A RESEARCH ON THE IMPACT OT THE DIFFERENTIAL EFFECTS OF CELEBRITY AND

EXPERT ENDORSEMENTS ON CONSUMER RISK PERCEPTION

Carried out under the guidance of Mrs.Rekha Attri

Submitted towards the completion of 2 years Full Time PGDM programme at

Core Business School, Indore

Sumitted by:

Amit Rathore

CBS/2009-48

Acknowledgement

My research interest in celebrity endorsement and the efforts leading to this study have brought me various debts of favour.

I am particularly appreciative to Mrs. Rekha Attri who gave her time to assist with my requests for information, as well as for her guidance and valuable assistance from the offset of this project. She has been of remarkable help to me in assisting me throughout my dissertation and would like to appreciate from my side. Her valuable feedback and comments have greatly helped me to structure my dissertation and also to complete my dissertation on time.

My deliberations on the study have also been influenced by the contributions of several other researchers, many of whom are cited throughout the text. Furthermore, I would like to express my gratitude to all the respondents without whom this research would not have been possible.

I would also like to sincerely thank all the interviewees for their precious time and useful insights on the research topic and who have patiently expressed their views to help me carry on with my dissertation. In the end, I am thankful to my friends directly and indirectly, for their constant source of encouragement and being there for me always, even when I was de-motivated during the course of my dissertation.

Declaration

I hereby declare that this dissertation entitled “The Differential effects of Celebrity and Expert Endorsements on Consumer Risk Perception” is the result of my own research work carried out under the guidance and supervision of Mrs.Rekha Attri Core Business School, Indore.

I also declare that this dissertation has not been submitted

earlier to any Institute/Organization for the award of any degree

or diploma.

Place: Indore

Date: 31/03/11 Amit

Rathore

Certificate

I hereby certify that this dissertation entitled “The Differential

effects of Celebrity and Expert Endorsements on Consumer

Risk Perception” is the result of research work carried out by

Mr.Amit Rathore under my guidance.

Place: Indore Mrs. Rekha Attri

Date: 30/03/11 (Faculty, CBS)

ABSTRACT

Many of the today’s companies use celebrities in marketing campaign in order to on a more effective way, reach out with the message to the target group. Those celebrity that are used as endorsers of the product/the service are mostly movie stars or athletes .This type of marketing has become very popular but also involve certain risks. This lead to our aim with this thesis were through research we aim to gaining a deeper understanding of the reasons for using celebrity as promotion tools in marketing and how the risk that arise can be described and prevented. This paper examines the differential effects of celebrity and expert endorsements on consumer risk perceptions via three studies. Using source model theories, it is hypothesized that for high technology–oriented products there will be stronger effects of expert endorsers than celebrity endorsers in reducing consumer risk perceptions. In addition, for high technology–oriented products, there is likely to be an interaction effect between endorser type and consumer knowledge on respondents’ risk perceptions. Such an interaction effect is likely to be absent for products with a low technology orientation. These hypotheses are supported by the first study.

Contents

Topic Page no.

Introduction 8Important Celebrity Attributes 9Need for Celebrity Endorsement 10 Research Aim 11Pros of Celebrity Advertisement 12Cons of Celebrity Endorsement 13Theoretical Background & Hypothesis 14Role of Consumer knowledge in Evaluating 15EndorsementsMethod 17Results 18Discussion 20References 21

