In today’s media landscape, when everything a celebrity does is available for public consumption, then scrutinized and interpreted in different ways, how are brands to protect themselves in the case of a celebrity scandal?
One way is through disgrace insurance, a financial product that brands are increasingly taking out when signing on a celebrity for a marketing campaign or endorsement deal.
Spotted CEO, Janet Comenos, was recently interviewed on the floor of the New York Stock Exchange by financial news network, Cheddar, about the rise of disgrace insurance and how the social media era is contributing to the rise of this unique insurance vehicle.
Visit the Cheddar website for the full video interview, but here are the key takeaways.
Brands aren’t fully considering the risks celebrities pose
When signing multi-million dollar agreements with celebrities, brands aren’t fully considering the many risks that celebrities can pose to both brand image and the brand’s consumer audiences.
Celebrity risk comes in many forms, not just from more obvious scandals and controversies like a prior arrest or drug- and alcohol-related incidents. Politically- or racially-driven content and political leanings and social causes (liberal or conservative) can all pose a risk to brands because they may turn off a certain percentage of customers.
More conservative industries are the first movers
Disgrace insurance is a much more mature financial product in the U.K., and while it’s newer to the U.S., more conservative industries such as financial services, pharmaceuticals, and consumer packaged goods (CPG) have been the first movers stateside.
Growing popularity is due to social media and the Harvey Weinstein blow-up
In the U.S., disgrace insurance has risen as much as 2,000% over the last couple of years. But the reason why disgrace insurance has become so immensely popular in the U.S. over the past year, in particular, largely seems due to two things.
The first is the massive scandal surrounding Harvey Weinstein and the growing number of cases of sexual assault and harassment that have since been brought to light, particularly among Hollywood actors.
The second primary reason is that, due to today’s social media-driven environment, every single thing a celebrity does is immediately available for public consumption — ready to be scrutinized and interpreted in different ways by different consumers.
Both of these reasons are driving brands to want to further protect themselves when selecting a celebrity for a campaign or endorsement deal.
Disgrace insurance is about 1% of the total cost of an endorsement deal
The cost of taking out a disgrace insurance policy is typically only 1% of the total cost to sign a celebrity endorser. So, if you pay $5,000,000 for an endorsement deal, a disgrace insurance policy would cost $50,000.
It’s only a drop in the bucket when you consider the risks involved. This is especially true if you consider the fact that brands typically spend ten times as much on media and advertising costs than they do on the celebrity ($5,000,000 for an endorsement deal = $50,000,000 for media).
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Every brand that works with celebrity talent should now be taking out disgrace insurance as a best practice. Celebrity endorsement decisions are high-risk, high-reward, and you have to protect yourself.
Assess and Avoid the Risks of Celebrity Endorsement with Spotted
Spotted now helps brands assess the risk of celebrity talent in advance of signing on with them. Incorporating more than 20 risk factors, Spotted’s Risk Assessment measures how risky a potential celebrity partner is, including how recently the celebrity created risk, how likely they are to create risk, and how likely they are to recover from risk.
Visit our website to learn more about Risk Assessment, which is one of six core components of our proven methodology to yielding stronger celebrity endorsements.