All it takes is one glance at the NBA’s Eastern Conference standings to see the effect of Michael Jordan’s presence (or, this year, absence) on the Chicago Bulls. But Jordan is and was more than just the greatest basketball player in history. He’s also the greatest pitchman in history (yes, greater even than Arnold Palmer). So is there a Jordan Effect when it comes to endorsements?
In its most recent issue, Worth magazine argues that there is, and puts together a little study to demonstrate the point. Worth took five companies whose products Jordan endorses–MCI, Quaker Oats (maker of Gatorade), Nike, Sara Lee (maker of Hanes), and Ray-O-Vac–and compared the performance of their stocks over the past three years to the performance of the stocks of their closest competitors (AT&T, Coke, Reebok, Fruit of the Loom, and Gillette, which makes Duracell). The Jordan stocks were up 101.7 percent, while the non-Jordan stocks were up just 32 percent. Jordan made his companies three times as good as their competitors, in other words.
OK, not even Worth would argue that. But the magazine does suggest that Jordan made a material difference in the stock performances of his endorsees, and quotes marketing specialists to that effect. But a closer look at the numbers makes the whole study look remarkably flimsy, even granting that Worth is just kind of goofing around a bit.
Most of the increase in the value of the Jordan stocks, for instance, comes from one company: MCI/WorldCom, whose shares rose 314 percent (AT&T’s were up 68 percent). I didn’t even know MJ endorsed MCI, which says something either about my lack of brand awareness (though I doubt it) or about the somewhat fragile link between Jordan and global telecommunications. In any case, I think even Jordan himself would be hard-pressed to argue that his image has significantly altered MCI’s business. But without the MCI-AT&T comparison, the difference between the two groups practically vanishes.
As for the company with which Jordan is most closely identified, Nike, its stock rose just 18 percent, well behind the market as a whole. Thankfully for the Jordan stocks, though, Nike’s chief competitor, Reebok, was the worst stock in either group, with the value of its shares falling a remarkable 47 percent. It’s plausible that MJ really did help Nike hang on to market share in the face of declining sneaker sales. And if he were a Reebok guy instead, that company might not have underperformed as it did. But Reebok’s problems run much deeper than just their slate of endorsers (Reebok does have the game’s most exciting player, Allen Iverson, after all).
What’s most interesting about the actual numbers is how little difference Jordan has really made (if you accept that he’s not driving MCI’s precipitous rise). But this shouldn’t come as any real surprise. Marketers always overestimate the impact of advertising, and always assume that it’s easy to drive consumers to a product, when in fact it’s incredibly difficult. Advertising is what Michael Schudson famously called it: the “uneasy persuasion.” Its effects are far more diffuse and complicated than we recognize, and the assumption that Michael Jordan’s imprimatur equals marketplace success is facile at best. If there is a Jordan Effect, it’s a small one, and one that’s undoubtedly outweighed by all the other factors that drive business success. That doesn’t mean Michael’s not worth what he’s being paid, since even small changes in market share are worth millions to companies like Nike and Gatorade. But I’d hesitate before opening the vault for him.
