Nike vs. Pacquiao: Should Sponsors Always Drop Embattled Celebrities?

Nike’s announcement that it’s terminating its relationship with Filipino boxer Manny Pacquiao over homophobic remarks he made in a recent interview points to a larger issue in celebrity-sponsored advertising.

Should sponsors always drop celebrities who fall out of favor with public opinion?

Ethics aside, it very much depends on the circumstances.

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Make no mistake about it, the push-pull factor between a company’s brand values verses the potential windfall of cash that may result if a brand continues to support an embattled celebrity is very real.

It’s a complex balancing act to determine if a celebrity-backed marketing campaign with a falling star will actually result in more money. In each case, companies must carefully weigh their options, considering the potential loss of shareholder money.

Below are three companies that experienced huge financial ramifications by making a decision to either stand by or abandon a scandal-laden celebrity.

Tiger Woods vs. Nike

The scandal: Golfer Tiger Woods was caught engaging in several extramarital affairs in 2009. The image of the all-American family man that so many brands banked on and directly profited from was shattered.

The decision: Nike was one of the few sponsors that stuck by Woods after big players like AT&T, Gillette and Gatorade dropped him.

Money gained: Nike gained $2 million in sales in the six month period following exposure of the affairs which researchers directly attribute to the scandal itself.

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Paula Deen vs. Random House

The scandal: Celebrity chef and southern food lover Paula Deen was slapped with a discrimination lawsuit in 2013 in which she admitted to using racial slurs about blacks. Several of her major sponsors including WalMart, JC Penny and the Food Network cut ties with Deen, suggesting her words were unforgivable.

The decision: Random House was a little slower to party, but ultimately cut ties with Deen. The publishing house announced they would not release Deen’s upcoming cookbook, “Paula Deen’s New Testament: 250 Recipes: All Lightened Up”, as well as four other cookbooks she was slated to write.

Money lost: It’s hard to give an exact dollar figure Random House lost by not releasing her book. But at the time of their decision, pre-sales for the book were soaring and it ranked number one on Amazon and Barnes & Noble. Not to mention, the potential losses from the books she was contracted to write but never came to fruition.

Madonna vs. Pepsi

The scandal: In 1989, Pepsi faced a boycott for associating their brand with pop queen Madonna. Madonna had just released her controversial “Like a Prayer” video a few days after Pepsi aired their new ad featuring Madonna. Religious groups were offended by the music video’s Catholic imagery and threatened to boycott Pepsi if they didn’t remove their ads featuring Madonna.

The decision: Pepsi bowed to public sentiment and stopped airing the ads.

Money lost: The soft drink manufacturer lost $5 million they had already paid Madonna under a one-year contract.

The above examples highlight just how much a celebrity sponsorship — or the absence of it — can impact a company’s bottom line. Whether a brand chooses to stay with a controversial celebrity is not an easy choice, but to assume there’s a one-fits-all solution is patently false.

The bottom line? Don’t be a lemming. Don’t jump off the cliff just because everyone else has. Play by your own rules.