HOW CELEBRITY COLLABORATIONS AFFECT THEIR BRANDS 1

Adidas’s Partnership with :

How Celebrity Collaborations Affect Their Affiliated Brands

Gabby Derosier, Kennedy Chester, Jess Dally

June 20th, 2019

The University of North Carolina at Chapel Hill

HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 2

Introduction

In February of 2015, multinational athletic wear corporation, Adidas, began their collaboration with Yeezy, a brand created by Kanye West, with the creation of the

Adidas Yeezy 750 Boost "Grey" shoe (“A Brief History of Kanye,” 2016). When the shoe was first launched it sold out 500,000 dollars worth of products in thirty minutes. Since the launch of the collaboration’s first shoe, Adidas and Yeezy have worked together to produce several limited edition shoes and luxury clothing collections.

As of 2018, Adidas employs approximately 57,000 people from over a hundred different countries and produced 900 million units within the year alone (“Adidas-Profile,” 2018). In the past year, the brand averaged over 200 million shares and had net sales of 21.915 billion euros.

The company’s goal for 2020 is to achieve growth by increasing brand desirability with an emphasis on “what [their] consumers, athletes, teams, partners, media and shareholders say about

[the brand]” (“Adidas- Strategy,” 2018).

Over the years, Kanye has remained an influential figure in pop culture not just because of his music, but because of many high- controversies. Unlike many of his celebrity peers, Kanye has publicly supported Trump, featuring a signed “Make America Great Again” hat on his social media. Furthermore, Kanye has publicly referenced Black slavery in the U.S. as a “choice” (Kaur, 2018). His pro-right stance is an anomaly within his industry where the majority of his peers publicly endorse left-leaning views (Gross, 2018). Adidas’s main competitor (Euromonitor, 2019), Nike, has run several campaigns supporting left-leaning, controversial athletes, such as Colin Kaepernick (Zirin, 2018), positioning Adidas in a unique spot relative to other brands in the athletic wear industry.

Furthermore, Kanye’s controversial stances pose a potential problem for Adidas because the publicity they receive and increasingly contentious political climate. Given Adidas’s 2020 HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 3 objectives of increasing its brand desirability and maintaining its image of inclusiveness and responsiveness to consumers in 2020 (“Adidas- Strategy,” 2018), we are interested in researching what impact Kanye’s political comments have on Adidas to properly assess the risk he poses to the brand.

Literature Review

Previous literature has suggested that celebrity endorser scandals can have detrimental impacts on the corporations they are involved with. For example, according to the Harvard

Business Review, firms who had ties with during his 2009 scandals lost up to twelve billion dollars in profits (“When Scandal Engulfs a Celebrity Endorser,” 2019). Adidas has not officially responded to any of the controversial statements made by Kanye. Only Kasper

Rorsted, the Adidas CEO, has commented, saying that West’s views and tweets are “not something I worry about when I wake up in the morning” (“Adidas CEO says he”, 2019).

However, a study published by the Harvard Business review found that companies that engage with the situation and handle it well “don’t just staunch the bleeding; they come out ahead”

(“When Scandal Engulfs a Celebrity Endorser”, 2019). In fact, those who responded in a timely manner saw their stock rise by 2.1% on average; whether a firm stood by its celebrity mattered less than whether it did something at all. These findings demonstrate a potential opportunity for

Adidas to increase brand value and capitalize on this unique situation with their endorser to reach a larger audience from many different spheres, which could help them maintain their company image and achieve their 2020 objectives.