INTRODUCTION

The modern world of marketing communication has become colorful and inundated with advertisements, and it is hard to get noticed. It is an uphill task for the designer of an advertising campaign to differentiate itself from others and attract viewers’ attention. Everyday consumers are exposed to thousands of voices and images in magazines, newspapers, and on billboards, websites, radio and television. Every brand attempts to steal at least a fraction of an unsuspecting person’s time to inform him or her of the amazing and different attributes of the product at hand. The challenge of the marketer is to find a hook that will hold the subject’s attention. In helping to achieve this, use of celebrity endorsers is a widely used marcom strategy. In this jet age, people tend to ignore all commercials and advertisements while flipping through the magazines and newspapers or viewing TV. But even then, the glamour of a celebrity seldom goes unnoticed. Thus, celebrity endorsement in advertisement and its impact on the overall brand is of great significance. In this process, the companies hire celebrities from a particular field to feature in its advertisement campaigns. The promotional features and images of the product are matched with the celebrity image, which tends to persuade a consumer to fix up his choice from a plethora of brands. Although this sounds pretty simple, but the design of such campaigns and the subsequent success in achieving the desired result calls for an in-depth understanding of the product, the brand objective, choice of acelebrity, associating the celebrity with the brand, and a framework for measuring the effectiveness. Companies invest large sums of money to align their brands and themselves with endorsers. Such endorsers are seen as dynamic with both attractive and likeable qualities and companies plan that these qualities are transferred to products via marcom activities. Furthermore, because of their fame, celebrities serve not only to create and maintain attention but also to achieve high recall rates for marcom messages in today’s highly cluttered environments.Aristotle said, “Beauty is a greater recommendation than any letter of introduction.” This could aptly summarize why innumerable products are endorsed by celebrities, with or without a significant need or benefit from the same.Similarly every product has an image. The consumer tries to consume a brand which has the maximum fit with his/her own personality/image. The celebrity endorser fits in between these two interactions, where he tries to bring the

image of the product closer to the expectation of the consumer, by transferring some of the cultural meanings residing in his image to the product.Through this paper we primarily try to evaluate the impact of any celebrity endorsement on to the consumer’s risk perception”. And finally, is the investment in a celebrity commensurate to the returns earned by the company? If the world were full of all wise men and all wise women; we would have never heard of a term called “advertisement”. And then good products would have found the right customers and grown to prosperity. Firms would have worked out a mathematical formula to sell and succeed. But the buying process isn’t rational; and so is this world. Indians are die-hard movie and sport buffs; and this aspect of the consumers has invited the concept of “Celebrity Endorsement” to the world of advertisement. The purpose of this paper is to analyse the role of Celebrity Endorsement on to the consumer’s risk perception.

DEFINITION OF CELEBRITIES

Celebrities are people who enjoy specific public recognition by a large number of certain groups of people. They have some characteristic attributes like attractiveness, extraordinary lifestyle or special skills that are not commonly observed. Thus, it can be said that within a society, celebrities generally differ from the common people and enjoy a high degree of public awareness.According to Friedman and Friedman, a “celebrity endorser is an individual who is known by the public for his or her achievements in areas other than that of the product class endorsed”. Compared to other endorser types, famous people always attach a greater degree of attention, recall and loyalty.

IMPORTANT CELEBRITY ATTRIBUTES

While selecting a celebrity as endorser, the company has to decide the promotional objective of the brand and how far the celebrity image matches with it. The selection is in fact a collaboration, from which both the company and the celebrity gains. The most important attribute for a celebrity endorser is the trustworthiness. The target audience must trust that a celebrity carries a particular image and it must match with the product. The second attribute in order of importance is likeability. The celebrity also must be accepted as a popular icon by a large cross section of the audience. Similarity between the target audience and the celebrity is the third important attribute. A person well-known in a society can have greater impact than a celebrity of a different world. If the endorser and receiver have similar needs, goals, interests and lifestyles, the position advocated by the brand communication is better understood and received. Similarity is also used to create a situation where the consumer feels empathy for the person shown in the commercial. The bond of similarity between the endorser and the receiver increases the level of persuasiveness. Apart from that, expertise is also believed to be another important attribute.

Definition of Celebrity Endorsement

According to Friedman & Friedman, a “celebrity endorser is an individual who is known by the public for his or her achievements in areas other than that of the product class endorsed.” So, in the Coco-Cola advertisement; actor Amir Khan is the celebrity endorser for the product or brand called Coke, and this process is referred to as Celebrity Endorsement. Celebrities might endorse as a brand ambassador or a brand face.

