Our guest author dissects the sweat-equity trend in D2C brands, unraveling the dynamics of celebrity endorsements and investor models.
With the recent announcement of Ranveer being an investor cum Brand Ambassador in the D2C brand BOAT, he joins a slew of other celebrities who have turned investors.
This is a new model employed by D2C brands that are cash-strapped and have no money to afford the tens of crores that these celebrities would demand for a brand ambassador deal. However, when you are in a category where scaling will require fighting off the incumbent legacy brand with a celebrity both online for CTR on creatives and offline for getting credibility with retailers and distributors – a Celebrity becomes a hygiene need, or so is the common belief.
So, as a brand, you can approach a celebrity and offer equity in return for their time. The investment thus made in a brand is the investment of time that a celebrity makes – one day a year that can get them anywhere between 3-12% of the brand's equity based on the scale of the brand and the prevalent brand endorsement cost of the celebrity.
So, if a celebrity charges 6 crore for a 1-year deal, then the celebrity can demand up to 10% in a company with a valuation of 60 crore, and the negotiations then ensue. In return for this 10% equity, the celebrity promises 1/2 days of shoot where stills and videos can be shot and to promote them on social media with 2-3 posts from their handles that have a reach of tens of millions.
The usage rights of their image across digital media assets and retail assets are invaluable to a small brand, and they walk into such deals with an expectation of a quantum shift in the baseline.
If you talk to insiders, celebrities have a very low success rate. In most cases, celebrities have not managed to create any quantum shift in the brand's timeline either through an increase in sales revenue or through conversion metrics. A celebrity doesn’t have any impact on digitally measurable metrics.
A celebrity has an impact on metrics like Credibility of the Brand, Brand Mentions, and Awareness and helps get more customers to notice the brand and remember the name of the brand. A consumer is more likely to recollect the name of a brand endorsed by a celebrity and hence now has the brand in consideration. That’s all. That is all that the celebrity can do!!!
For a brand competing in a category where there are too many players and is struggling to even get into the consideration set, a celebrity works like a charm. S/he helps consumers consider purchasing your brand, which is a great step change for a new brand. However, conversion, sales, and ROAS are dependent more on factors like pricing, promotion, reviews, ratings, and SEO!!
The pre-work that a brand should do before getting a celebrity campaign is to get fundamentals right, improve your imagery, have consistent brand tonality, set up campaigns in order, have a brand tagline, test communication, work on SEO, work on ratings, work on ORM, and then the celebrity can give the desired turbocharging brands dream about.
A lot of brands wonder what is the right time to do a celebrity brand endorsement. Should I create enough revenue to afford a celebrity, or should I invest to get the celebrity first, and they will generate revenue for me?
Three things that any brand indulging in a celebrity campaign should have as a prerequisite are:
Even if it’s a sweat equity deal, production money on a celebrity campaign can range from 30L to a few crores. This money has to be in the bank before getting into any long-term plans.
There is no point in doing a campaign if you can’t promote it with decent money. Have at least 3 crore in the bank for promotion if you are planning a celebrity campaign. A bad campaign with 8-10 crore media spends will have more cut through than a fabulous campaign with 1 crore media spends.
Taking a celebrity campaign live can take up to 45 days. It is super important to ensure the campaign goes live during the peak season for the category. A celebrity campaign launched in Summers for a cooler brand will obviously not yield any value.
Three things that any brand indulging in celebrity campaigns should prepare itself for:
The communication between the brand and celebrity is often brokered by the team the celebrity has. It does due diligence, understands their ways of working, and works to ensure all pitfalls are accounted for during contracts.
Celebrity deals are often taxing. The to and fro, the unexpected undertaking can be an ordeal to handle and often leave you with a sour taste in your mouth. It makes sense to have someone who is experienced to be there right from the start and who knows how to mount a celebrity campaign while keeping the brand's best interest in mind.
Don’t bend over backwards to what the celebrity says. Always remember the brand comes first, and don’t shy away from going back if the brand's interests are compromised. Announce the celebrity association only after all deliverables are in the bag. There are many slips between the cup and the lip.
The glitz, glamour, adrenaline, and serotonin of the first celebrity campaign are unmatched to anything. But if you ask someone who has gone through it, they will also talk about how topsy-turvy the journey was for them to go for this glory. It’s not as shiny as it looks!!!
And yet we will continue to see more D2C brands and Brand ambassadors cum investors because the stars need to be in the limelight and D2C is the most prolific category right now; D2C brands, in turn, need celebrities to clash with the Goliaths.
D2C and Celebrities are a match made in heaven. Let the stories unfold.