Celebrities you can bank on

Do celebrity endorsements actually work? The best answer is that it depends on the celebrity, their natural alignment and tie with the product, how their personality connects with consumers and the lasting impression the celebrity creates.

Companies fork over hundreds of millions of dollars every year for advertising campaigns featuring celebrities of various types. Hollywood stars, star athletes and hit singers and bands appear regularly on television, in magazines and other marketing venues. Here are a few that may be worth more than what they are getting paid.

The Oprah Effect

Oprah Winfrey is arguably the most powerful person on the planet when it comes to influencing consumers on a grand scale. With the number one daytime show in the US for over two decades, her television platform was a marketing springboard for books, magazines, products and new television shows. According to PBS.org, most recently she founded the Oprah Winfrey Network (OWN) carried by 80 million homes nationwide.

The numbers for her daytime show were staggering. With a weekly audience of 48 million viewers, Oprah was a cultural force that permeated the entire landscape. Her book club had a total of 70 selections and 59 of those climbed onto the USA Today bestseller list. Her recommended books sold 55 million copies after they received mention on her show.

Oprah gave away countless products on her shows, which gave them instant national exposure, famously she offered her audience members an eight-day trip to Australian in 2011. She also spawned the birth of several new shows by promoting and featuring guests who achieved their own fame. These include Dr. Phil, Rachael Ray, Dr. Mehmet Oz, Suze Orman and Nate Berkus.

Patrick Rafter

Over the past year, Rafter's appeal has helped Mantra Hotel increase their revenue by roughly 10 per cent.

When Mantra Hotels, Resorts and Apartments hired Pat Rafter in 2011, the company registered a 36 per cent increase in website traffic, translating into A$200,000 extra revenue so far during this year's Australian Open.

Rafter, the two-time winner of the US Open, has also enjoyed a successful partnership with iconic Australian clothing company, Bonds. The former Australian of the Year is reportedly paid around $150,000 per year for his endorsement of company's underwear line.

Tiger Woods

Woods provides an interesting case study because of his rise and fall from grace after his marital infidelities were exposed. He and fellow golfer Phil Mickelson, according to Sports Illustrated in 2008 and 2009, were the top two athletes ranked by endorsement income. Both have consistently made far more money off the course than on it.

Data compiled by Golf Datatech LLC shows that both Nike and the sport of golf benefited from Nike's sponsorship of Woods over a 10-year period. It's estimated that the company's golf ball division reaped $60 million in additional profits by acquiring 4.5 million new customers that switched makers because of Woods. Further, when Woods left Titleist for Nike in 2000, sales of Titleist golf balls dropped by almost 8% during the following year.

After Woods' troubles surfaced, Nike lost 105,000 customers and took a A$1.24 million profit hit. Nonetheless, Datatech still concluded that Nike's profit was A$1.5 million more than it would have been without Woods. That validates the company's decision to stick with Woods rather than abandon him.

Fashion

It's common for designers to seek out celebrities to wear their latest fashions at big events like the Oscars and Emmys. They often give them away or offer significant discounts to attract the top stars. The impact this has on their businesses can be huge.

Designer Johanna Johnson spent three months on a custom dress that she gave to "Mad Men" star Christina Hendricks, without knowing for sure that the dress would even be worn. After the actress appeared on the red carpet at the Emmys in the Johnson creation, visits to the designer's website quadrupled overnight. The wave of 210,000 hits crashed her online store, and her small staff couldn't keep up with the instant growth in demand.

While Hendricks is not generally considered an A-list star, this shows the power of celebrity when combined with an event that's all about glamor and who's wearing what to the latest Hollywood gala.

The Bottom Line

Advertisers gamble even when they use normally bankable stars. Did people flock to Vodaphone because it was pushed by Australian cricket captain Michael Clarke?

For a celebrity backing to be successful consumers need to feel a genuine connection with the celebrity and a belief that he or she might actually be using the product. Sometimes that just doesn't happen.