THE NEED FOR CELEBRITY ENDORSEMENT

The charisma of the celebrities almost always entices people and their words are worshipped by a lot of people. Their influence also goes on the political front, where they are invited for political endorsement. Eg. Hema Malini for B.J.P. , Govinda for Congress , Amitabh Bachchan for S.P..When actor Shah Rukh Khan endorses Santro-Zip drive; the consumers are made to think that he is giving his opinion to go for this car. Similarly, actress Rani Mukherjee has turned the tables for Bata’s ladies footwear brand called Sundrop as sales increased by a whooping 500%.

Celebrity endorsements are impelled by virtue of the following motives: -

Instant Brand Awareness and Recall Celebrity values define, and refresh the brand image Celebrity adds new dimensions to the brand image Instant credibility or aspiration PR coverage Lack of ideas Convincing clients

WHY COMPANIES USE CELEBRITIES – THE CELEBRITY EDGE

Psychological Factors: Celebrities generally satisfy the 'esteem needs' of an individual. For example a movie actress is expected to possess a flawless skin and a blemish free face. Her fans want to know the secret of

her beauty, so she becomes a natural endorser for beauty related products (cosmetics, soaps, powder).

Propping Up Awareness and Trust Levels: Rahul dravid - bob To Communicate a Certain Message about the Company: Sachin

Tendulkar as brand ambassador gave it the desired facelift and image for the launch of 'Victor'

Value for Money: To Position their Brand Distinctively: Lux worldwide has positioned

itself as the 'soap the filmstars use'. From Leela Chitnis to Aishwarya Rai, all top actresses have modeled for Lux.

Celebrity Standing for a Single Brand:Think Zakir Hussain and you are reminded of 'Wah Taj' Taj Mahal tea. Ditto with A. R. Rahman for Airtel.

Background Marketers spend enormous amounts of money annually on celebrity endorsement contracts based on the belief that celebrities are effective spokespeople for their products or brands (Katyal, 2007). Celebrity Endorsement is viewed as a billion dollar industry in today’s era. (Kambitsis et al, 2002). Various companies are signing deals with celebrities in the hope that by using celebrities they can accomplish a unique and relevant position in the minds of the consumers. (Temperley & Tangen, 2006).Celebrity endorsement is increasingly being employed across various industries regardless of the product type. It is known to be playing the role of a signalling strategy. (Mustafa, 2005). Also According to Reynolds (2000) celebrity endorsement can give a brand a touch of glamour. Everything said and done, one have to weigh the potential risks vs. the potential rewards as celebrity endorsements are always a high-risk, high-reward situation and there is always a human element that you might not know about.( Miller 1994)

Research Aim The topic of celebrity endorsements and its elements is heavily documented in academic literature, but what makes this research interesting is that it enables us to understand the celebrity endorsement process from an Indian consumers point of view. Not much work has been seen in the Indian light despite the fact of it being perceived as a potential market for celebrity endorsed products.

Indian consumer attitudes are changing at a rapid pace and they are becoming more aware of the products that they use to define their ‘self’. The research is carried out to obtain a view amongst Indian Consumers about celebrity endorsement. Is it as positive as it is assumed to be?

Most advertisements, be it of any form, majorly focuses on the young generation therefore their perception about the celebrity endorsed form of advertisement is of utmost importance, also getting to know the attitude the youth provides the knowledge of the most current incidents or attitudes of any country, hence the youth has been targeted in this research.

The research undertaken on celebrity endorsement in this paper will be useful on both academic and professional platform, as it looks into the perception of Indian consumers risk towards the celebrity endorsement, providing theory for scholarly and directives for managers and professionals

Pros of Celebrity Advertisement Academic researchers have conducted sufficient empirical research to express the benefits of product endorsement, in addition to the intuitive arguments that rationalize this practice.(Till and Shimp, 1998). It is observed that the presence of a renowned persona helps in solving the problem of over communication that is becoming more and more prevalent these days.(Kulkarni & Gaulankar, 2005)

