HOW CELEBRITY COLLABORATIONS AFFECT THEIR BRANDS 1 Adidas’s Partnership with Kanye West: 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 fashion 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-publicity 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 Tiger Woods 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.