Research has also found that brands can lose credibility when a celebrity endorser is involved in a scandal. In a poll conducted by AdWeek, when asked how consumers feel about a brand when a celebrity endorser is involved in a scandal, 22% responded that they feel worse about the brand, which is a possible problem for Adidas if Kanye continues to act unpredictably HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 4

(Dolliver, 2010). While generally it has been found that negative feelings toward a celebrity endorser can hurt the image of affiliated brands, it is also possible that behavior that has an adverse effect on a celebrity himself/herself can sometimes increase purchase intentions

(“Consumers’ Reactions to a Celebrity Endorser Scandal”, 2012). Based on these findings, it is of interest to us to find out whether or not these behaviors have an effect on purchase intention, if at all, and whether feelings toward Kanye are separate from purchase intention. Fong et al also found that a strong positive brand attitude may offset the negative impact of the scandal. Because

Adidas is a well established and well-respected brand, it is of interest to us whether or not their brand is enough to counter any negative impact these behaviors might have. The same study also found that the effect of the scandal on consumers' product evaluations and purchase intentions is likely to depend not only on their reactions to the celebrities' involvement in the scandal but also on their liking for the celebrities before the scandal occurred (“Consumers’ Reactions to”, 2012).

Because Kanye is a well known yet controversial figure, it will be important to measure attitudes towards him before knowing about his recent controversies as a control for our research.

There is evidence that brands partnering with celebrities involved in political conflicts can also have an adverse effect on the brand itself. Adidas’ direct competitor Nike became involved in controversy when it chose to partner with Colin Kaepernick, the quarterback blackballed from the National Football League over his political protests utilized during games.

While some on the left praised Nike’s decision to partner with Kapernick with the idea of

“promoting social justice”, on the right there was a massive uproar and calls to boycott or destroy previously purchased Nike products (“Just Do it Nation”, 2018). The polarization of this issue lead to conversations on both sides about the consequences of this decision. Although

Kanye is a direct foil of Kapernick (identifying right-of-center), we have reason to believe that the same could happen with him as well. Politics are a polarizing issue and if people are inclined HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 5 to take sides of the political spectrum, this could have a harmful effect on Adidas as they presumably have a number of left-leaning consumers who may feel negatively about the comments he has made. It is also important to do this risk analysis as Nike stands in direct opposition to Adidas by collaborating with a famously left-leaning associate, and measuring how

Adidas could be affected by these political controversies will help us understand how they are positioned in terms of their competitors.

We have consulted previous literature as a way to inform our methods and operational definitions that will be used in research. We are seeking to measure crisis responsibility as a variable, which is defined by Brown and Ki as the “perception of an organization’s responsibility in a crisis situation” (“Developing a Valid and Reliable”, 2013). This will be used in determining whether or not Adidas consumers believe that Adidas is responsible for Kanye’s controversies and whether they are responsible for responding. We also consulted the Dundalk Institute of

Technology’s guide for doing a thematic analysis to inform our methods for qualitative research and analysis. They define thematic analysis as the “process of identifying patterns or themes within qualitative data” (“Doing a Thematic Analysis, 2017). As discussed in the guide, our goal during thematic analysis should be to identify themes, i.e. patterns in the data that are important or interesting, and use these themes to address the research or say something about an issue. We will go beyond simple observations to look for “latent themes”: that is, looking beyond what is said and “starting to identify or examine the underlying ideas, assumptions, and conceptualisations – and ideologies - that are theorised as shaping or informing the semantic content of the data” (“Doing a Thematic Analysis”, 2017).

Given Adidas’s 2020 objectives, Kanye poses potential threats and, possibly, opportunities for the company;a risk analysis is necessary for understanding how Adidas should handle future Kanye controversies. We want to know how and to what extent Kanye’s HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 6 controversial behavior impacts consumer perceptions of Adidas and their likelihood to purchase

Adidas products. We also want to know if and to what extent consumers feel Adidas is responsible for Kanye’s statements.These research questions will help us paint the picture as to if

Kanye’s collaboration is a risk or benefit to Adidas, which is important given the how competitor-saturated the athletic wear industry is and how many substitutes for Adidas are available in the market. Specifically, we seek to measure Kanye's political stances affect consumer perceptions and purchase intentions towards Adidas, and to what extent consumers feel Adidas is responsible for Kanye’s statements.