The increased consumer power over programmed advertisement has made advertising has made advertising more challenging. To ease this threat and to help create and maintain consumer attention to advertisements celebrity endorsement strategy is seen to be advantageous. Celebrities have the potential of helping the advertisements stand out from the surrounding clutter, guiding towards a improved communicative ability by cutting through excess noise in a communication process( Sherman 1985). Also one probable solution in the face of tarnished company image is the hiring of a celebrity to restore it. Celebrity Endorsement assists in the image polishing of the company’s image.(Erdogan, 1999)

A stream of studies identifies the attributes such trustworthiness, similarity, likableness, expertise that cause a celebrity to stand as a persuasive source which in turn creates a sense of certainty.(Mustafa 2005). It is shown by research and experience that consumers are highly ready to spend and more comfortable , when products that relate to their desired image is endorsed by celebrities. (Internet World 2001) as it helps them to take more notice of celebrity endorsements and improve their level of product recall. (Bowman 2002)

Another reason for the use of celebrity endorsement is because it has a strong impact on the learning style and memory which is critical to marketing communication success. This is because

most consumers are not in a purchasing situation when they come into contact with the brand message. Marketers make use of celebrity endorsements as they lead to better information storage in the minds of the consumers which can be readily retrieved when the purchasing situation dose arise.(Schultz & Barnes, 1995)

All these lead to the conclusion that celebrity endorsements is likely to have a positive effect on product choice behaviour.(Goldsmith, Lafferty and Newell 2000; Mathur, Mathur & Rangan 1997)

Cons of Celebrity Endorsement The very first downside of celebrity endorsement is the term ‘Lazy Advertising’ used to address the extreme usage of celebrities to endorse products, which poses a question on the validation of success of celebrity endorsement as a prevalent marketing communication activity. (Kulkarni and Gaulankar, 2005). It is believed that using celebrities can turn out to be an unnecessary risk, unless there appears to be a very logical relation between the endorser and the product. (Beverage Industry 1989, USA Today, 1995)

Celebrity endorsers may now and then become a liability to the brand they endorse(Till and Shimp,1998). Negative information and publicity regarding the celebrity is one risk associated with the use of celebrity endorsers. If the celebrity is strongly associated with the brand then the impact of the negative publicity will brim over to the product. (Till, 1996). Many companies have been badly affected by the negative publicity accruing from the celebrity’s misdeeds. One very prominent example is Pepsi which suffered with three tarnished celebrities - Mike Tyson, Madonna, and Michael Jackson. (Katyal, 2007). Furthermore, those who chooses to use celebrities have no control over the celebrity’s future behaviour.(Till & Shimp, 1998)

Clutter in brand endorsement is very high up these days. (Kulkarni and Gaulankar, 2005). This is due to celebrity greed which leads to a celebrity endorsing many diverse products. (Erdogan, 1999) Overexposure is a common occurrence between highly recognized and well-liked endorsers and highly competing brands and leads to making the consumer confused and unable to recall correctly which brand the celebrity stands for. (Tripp et.al., 1994). This not only compromises the value of the celebrity in the eyes of the star’s fans but also brings to the customers notice the true nature of endorsements which is more compensation inclined and not so brand or product inclined. (Cooper, 1984, Tripp et al. 1994, Graham 1989). This has been

referred to by Solomon et al. (2002) as the “hired gun” problem, where the spokesperson is perceived as endorsing the product only for the motive of money. A review by King (1989) found that especially among young people the perceived credibility of celebrity endorsers has fallen drastically, with 64% believing that celebrities appeared in the ads only for money.

As Cooper (1984) articulates “the product, not the celebrity, must be the star.”Overshadowing or better known as the ‘vampire effect’ occurs ‘’when the celebrity endorser occurs in the presence of multiple other stimuli which all competes to form a link with the celebrity endorser.” (Till, 1996) . It is a fairly familiar problem that tends to ‘water out’ the image and association present between the celebrity and the brand being endorsed and one that leads to lack of clarity for the consumer. (Evans, 1998) . A universal concern here is that consumers will fail to notice the brand being promoted because they are focusing their attention on the celebrity. (Erdogan, 1999)

Two new shortcomings can be seen these days what marketers call Celebrity Trap and Celebrity Credibility. Celebrity trap is when the task to find substitutes becomes more and more difficult and thus celebrity becomes an addiction for the marketing team leading to surfeit of celebrities. Celebrity credibility refers to scepticism by the consumers regarding the celebrities, because of which brand is bound to be affected, especially when there is anything negative regarding the celebrity associated with the brand in the news. (Kulkarni and Gaulankar, 2005).

