Consumers love celebrities and are more than willing to fork over billions of dollars for things they endorse. But do you want them to land on your product when they fall from grace?

That multi-million dollar celebrity endorsement deal for your store’s organic clothing line is going gangbusters, with sales soaring 20% in just four weeks.

But then your squeaky clean, environmentally-active spokesman is caught in a sleazy hotel room wearing a sequined ball gown, with two underage prostitutes, a German shepherd and a bag full of crack cocaine. What now?

A little over the top? Maybe. But when it comes to celebrities nothing is impossible. As someone once said, “you pay your dime and take your chances.”

American Royalty

But we love our celebrities. No, let me amend that. We worship them! From Snooki to Jennifer Anniston they are American royalty—and we imbue them with superhuman status. We spend billions of dollars buying what they sell in hopes of looking like them, being like them and having what they have. Psychologists call it adaptive behavior.

And if we can’t, we take a Schadenfreude-fueled pleasure in watching them implode. That is, unless you’re a marketer, in which case you start looking for the morals clause in their contracts before their fall from grace crushes your product. The bigger they are, the harder they fall—and you don’t want to be underneath.

If you want to get technical, Moses and Jesus were probably the greatest celebrity spokesmen of all time. Think about it. They sold something no one could see and are still selling it thousands of years later. You think the George Foreman Grill will last that long?

But If you want something a little more modern, my money is on Nike’s deal with the always affable and consumer-friendly hoops icon Michael Jordan. And the development of Air Jordan has been one of the most lucrative partnerships in endorsement history.

Navigating Celebrity Minefields

But celebrity endorsements can also become a minefield, with manufacturers and retailers scrambling to avoid craters of bad publicity. Are these people worth the money and worry? Is there such a thing as a safe bet when it comes to endorsers? And at what point should a marketer cut and run?

You’d think companies would know the answers by now. The first recorded advertisement I found was in 1880 when the Mariani Wine Company was awarded a gold medal by the Vatican and immediately put the likeness of Pope Leo XIII on its labels. His Holiness was not amused and this was not a guy you wanted to piss off.

The 1930s and 1940s were the heyday of celebrity endorsements. Blonde bombshell Jean Harlow was washing her undies in Lux soap flakes and so did Fay Wray after King Kong carried her up the Empire State Building.

Tobacco companies defined American culture by paying millions of dollars to actors like Clark Gable, Joan Crawford, Gary Cooper and John Wayne to make cigarettes a must-have accessory for generations of movie-goers. Then you had Jimmy Stewart endorsing socks, Humphrey Bogart for Whitman’s Chocolates, and Wheaties became the “Breakfast of Champions” by putting pictures of guys like Yankee slugger Lou Gehrig on the box.

Keep going to the 1950s—when they first plopped me down in front of the TV babysitter—and you have Dinah Shore singing her heart out to “See the USA in your Chevrolet” which was sung with such gusto that my father switched allegiances from Dodge to Chevy.

The Kardashian Konundrum

Today we’re in the netherworld of people who are famous-for-being-famous like the Kardashians, whose on-camera pseudo-dramas and titillating tabloid tidbits have netted the clan $100 million in endorsement deals—almost enough to pay for their makeup. Kim, alone, can get an estimated $25,000 just for mentioning a product in one of her Tweets. I have to admit being an admirer of their methods. This is a family that really knows how to exploit the media, and a consuming public that can’t seem to get enough of them.

Then there’s the dark side. Some put Martha Stewart’s jail time for insider trading into this category. Personally, I think she just made a dumb move and was pilloried because of public sentiment about Wall Street excesses and corporate greed in general. Her business suffered but only briefly because Martha’s got better moves than Michael Jordan. Tiger Woods wasn’t as successful and lost an estimated $22 million in endorsements when the public found out he couldn’t keep his pants zipped around women that weren’t his wife. Time will tell whether he lost sponsors due to his morals or lousy play.

Things get far darker. What happens if your product is in the hands of O.J. Simpson, Lance Armstrong, Michael Jackson, or designer John Galliano whose anti-semitic tirades got him canned from Christian Dior in 2011 and shunned by the fashion industry.

The $-word

Celebrity chef Paula Deen’s multi- faceted empire unraveled pretty quickly after she admitted to using the “N” word” in the past. I suspect that time and a few more mea culpas will start to heal the wound. A white woman brought up in the deep South in the 1950s who used the “N” word” is not exactly an earth shattering revelation. Frankly, the disclosure of her having diabetes while pushing high-fat recipes probably did as much or more damage to her image.

As gambler friends have reminded me over and over, there’s no such thing as a sure thing. And in the age of social media there’s no such thing as managing a situation or putting a positive spin on bad PR. The old 24-hour news cycle where you could contain the story and all would blow over in a day, no longer exists.

Information, and misinformation, move at lightspeed with celebrity faux pas, crimes and misdemeanors going viral in seconds, instantly making them more of a liability than an asset. When something goes up on the Web it’s there forever. And so is the association with your brand.

This brings us back to the question of what to do when and if something happens to your larger-than-life spokesperson. To paraphrase Gilbert & Sullivan, “let the punishment fit the crime.” There are degrees of transgressions. Celebrities are people too. They make mistakes and the court of public opinion can be very forgiving. But in a hyper-competitive business environment are you willing to bank on it?

Maybe the answer is creating your own celebrities. The Geico gecko and Betty Crocker never got caught in compromising situations—at least not yet! But there have been rumors.

Len Lewis, is editorial director of Lewis Communications, Inc., a New York-based editorial planning, research and consulting firm. He is a contributor to several retail publications and trade groups in the U.S. and Europe and the author of The Trader Joe’s Adventure-Turning a Unique Approach to business into a Retail and Cultural Phenomenon. He has been a speaker and moderator at numerous industry events. He can be reached at lenlewis@optonline.net or via his website www.lenlewiscommunications.com.