We believe that Kanye’s controversial statements will have a negative effect on consumer perceptions towards Adidas, purchase intention, and gain a high level of crisis responsibility.

Quantitative Methods

Because Adidas’s 2020 objectives are to increase its brand desirability and maintain its image of inclusiveness and responsiveness to consumers in 2020 (“Adidas- Strategy,” 2018), we are interested in researching what impact Kanye’s political comments have on Adidas.

Specifically, we sought to measure to what extent Kanye's political stances affect consumer perceptions and purchase intentions towards Adidas, and to what extent consumers feel Adidas is responsible for Kanye’s statements.

To answer these questions we chose to conduct a cross-sectional Qualtrics survey to collect descriptive statistics to summarize the data. To collect inferential data, we included an experiment within the survey, where each respondent had an equal chance of being randomly placed into one of two groups. One group of respondents was exposed to Kanye’s political statements and Adidas’s responses to Kanye, the other group will only be exposed to Kanye’s political statements-- all else equal. In our experiment, we sought to learn how much variation in our dependent variables-- crisis responsibility, consumer perception, and purchase intention-- is HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 7 explained by exposure to Adidas’s response. We chose to Adidas’s response tweet the independent variable because we wanted to know to what extent Adidas’s actions affect consumers’ view of the role Adidas plays in Kanye’s controversial behavior, and if it affects their attitudes and purchase intentions. We used the group only exposed to Kanye’s statements as the control group. Furthermore, we included demographic information and political ideology as intervening variables.

In our survey, we used predominately interval levels of measurement, however, we did include some ratio and nominal levels of measurement as well. We defined consumer perceptions as an individual’s feelings and attitudes towards the Adidas brand. We measured consumer perceptions with interval level of measurements using a five-point Likert-scales ranging from strongly agree to strongly disagree. We coded Likert-scales so that strongly agree corresponds to one, agree corresponds to two, neutral corresponds to three, disagree corresponds to four, and strongly disagree corresponds to five. We used positive and negative emotions, such as enthusiastic and disappointment in our consumer perception Likert-scales. Based off Brown and Ki’s Journalism & Mass Communication Quarterly study, we defined crisis responsibility as an organization’s stake in the preventability of and accountability for a crisis (Brown & Ki,

2013). To measure crisis responsibility, we extrapolated from Brown and Ki’s ordinal to create Likert scales to assess respondent’s levels of agreement with statements, such as Adidas is responsible for Kanye from making pro-Trump statements and Adidas should be blamed for

Kanye’s slavery comments. We coded crisis responsibility scales identical to consumer perception scales. We defined purchase intention as an individual’s willingness to buy Adidas products. We measure purchase intentions with an ordinal level of measurement using a five- point Likert scale ranging from how likely to unlikely the consumer is to buy Adidas products.

We coded the likely to correspond to one and unlikely to five accordingly. HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 8

Our desired population consisted of people 12 years and older because though Adidas consumers may be 18 years or older, children’s preferences often motivate their parent's purchasing choices. We recruited respondents through non-probability convenience sampling due to our inability to pay respondents. Due to our methods of distribution, which are mainly social media platforms, we expect our sample demographics to be primarily college-age young adults. Through Qualtrics, each respondent is given an equal chance of being exposed to

Adidas’s response or not.

We believed our experiment to be reliable because we implemented consistent criteria from wording to question structure to measure each variable replicated from secondary research.

Furthermore, we ensured that the only difference between the two branches of the survey is the exposure to Adidas’s responses, limiting the possibility of confounding variables.

Qualitative Methods

To supplement our quantitative research, we engaged in qualitative data collection to gain more understanding of consumer reactions to Kanye's political stances and persona and Adidas’s responses to his statements. We sought to answer how and why consumer perceptions and purchase intentions towards Adidas changed due to Kanye’s statements, and how consumers felt

Adidas responded appropriately to Kanye’s statements.