Agrawal and Kamakura (1995) recommend that there are decreasing returns associated with celebrities in advertising. Also some consumers have termed celebrities to be a ‘puppet’ used by companies implying that they perceive the celebrities to be lying, when endorsing certain products. (Temperley & Tangen, 2006)

THEORETICAL BACKGROUND AND HYPOTHESESConsumer Risk Perceptions:- Since there is some form of uncertainty involved for any product purchase scenario due to the information asymmetry existing between buyers and sellers, there will always be some level of perceived risk for consumers for almost any purchase decision. The perceived risk for a product purchase is directly related to the amount at stake for the product (Cox 1967; Dowling and Staelin 1994). Hence, higher priced products and products with higher involvement will invoke higher risk perceptions for consumers. Although the economics literature has identified several types of risks, two types of risks (performance and financial) have assumed more importance in the marketing literature. Performance risk is the risk associated with uncertainties regarding the product not performing according to expected levels. Financial risk is the risk associated with the costs and expenses involved with the product, and with uncertainties about whether the product is worth that amount of money .

Endorser Effects and Source Model Theories:- According to SMT, endorsements are effective usually because of their source’s credibility and attractiveness (Sternthal and Craig 1973). Source attractiveness has been traditionally viewed as having three interrelated aspects—familiarity, similarity, and liking (McGuire 1969). Familiarity is defined as knowledge of the source through exposure; similarity is the supposed resemblance between the source and receiver of a message; likability is affection for the source as a result of the source’s physical attractiveness, behavior, or credentials. According to McGuire (1969), sources that are known to, liked by, and/or similar to the consumer are considered attractive and persuasive

Celebrity Endorsements:-A celebrity endorser is defined as “any individual who enjoys public recognition and who uses this recognition on behalf of a consumer good by appearing with it in an advertisement”. In comparison with other types of endorsements, celebrity endorsements are more effective in dimensions such as trustworthiness, believability, persuasiveness, and likability (Freiden 1984; Till and Shimp 1998). The effectiveness of a celebrity endorser compared with an anonymous endorser lies in bringing a distinguishing feature in terms of personality and lifestyle meanings to an endorsement process (McCracken 1989). Consumers have a preconceived image about any celebrity endorser, and this image affect is transferred to the endorsed brand.

Expert Endorsements:- In a way, some celebrity endorsers could be considered experts in their own fields, since sometimes one has to be the best in his or her career to become a celebrity. Expert endorsers are not necessarily celebrities, however. The expertise of an endorser accrues “from an actor’s ability to provide information to others because of his [or her] experience, education, or competence. Traditionally, an expert has been defined as a source of valid assertions, one who knows the correct stand on an issue (McGuire 1969), or one whose statements have been verified empirically. Expertise is topic-specific; an expert source must possess expertise on a particular topic rather than having it at the generalized level. Expert endorsements are effective because communications attributed to an expert endorser produce greater agreement with the subject than the same communications attributed to a non expert. Since the objective of most ads is to convey certain meanings and/or views associated with a brand (or an issue) in order to persuade trial usage or repeat usage of that brand, the use of an expert endorser will tend to make viewers more agreeable to the conveyed meanings.

