the topic of celebrity endorsement and are designed to determine
the conditions under which the message sender or source is persuasive.
McCracken (1989), in his study titled as Who is the celebrity endorser? Cultural foundations of
the endorsement process states that few earlier studies have validated the fact that celebrities
owe some of their effectiveness as marketing devices to their credibility and attractiveness. In
any case, he highlighted inadequacies in these models by indicating that they can't explain
endorsement's most principal components, for example, the fact that "endorsement consists of
the transfer of these meanings from the celebrity to the product and from the product to the
consumer". As a consequence of which he proposed the "Meaning Transfer Model".
McCracken (1989) suggested that "celebrity endorsement is a special instance of a more broad
process of meaning transfer". In this manner, according to the "Meaning Transfer Model",
companies ought to painstakingly select the appropriate celebrity whose individual
characteristics look like that of the product, in this way enabling a transfer of these
characteristics from the celebrity to the product lastly to the consumer.
Another study titled Endorsers in advertising: The case of negative celebrity information by
Till & Shimp, (1998) also confirmed the same argument as author states that the "Associative
learning principles are in view of a conception of memory as a system consisting of various
nodes connected by associative links" (Till & Shimp, 1998). The transfer of feelings towards a
celebrity to the endorsed brand is expected to happen through their recurring association and this
repeated exposure serves to build solid associative links between the brand and the celebrity in
the consumer's minds (Till & Shimp, 1998). This is found in the case of Coca-Cola's repeated
pairing with Bollywood star Aamir Khan in its Indian advertisements.
H0: scandals does not have a negative impact on brand equity
H1: scandals have a negative impact on brand equity
2.4.

Brand Loyalty

Brand Loyalty is the act of consumer when they are involved in repeated purchase and according
to Sharma, K. & Kumar, S. S. (2013) there are many sportsmen and athletes who are endorsing
several brands. Whenever such debacle has took place, due to involvement of these people in
certain activities; Brand has always to suffer in form of loyalty. The reason for such incident
could be, that an endorser always wears an image for their consumer and after any kind of
scandal, that image may conflict.
H0: Brand loyalty does not have a positive impact on brand equity
H1: Brand loyalty have a positive impact on brand equity

2.5.

Theoretical Framework
Brand
Reputatio
n

Brand
Loyalty

Bran
d
Equit
y

Celebrity
Crisis

Negative
Impact

3. Data and Methodology

In methodology section, make sure you give full names of GFI, NFI, TLI, CMIN/df, RMSEA
(see Goldstein article). Why are these model fits important? Their significance?

3.1 MEASUREMENT MODEL

Include factor loadings of each construct (min and maximum)
AVE 0.5 or above
DV
Composite reliability 0.7
Report Model fits. There are two types of model fits 1) Stand-alone indices and 2) Incremental
indices.
Stand-alone indices
CMIN/d.f.
Goodness of fit (GFI)
Adjusted goodness of fit (AGFI)

RMSEA
Incremental indices
Normed fit index (NFI)
Comparative fit index (CFI)

CMIN/df the p value should be insignificant (greater than 0.05) and the value of CMIN/df
should not exceed 5.
(For default model)
NFI, TLI, GFI, AGFI 0.9 or above
RMSEA less than 0.05
(you can also add more model fits if you wish, consult the SEM article of goldstein )
Give reference for all above
4.4 PATH ANALYSIS (STRUCTURAL MODEL)
Report un- standardized estimates () which tells the sign and magnitude of the relationship.
Report p value (if p value is less than 0.05, accept the hypothesis H1 otherwise reject.)
Squared multiple correlation (R2) for each variable which is the explanatory power of the
variable in the model.
Report Model fits. There are two types of model fits 1) Stand-alone indices and 2) Incremental
indices.
Stand-alone indices
CMIN/d.f.
Goodness of fit (GFI)
Adjusted goodness of fit (AGFI)
RMSEA
Incremental indices
Normed fit index (NFI)
Comparative fit index (CFI)
CMIN/df the p value should be insignificant (greater than 0.05) and the value of
CMIN/df should not exceed 5.
NFI, TLI, GFI, AGFI 0.9 or above
RMSEA less than 0.05
(you can also add more model fits if you wish, consult the SEM article of goldstein )
Give reference for all above

4.4 MEDIATION / MODERATION

Please download article with mediation/ moderation analysis to interpret the results.
Make sure moderator is a categorical variable and mediator is a continuous
In mediation compare P values to identify full, partial or no mediation.
In moderation, only interpret the relationship that you are interested in; e.g in male moderation
its estimate and p value, in female moderation its estimate and p value and the group difference
between male and female.

BIBLIOGRAPHY
Aaker, D. A. (1996). Measuring brand equity across products and markets.California
management review, 38(3), 103.
Chaudhari, J. (2009). Indian ites industry: Emerging trends & challenges in global
perspective. National Journal of System and Information Technology,2(2), 210.
De Chernatony, L. (1999). Brand management through narrowing the gap between brand identity
and brand reputation. Journal of Marketing Management,15(1-3), 157-179.
Deephouse, D. L. (2000). Media reputation as a strategic resource: An integration of mass
communication and resource-based theories. Journal of management, 26(6), 1091-1112.
Edwards, S. M., & La Ferle, C. (2009). Does gender impact the perception of negative
information related to celebrity endorsers?. Journal of Promotion Management, 15(1-2), 22-35.
Ferrell, O. C., & Hartline, M. (2012). Marketing strategy, text and cases. Cengage Learning.
Greyser, S. A. (2009). Corporate brand reputation and brand crisis management. Management
Decision, 47(4), 590-602.
Kaynak, E., Salman, G. G., & Tatoglu, E. (2008). An integrative framework linking brand
associations and brand loyalty in professional sports. Journal of Brand Management, 15(5), 336357.
Keller, K. L. (1993). Conceptualizing, measuring, and managing customer-based brand
equity. the Journal of Marketing, 1-22.
Lassar, W., Mittal, B., & Sharma, A. (1995). Measuring customer-based brand equity. Journal of
consumer marketing, 12(4), 11-19.
McCracken, G. (1989). Who is the celebrity endorser? Cultural foundations of the endorsement
process. Journal of consumer research, 310-321.
Meenaghan, T. (1995). The role of advertising in brand image development.Journal of Product
& Brand Management, 4(4), 23-34.
Till, B. D., & Shimp, T. A. (1998). Endorsers in advertising: The case of negative celebrity
information. Journal of advertising, 67-82.