We approached these questions using thematic analysis to interpret a focus group of seven participants. Due to time and funding constraints, recruitment was conducted through nonprobability convenience sampling via an open invitation to UNC-Chapel Hill undergraduate and graduate students to voluntarily participate. Though there were obvious limitations to our sampling, our focus group participants matched as a comparator to our target audience on the basis of age and sex, aiding replicability. Because we were interested in uncovering deeper consumer insights about specific topics, we utilized probing questions, such as “how do you feel HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 9 about Kanye,” that allow for multiple responses. The timeframe for the focus group was approximated to be thirty minutes, though it may have varied depending on the openness of our participants.

When creating our focus group protocol, we were aware that the controversies Kanye has been involved in regarding his personal thoughts and opinions may have been sensitive subjects to participants because they are of a political nature. To ensure the comfortability of participants to respond honestly, we modeled our introductory statement after templates created by the

University of Minnesota Professor Richard Krueger (Krueger, 2002). Our introductory statement included sensitivity statements, which we defined as statements that specify that there are no wrong answers and that differences in opinions are valid and welcomed during the focus group.

We included sensitivity statements in our introduction because understanding how participants felt towards Kanye’s controversial behavior was crucial for interpreting our survey data, and therefore, making it important to minimize social desirability bias.

Because we sought to gain insight into how brands are potentially threatened by controversies, specifically politically-charged controversies, we used thematic analysis on the data we gather from the focus group. We used Dundalk Institute of Technology researchers Brid

Delahunt and Moira Maguire’s definition of thematic analysis, which is analysis that “identifies themes, i.e. patterns in the data that are important or interesting, and uses these themes to address the research or say something about an issue” (Delahunt & Maguire, 2017). We used open coding, which Delahunt and Maguire define as not having pre-set codes, but developing and revise the codes throughout the coding process (Delahunt &Maguire, 2017). We analyzed the focus group transcript for trends in consumer perception, purchase intention, and crisis responsibility of Adidas, which we have defined in the previous methods section.

Quantitative Results HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 10

Overall, after approximately two weeks of being active, we received a total of ninety-nine responses to our survey. Respondents to the survey reported being eighty-seven percent eighteen to twenty-four years old, sixty-five percent female, and eighty-one percent white. If the respondent reported that they have never purchased an Adidas product in the past, they were skipped to the end of the survey. Consequently, of those ninety-nine responses, the non-exposure to Adidas responses and exposure to Adidas responses group each received approximately thirty- seven participants. To analyze descriptive statistics, we chose to use percentages to model our univariate data to accurately show the distribution of responses. To interpret findings from the experiment, we were limited in our options for which tests to run given our small sample size, consequently, we chose to run sampling average treatment effect tests (SATE) to measure the size of the treatment effect. In this experiment, the treatment effect was the effect being exposed to Adidas’s responses had on consumer perceptions towards Adidas, crisis responsibility of

Adidas, and purchase intentions. The SATE can be estimated by comparing the means of the treatment and control groups.

Inferential Statistics- SATE Tests

To calculate the average treatment effect the Adidas exposure had on respondents, we subtracted the means of the non-exposure group-- the control group-- from the exposure group.

Given that we coded the Likert-scales one through five, we considered an effect of 0.5 or higher to be a substantial treatment effect.

The following graphs display the means of how each group responded to our crisis responsibility questions:

As demonstrated by the means above, we did not find any average treatment effects that were large enough to have further implications on the data. Our lack of substantial findings is HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 11

likely due to the small size of our sample, which restricts us from making inferences about the greater population-- all Adidas consumers.

Descriptive Statistics

At the beginning of the survey, we asked respondents to answer a three-point semantic differential scale, to gauge their attitudes to the Adidas brand. Positive adjectives such as

“trendy” and “comfortable” were coded as one, neutral as two, and negative adjectives such as

“untrendy” and “uncomfortable” as three. Respondents answered favorably towards Adidas on every aspect, for affordable where approximately half of the respondents were neutral. When asked about how likely they were to buy an Adidas product, over seventy percent reported they were slightly to extremely likely to purchase Adidas products. We surmised from this data point that respondents felt generally positive towards Adidas.