Differential Effects of Celebrity and Expert Endorsements:-The processes by which celebrity and expert endorsements influence consumer attitude and belief change are likely to be different (Freiden 1984). According to Kelman (1961), when the source model of a communication is a celebrity, the consumer’s attitude change occurs through the process of identification. Identification occurs when an individual attempts to establish or maintain the identity associated with a celebrity endorser (Kelman 1961). Hence, when an individual attempts to believe the meanings or image portrayed by a celebrity endorser, it can be said that he or she is attempting to go through an identification process. When the source is an expert, however, the influence occurs through the process of internalization. Internalization is said to occur when an individual accepts influence that is congruent with his or her value or belief systems (Kelman 1961). An individual will be influenced by an expert endorser when the views presented seem useful for the solution of a particular problem. As a result, the greater effectiveness of a particular type of endorsement (celebrity or expert) is, to a great extent, contingent on the type of product being advertised. For more involving, durable, higher priced, or high technology–oriented products, expert endorsements are likely to have stronger effects than celebrity endorsements. This is because with high-priced or more technology-oriented items, there is likely to be greater levels of involvement with the product purchase,3 and hence, the internalization process will be more effective than mere identification. The identification process brought about by celebrity endorsements is more effective when the consumer is only peripherally processing the information presented for a product. In such a scenario, the various cues associated with the object or context (such as the celebrity endorser) exerts maximum influence. Thus, effectively, expert endorsers are likely to have greater effects than celebrity endorsers for high technology–oriented products and similar effects as celebrity endorsers for low technology–oriented products. It can therefore be formally proposed:

H1: For high technology–oriented products, consumers’ perceived(a) performance risk and (b) financial risk will be lower when an expert, rather than a celebrity, endorses the product.

H2: For low technology–oriented products, consumers will have similar levels of perceived (a) performance risk and (b) financial risk for both expert and celebrity endorsements.

The Role of Consumer Knowledge in Evaluating Endorsements

The moderating role of consumer knowledge has already been examined for various contexts of consumer behavior . However, no study has examined the moderating effects of consumer product knowledge in the context of endorser effectiveness. Consistent with prior literature, in this paper, consumer knowledge is defined as having two major components: familiarity and expertise (Jacoby 1986). Familiarity has been defined as the number of product- related experiences that have been accumulated by the consumer. Expertise is defined as the ability to perform product-related tasks successfully (Alba and Hutchinson 1987). Therefore, rather than being generic in nature, consumer knowledge is specific to a particular product. One major outcome of product familiarity is that it may allow consumers to efficiently process available information. In addition, the highly knowledgeable consumer may exhibit a tendency to delve into the details of the message, especially for high technology–oriented products. However, it might be noted that there can be certain situations under which more knowledgeable consumers might not process the given information more efficiently (for a detailed discussion on such extraordinary situations, refer to Alba and Hutchinson 2000).Based on the process of internalization, we propose that for a consumer who is highly knowledgeable about a product, the credibility of the claims made in an ad will be higher when it comes from an expert than when it is coming from a celebrity who is not perceived to be an expert on the concerned product. High-knowledge consumers have base knowledge that is richly endowed with attribute information, which allows them to use this knowledge for making decisions. Therefore, the opportunity for knowledgeable consumers to be influenced by a celebrity endorser in their decision making is minimal. For consumers with low product knowledge, there may be a greater reliance on the use of

peripheral cues as diagnostic signals to analyse the risks associated with a product purchase . Any form of endorsement present in the ad is therefore likely to be diagnostically evaluated by low-knowledge consumers. Hence, there are likely to be similar effects of both types of endorsements (EE and CE) in reducing risk perceptions for low-knowledge consumers. Also, the degree to which people are willing to accept a message regarding an issue from someone else is inversely related to confidence in their beliefs (Sherif 1963). Less knowledgeable consumers have lower confidence levels in their beliefs than more knowledgeable consumers. Therefore, less knowledgeable consumers are more likely to have a strong reliance on any type of endorsement. Stated formally:

H3: For high technology–oriented products, there will be an interaction effect between type of endorser and consumer product knowledge on perceived risks. Specifically, for products with a high technology orientation, there will be lower perceived (a) performance risk and (b) financial risk for expert as opposed to celebrity endorsements, and this effect will be further magnified for high-knowledge consumers.

