Fair market value for celebrity endorsement is like the weather: it will be different tomorrow than today.
It would be great if you could research the price of celebrity endorsements online. For example, Celebrity Endorsement Ads is a great resource of endorsement deals in the entertainment world.
With this type of online research, you can often find some pricing information but it will lack important details such as a varying list of services and usages.
Unfortunately, the detailed information is guarded by agents.
Understanding the nuances of fair market value enables you to make the right offer which is a win for both your brand and the celebrity. An offer that is high enough not to embarrass the celebrity, yet low enough not to wildly overpay.
Here are five things you should know:
1. Agent’s Perception of Fair Market Value
Agents have the most access to celebrity endorsement contract information and pool it to use against brands in negotiations.
2. Celebrity’s Perception of Fair Market Value
A celebrity’s perception of their market value is based on what they’ve been paid for similar endorsements in the past, but can be more emotional. Their self-worth rises or falls based on their future career opportunities, personal finances, ego as well as what they’ve been paid for similar endorsements.
3. A Brand’s Perception of Fair Market Value
Brands often lack the necessary information to negotiate a fair endorsement contract. Naively, they will make a ludicrous low-ball offer which could backfire and greatly increase their cost. To get their celebrity of choice, they may even initially offer their entire marketing budget.
4. Brand Categories Pay Different Prices
Categories which are heavy users of celebrity endorsers pay more. Why? An agent’s nightmare is to reach an agreement, but then receive another offer that is much higher before the original deal is finalized.
Agents hold out for more services and money because of supply and demand. Less celebrities available for brands drives up the cost of endorsement contracts.
5. Over Paying Brands Skew Fair Market Value
I was meeting with one of the largest food companies in the world on a celebrity project when they announced the signing of a high profile golf celebrity. I asked them, how did you decide what to pay? The answer blew me away. Their budget was $800,000 so they decided to offer it all. Unfortunately for them, they didn’t have enough information to know that they could have easily gotten the deal for almost half that price.
So, the asking price for the next endorsement deal just became $300,000 more than it should be. This is how fair market value gets skewed.