The following graph illustrates how respondents answered questions about their feelings towards Kanye and Adidas after seeing the political statements Kanye has made, which both groups were exposed to. HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 12

This graph demonstrates that even after understanding what Kanye has said, respondents on average are unchanged or neutral about Adidas, which is represented by the light blue bars.

Nearly half of respondents somewhat or strongly disagreed when asked about if their attitudes have shifted negatively (as shown by the first two questions on the left). Over two-thirds of participants strongly agree that Adidas should have stopped Kanye from making political commentary and should be blamed for Kanye’s statements. Furthermore, fifty-eight percent of participants should be held accountable for Kanye’s political statements. However, interestingly, after learning for Kanye’s statements over half of the respondents reported that they were somewhat to extremely likely to purchase Adidas products in the future.

Qualitative Results

Kanye’s Persona

Our focus group confirmed that everyone was familiar with Kanye West and had at least heard of his controversial behavior before. However, most in the group were not surprised by his recent scandals due to his history of a controversial past. Most all were familiar with past scandals that led to exposure in the media and recognized that this was just a part of who he is. HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 13

Issues of his mental health came up often and were used as a basis for understanding his personality and who he is as a person that would lead him to say these things.

"He's been unwell since his mom died... I think he has some mental health issues that have certainly taken a toll to the things that he says, and some things that he maybe should not say publicly… cause they’re just… I don’t know if he actually feels that way, or if it’s just like just kind of a way he’s coping with that loss.”

According to Participant G, Kanye may not be completely accountable for the things that he’s said in the past. There was a general belief that there might be something underlying his statements that would lead him to make the claims that he has. As a result, perceptions towards

Kanye were generally not very negative as it was agreed upon that the things he said were so outlandish that it is hard to take him seriously or give him credibility. While participants might not have agreed with the statements made by Kanye, they didn’t give him enough credibility for these statements to have a dramatic impact on how they viewed him as a person.

Brand Associations

We determined that while there was a significant association between Kanye and the Yeezy brand, there wasn’t much of a connection between Kanye and Adidas. Because Yeezy was created, designed, and crafted by Kanye, there is an obvious link between the two. However,

Adidas was seen almost as a separate entity.

“I think it depends on which Adidas products you’re thinking of. Like for Yeezy specifically, yeah I might have you know, changed my opinion about it. I’m wearing Adidas shoes now and I don’t associate it, like they’re not Yeezy shoes so I don’t really associate these with him. I kind of consider them two separate things. Even though I understand it’s a part of Adidas, you know that’s a business partnership, and if I think about buying these Adidas shoes, I knew they weren’t Yeezy”.

Adidas and Yeezy were seen as two separate companies in Participant C’s mind. He identified being an Adidas consumer as being completely different from being a Yeezy consumer. Though the two are linked because of a business partnership, there isn’t a significant association between HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 14 the two in consumers’ minds where Kanye is directly affiliated with the Adidas brand. Because of this weak association, participants did perceive that Adidas had any crisis responsibility.

“For me then, since I buy Adidas every now and then, it doesn’t impact anything but part of it is that I don’t buy Yeezy stuff because its expensive, I think it would disincline me from potentially purchasing Yeezy branded Adidas stuff but for Adidas in general I don’t think it has any effect.”

Although participants said that Kanye’s statements did not impact their purchase intention for

Adidas specific products, the brand association with Yeezy was strong enough to discourage them from buying products in the future. If the connection were stronger, perhaps it would influence purchase intent, but the link is not strong enough to have an influence.

Brand Response/Responsibility

Participants were generally neutral towards the statements presented from the Adidas CEO and felt that it was a way for the company to remain neutral during the scandal. However, participants felt that the statements were ‘dismissive’ or ‘apathetic’ and felt that given the polarizing nature of the comments a more emotional or empathetic response was warranted.