For low technology–oriented products, however, no such interaction effects between endorser type and consumer product knowledge on perceived risks are expected. This is because when consumers do not have much difficulty in evaluating the attributes of such products, as is likely to be the case with high knowledge consumers, they may exhibit the same level of dependence (or nondependence) on the type of endorser. Since the product is low technology–oriented, the high-knowledge consumers most likely will exhibit non dependence even on the expert endorser in assessing perceived risk. On the other hand, low-knowledge consumers may demonstrate equally strong reliance on any form of endorsement due to the lack of confidence in their beliefs (Sherif 1963). Stated formally:

H4: For low technology–oriented products, there will be no interaction effect between type of endorser and consumer product knowledge on perceived risks. Specifically, high- and low knowledge consumers will have the same levels of perceived (a)performance risk and (b) financial risk for both celebrity and expert endorsements of low technology–oriented products. STUDY 1

MethodPretest and Stimulus DevelopmentProduct Selection. A computer was chosen as a product for Study1 since it is high technology oriented, and also because the target subject group is highly familiar with it. Moreover, prior studies have used this product with student respondents Pretest . A pretest asked participants (n = 31) to rate the reputation, popularity, and credibility of seven randomly chosen celebrities. Based on the results of the pretest, Jerry Seinfeld was chosen as the celebrity endorser (CE) for the study, as he ranked highly on all three parameters (reputation, popularity, and credibility). It might be noted that Jerry Seinfeld has been chosen for experimental manipulations of a celebrity endorser in prior studies in the literature (e.g., Sengupta, Goodstein, and Boninger 1997). For the stimulus condition of the expert endorser (EE), two types of qualification scenarios were presented and the participants were asked to rate the expertise for each person. In the first scenario, the person was presented as a professor of computer engineering at a reputed university with strong academic credentials. In the second scenario, he was presented as a top executive with a reputed software-consulting firm and strong academic credentials. The respondents in the pretest indicated a relatively higher level of perceived expertise for the first scenario. These perceptions are consistent with the FTC guidelines, which suggest that a person must have sufficient qualifications to be considered expert in the field. For the

noncelebrity non-expert (NCNE) control condition, the endorser was presented as the owner of “Spectrum Computers” (the fictitious brand name used in the experiments).

Design and ParticipantsHypotheses 1 and 3 were tested in an experiment using a 3 (endorser type: CE versus EE versus NCNE) × 2 (consumer product knowledge: high versus low) between-subjects design.The endorser type was manipulated and consumer product knowledge was measured (with the “high” and “low” conditions determined by a median split). One hundred seventeen students from a major university participated in the study for extra course credit, and were randomly assigned to one of the three endorser conditions. After the median split, the number of respondents in each of the 6 cells ranged from 15 to 21. The average age of the participants was 23, 45% of whom were female.

Independent Variables and ProcedureParticipants were asked to respond to the questionnaire by placing themselves in a described scenario and reviewing an advertisement. They were told that a fictitious brand name was being used and the real name had been concealed for technical purposes. Participants were asked to rate themselves on seven-pointLikert-type scales with four items: (1) How would you rate your knowledge about computers? (1 = very low, 7 = very high); (2) Do you consider yourself an expert regarding computers? (1 = not at all, 7 = highly); (3) What is your level of familiarity with computers? (1 = very low, 7 = very high); (4)What is your experience level with computers? (1 = very low, 7 = very high). Although there have been concerns regarding the correspondence between subjective and objective knowledge. Coefficient α for these four items was .93, indicating a high level of reliability. Inter-item correlation was also very high, ranging from .66 to .89 (all p < .01). A factor analysis revealed that all the items loaded onone component (with loading coefficients ranging from .85 to .93).The median of the average of these four items was obtained as 4.0. Similar to the approach adopted in other studies (e.g.,Roehm and Sternthal 2001), a median split was used to classify subjects as high-knowledge versus low-knowledge.Dependent MeasuresThe dependent variables of interest—perceived performance (α = .85) and financial risks (α = .90)—were operationalized by using four, seven-point Likert scales for each construct, which are slightly modified versions of prior-used measures(e.g., Grewal, Gotlieb, and Marmorstein 1994; Shimp and Bearden 1982).

