After Miss Cleo, What Does Future Hold for Celebrity Endorsers?
"In the case of Miss Cleo, she is the brand," said Steve Howard, executive vice president of Direct Response Media, Wayne, PA. "Most people are not buying the service because of her endorsement. They are buying her."
The FTC charged last month that the fortune-telling service's offer to callers of three "free minutes" was used to obtain personal information and did not include the psychic reading, which did not begin until the $4.95-a-minute toll charges started.
Howard cautioned marketers not to depend too heavily on celebrity endorsements. If you bet your entire operation on a celebrity, you could lose the house if that celebrity dies, gets into legal trouble or is otherwise taken out of the campaign.
"When the personality involved is the brand, a lot more is at stake," he said. "The business itself rides on him or her."
That could mean trouble for the Psychic Readers Network if reports of Miss Cleo's impending departure from the brand prove true.
Executives for Access Resource Services, Fort Lauderdale, FL, reportedly have said that they intend to continue operating the Psychic Readers Network and its late-night DRTV ad spots without Miss Cleo. Access president Peter Stolz told the Los Angeles Times that the company was removing Miss Cleo from the famous DRTV ads for fear that her reputation may be tarnished by the legal proceedings.
"It will leave a gaping hole [in the brand]," said Ron Perlstein, executive producer and president of Concept Media, Boca Raton, FL. "The success of the shows was based on the Miss Cleo concept."
Miss Cleo's case is unusual because she was not a celebrity when she was hired to appear in the Psychic Readers Network ads, Perlstein said. She became a celebrity from the late-night spots, and the ads likely will be ineffective without her.
In Miss Cleo's case and many others, the use of celebrity endorsements is questionable, Perlstein said. Companies often depend too much on the weight of a celebrity's word to boost their product when they should focus on the benefits of the product itself.
For beauty and skin-care products, celebrity endorsements can help because they lend an air of glamour and credibility to the product, Perlstein said. In most other cases, customer testimonials are more effective than a celebrity's word.
"In many cases, celebrities are overused," he said. "What the consumer is looking for is a compelling product that does something for them."
Even if the Miss Cleo ads are stopped, Miss Cleo herself -- whose real name is Youree Cleomili Harris of Miami, according to the New York Consumer Protection Board -- still may be in trouble.
She has been subpoenaed by the Florida attorney general's office in a separate suit against Access Resource Services. Though Miss Cleo herself has not been individually charged, Florida prosecutors are questioning her claims to being a Jamaican psychic.
"It's a 'No one is above the law' type of approach they're taking," said Andrew Lustigman, a New York lawyer specializing in marketing law and a columnist for DM News. "It behooves celebrities to open their eyes and make sure they're comfortable with the offer they're making."
The case also holds lessons for marketers about how they promote products or services that include free-trial offers.
"They need to be conscious when they make a free offer that consumers understand the limitations of it," he said.
Though the FTC seems to have grown more aggressive on enforcement of consumer and privacy protections since last year, after new FTC chairman Timothy Muris took office, there is also a new attitude of "reasonableness" in the agency's handling of the Miss Cleo case, Lustigman said. After initially seeking the immediate shutdown of the Psychic Readers Network, the FTC let the network continue operating with an independent observer monitoring its activities.
Celebrities have been held liable for their endorsements in past cases.
In the 1970s, the FTC sanctioned singer Pat Boone for his endorsement of skin cream Acne-Statin. Boone claimed that his daughters had successfully used the product, which the FTC alleged was untrue. Boone eventually agreed to pay money to consumers who had bought the Acne-Statin product while his endorsement ran.
In September 2000, the FTC filed suit against baseball great Steve Garvey, alleging deceptive advertising in his endorsement of the Enforma diet program and supplements. The case against Garvey is pending, though the maker of the diet program, which also was sued, settled its case early on.