If the researchers at The University of California Davis did their math correctly, Tiger Wood's multi- infidelities is costing shareholders a boatload of money.Possibly as much as $12 Billion dollars.
The event study" method that we employ measures losses relative to both the stock market as a whole and a set of competitor firms - in other words, relative to all firms that do not use Mr. Woods as an endorser. For example, we measure the losses for Nike shareholders considering both changes in the broader stock market, and changes in the value of Reebok. Event studies are commonly used in economics and finance to measure changes in shareholder value following unanticipated events.
What is so fascinating about this particular study is that usually the focus is on how much the celebrity is losing when a scandal causes a corporation to sever their relationship with a celebrity. Tiger Woods was earning $100 million in corporate deals - more than any other celebrity.
Tiger is certainly not the first celebrity that has caused corporations to switch marketing programs and disassociate themselves with "tainted goods."
Tiger is not the only celebrity to lose eendorsements in 2009. Michael Phelps was dropped by Kellogg after photos of him smoking weed showed up online. Chris Brown was dropped by Doublemint gum after he was arrested for assault.
Tiger's problems are probably now going to be the problem of lots of celebrities who have enjoyed lucrative endorsement deals. Last year, Greenlight. L.A. measured the number of ads during the Grammy Awards that had celebrity endorsements. In 2009, only 7% of the advertising involved a celebrity endorsement - a significant drop from 2008 and 2007 when endorsementt spots accounted for 13% and 21% of the advertising. David Reeder of Greenlight,LA told Media Daily News last February,
"Every year, over the past 10 years, there are a handful of celebrities who are caught misbehaving in public and lose their endorsements. I don't think it means brands are going to stop using them," Reeder says. "[But given] this stuff and the current economic crisis, they are going to think twice about it."The creators of the report about shareholder loss due to Tiger Wood's many extracurricular relationships caution that their findings could be "statistically noisy."
Some marketers are taking a more subtle approach. Rather than enlisting celebrities as endorsers, they are getting them to work behind the scenes or have up-and-comers be less visible, just in case, Reeder says. "What brands are doing is trying to control the content associated with their brands [by using] a go-to guy--a relatively obscure person to the general public.
we should caution that our estimates are statistically `noisy,' in that they could be signicantly higher or lower than the numbers we report. One must make that caveat in any statistical study like this, and in our case the statistical margin of error is particularly large in part because Mr. Woods' sponsors are (with the exception of Nike and EA) subsidiaries of larger parentcompanies.