Results

Manipulation CheckParticipants were asked who the endorser was and whether he was a celebrity, an expert or otherwise, to ensure that respondents processed the advertisement properly. Regarding the name of the endorser, 106 (90.6%) respondents answered correctly, 10 (8.6%) answered incorrectly, and 1 (.9%) did not answer. Regarding the background of the endorser, 115 (98.3%) respondents answered correctly, 1 (.9%) answered incorrectly, and 1 (.9%) did not answer. All the responses were kept in the analysis,

since taking out respondents failing the manipulation check did not make any significant difference in the result patterns.

Hypothesis TestsA 3 × 2 ANOVA (analysis of variance) (see Table 1) was used to test the hypotheses. As can be seen from Table 1, the interaction between endorser type and consumer knowledge was significant for both perceived performance risk, F(2, 106) = 5.51, p < .01, and financial risk, F(2, 106) = 5.48, p < .01. Since the interactions were ordinal, the main effect of endorser type (H1) was examined first, followed by the interaction of endorser type and consumer knowledge (H3).

TABLE 1 Study 1 ANOVA Results

TABLE 2 Study 1 Pair-wise Comparison of Means ( t Statistics)

Hypothesis 1 predicts main effects of endorser type on perceived performance and financial risks. Specifically, perceived performance and financial risks of the

respondents were expected to be lower when they were exposed to endorsement by EE than by CE endorsers for high technology–oriented products. As can be seen in Table 1, the main effects of endorser type were significant for both perceived performance risk, F(2, 106) = 12.38, p < .01, and financial risk, F(2, 106) = 6.89, p < .01. To determine the effects of endorser type, pair-wise t test comparisons were undertaken (see Table 2). As can be seen from the second column of Table 2, both perceived performance risk and financial risk were lower when the endorsement was by an expert than when it was by a celebrity (performance risk: means = 3.49 versus 4.47, t = 3.47, p < .01; financial risk: means = 4.21 versus 5.09, t = 3.19, p < .01). The follow-up t tests show that the main effects of EE over CE were significant for both high-knowledge and low knowledge consumers for performance risk (t = 19.19, p < .01; t = 7.98, p < .01, respectively), and for financial risk (t = 12.56, p < .01; t = 9.6, p < .01, respectively). Hence, H1a and H1b were both supported. Although not formally hypothesized, perceived performance risk (t = 3.78, p < .01) and financial risk (t = –2.22, p < .05) of the respondents were significantly lower when they were exposed to an endorsement by EE than in the control condition of NCNE for high technology–oriented products (see third column of Table 2). However, there were no differences between the effects of CE and NCNE on perceived performance risk (t = .02, p > .1) and financial risk (t = .79, p > .1) (see column 4 of Table 2). This result is surprising since CE was expected to have some positive effect compared with an anonymous NCNE. It is possible that some of the respondents made assumptions regarding the expertise of NCNE, since he was presented as the owner of Spectrum Computers. This could have contributed to neutralizing any potential stronger effects of CE.

Hypothesis 3 predicts an interaction effect between endorser type and consumer knowledge on perceived (a) performance risk and (b) financial risk, for high-technology products. Specifically, H3 predicts that EE will lead to lower perceived performance and financial risks than CE, and this effect will be further magnified for high-knowledge consumers. As can be seen from the ANOVA results in Table 1, the interaction between endorser type and consumer knowledge was significant for both perceived performance risk (F = 5.51, p < .01) and financial risk (F = 5.48, p < .01). However, only EE resulted in significantly lower perceived risks for high-knowledge consumers (versus low-knowledge consumers) for both performance risk, means = 2.83 versus 4.07, t(38) = 3.43, p < .01, and financial risk, means = 3.45 versus 4.87, t(38) = 4.12, p < .01. In contrast, perceived performance risk and financial risk did not differ between the high- and low-knowledge consumers in the CE/NCNE conditions (all p > .2). Hence, H3a and H3b were supported

Discussion

Study 1 provides some interesting results related to main effects, as well as interaction effects. Consistent with our hypotheses, EE is more effective than CE for high technology–oriented products, and this becomes even more effective when the consumer is highly knowledgeable about the product.

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