“Probably would’ve gotten rid of the ‘it’s not something I think about when I wake up’ cause he kind of said ‘we don’t always agree with those opinions’ but that’s kind of somewhat like ‘we don’t agree with it’, he could have worded it a little bit better. You know like maybe ‘hey we know that slavery was like one of the worst things in human history, obviously Adidas never strives to never support those views like that, we’re upset that Kanye said that’, or something like that. It was just very dismissive.”

The comments about slavery were one of the main concerns with Adidas’ apathetic responses.

Participants identified this as something that warranted a response from the company. While some of his controversies are easy to ignore, or didn’t need a response, some comments were almost to controversial to ignore.

“Well there were probably a lot of people who agreed with Trump, you know, that were probably very Republican, but that doesn’t mean that you don’t have to take a stance on whether or not slavery was a big deal. I mean, I don’t care about Kanye’s love of Trump, HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 15

you know at that point that he has his political opinions, but when you go out and say on a TV show that you thought slavery was a choice, that should be acknowledged.”

While Adidas was not viewed as responsible or liable for the comments made by Kanye, participants agreed that there comes a point where brands should be held accountable. When something goes directly against a company's values, or the image that they are trying to promote, they should take action to ensure that their values are understood by their target audience.

Conclusion

The data revealed that Adidas was held as responsible for the actions of Kanye as we thought they would. Because there wasn’t a strong enough connection between Adidas and

Kanye, there wasn’t much of a change in perceptions towards the company and a low level of crisis responsibility. Additionally, results revealed that Kanye’s unpredictable behavior is seen less of an anomaly and more of a part of his personal brand which may change how the crisis is perceived by consumers. However, some of his sensationalized comments were deemed as worthy of response from the company, especially when they were perceived as very polarizing and directly incorrect. We found that the nature of the controversial statements have an effect on whether or not the brand should be held responsible to respond. For example, the slavery comment was seen as being too controversial to ignore. Brands should take note that the level of perceived ignorance about a controversy is important to how the conflict is viewed in consumers’ eyes.

With the saturation of the market and brands like Nike standing in direct competition,

Adidas should always be looking to improve. Adidas should conduct further research based on what they already know about their company as a whole, their consumers, sales, and opinions regarding the company. Because we cannot know their sales, marketing strategy, etc it would be in the company’s best interest to do their own research to determine if Kanye’s behavior could HOW CELEBRITY COLLABORATIONS AFFECT THEIR AFFILIATED BRANDS 16 have an effect on consumer’s perceptions of Adidas and their purchasing power. Because a 2020 goal for Adidas was to increase brand desirability by paying close attention to the responses of their consumers, they should be more conscious of their responses to controversies conducted by

Kanye. While these issues may not be something directly affecting the Adidas CEO and those high up within the company, these are issues that are important to their target consumers.

Because these statements were potentially harmful to their target audiences, they should be more sensitive to the responses and concerns of Adidas consumers who felt that these issues were too controversial to be ignored.

Adidas should be more cautious with Kanye and monitor his behavior more closely so that they can be prepared for potential problems in the future. As the results revealed, controversy and unpredictability is a part of Kanye’s personal brand. Recognizing that he has the potential to cause problems in the future is necessary and developing a strategy to deal with these issues as they happen should be in place. As our literature review revealed, firms that got out ahead of a crisis fared far better than those who simply reacted. Adidas should take steps to ensure that they are in the best position possible if and when Kanye decides to make headlines again. One of the ways that they could do this is keeping themselves distant and the Adidas brand distinctly different from the Yeezy brand. If there is a low association between Kanye and

Adidas, then there is a lower chance of potential problems in the future hurting their brand. They should develop an effective PR strategy specifically for dealing with Kanye. If they do these things, they will be in the best possible position for hitting their target goals for 2020 and staying ahead of any potential problems that could arise from being associated with Kanye West.

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