When a company is forced to re-evaluate the value of a celebrity marketing deal, it is usually because scandal has reared its head. Tiger Woods' marital infidelities, Lance Armstrong's doping, and Ryan Lochte's Pinocchio moment all had real-life consequences for their endorsements. Canadian retailer Reitmans (Canada) Ltd. is facing a rarer case: having a celebrity on its hands whose star power has abruptly soared.
The chain of women's clothing stores launched its latest collection under actress Meghan Markle's name on Nov. 3, just days after reports began circulating that the 35-year-old, known for her role on the TV drama Suits, is dating Prince Harry.
Reitmans has been working with Ms. Markle since last year, when it named her a "brand ambassador." In an effort to breathe some life into a tired brand, she has starred in corny commercials in which average women fall over themselves to find out where her outfits are from, until she informs them: "Ladies, it's Reitmans. Really."
In April, Ms. Markle deepened her involvement, launching a collection of four dresses with her design input, under the brand Meghan Markle x Reitmans. The latest collaboration focuses on "work wear."
Whether you buy into the fervour surrounding Britain's Royal Family – or endorse the idea that a successful actress and UN Women's Advocate becomes more interesting simply because of a romantic attachment to that clan – there is no question that the power of the name Ms. Markle is lending to the retailer has just gone up.
"It will be extremely commercially beneficial for her, both as a star and as a personal brand for broader commercial efforts like this," said Robert Haigh, marketing and communications director at London-based consultancy Brand Finance, which calculates the financial value of brands.
The U.K. firm has estimated that the PR value resulting from the presence of the Royal Family – in other words, the money that an advertiser would have to spend to buy the same level of exposure the royals get for free through news coverage – was £114-million last year ($191-million) and has a lifetime value of closer to £3.6-billion.
Kate Middleton represents the gold standard of the royal Midas touch: clothing she has been spotted in and items she has purchased for her children quickly sell out. The firm has calculated the value of the "Kate Effect" at £152-million in additional sales last year for brands that the Duchess of Cambridge has worn in public or has been known to buy.
Ms. Markle does not have nearly that level of influence yet. But her clout has undoubtedly grown. She also has her own lifestyle blog, the Tig, which could grow more valuable as a media property.
"It's positively impacted her brand. … One could argue that she was not a household name. She's not an A-lister," said Kevin Adler, president of Chicago-based Engage Marketing, which consults with companies thinking about using celebrities and athletes as spokespeople.
"When you launch a signature line, you're banking on the fame of that celebrity to carry the brand. [Athletic-wear brand] Fabletics and Kate Hudson – they're banking on Kate Hudson. I don't know that Meghan had that cachet. … Her awareness is greater today than it was a month ago. That, in theory, should positively impact sales. "
If it does, the results could be all upside for Reitmans: while marketers frequently write "morality clauses" into endorsement contracts that give them the right to terminate a relationship if a star behaves badly, typically the contract does not become more expensive if the star's popularity rises, Mr. Adler said. If the contract includes a revenue-sharing agreement, both parties benefit if sales go up. But the upfront fee to license her name and to have her appear in ads for the products would have been negotiated based on her brand value at the time the deal was struck.
The exception in these cases would be a performance-based "kicker," but these are more commonly negotiated in athlete deals (where a trip to the playoffs or a surge in scoring can change a sports star's value) than celebrity deals, according to Mr. Adler.
The question in celebrity deals is whether consumer perceptions of the name are positive – with one caveat. "By the way, all these rules are out the window as of this month," Mr. Adler said. "Nobody would have said Donald Trump has a positive brand. But here we are."
The news cycle has not been entirely positive for Ms. Markle personally, however. Last week, Prince Harry took the unusual step of releasing a statement appealing for an end to what he called "a wave of abuse and harassment" against Ms. Markle in the press and on social media.
The front page of the British tabloid The Sun earlier this month included the headline "Harry Girl's on Pornhub," reporting that "she can be seen stripping off and groaning" in a video – but the article did not specify until after the story turned to an inside page of the paper that the video was simply a clip from Suits that had been posted on the pornography website.
Other coverage has taken a racist tone. A column in the Daily Mail referred to Ms. Markle's mother, who is black, as "a dreadlocked African-American lady from the wrong side of the tracks," and speculated that, if the couple were to have children, "the Windsors will thicken their watery, thin blue blood and Spencer pale skin and ginger hair with some rich and exotic DNA." Another article in the same publication described the Los Angeles neighbourhood where Ms. Markle grew up as "tatty," "crime-plagued," and "gang-scarred." The headline: "EXCLUSIVE: Harry's girl is (almost) straight outta Compton."
The statement from Prince Harry's press secretary also highlighted "the attempts of reporters and photographers to gain illegal entry to her home" and the "bombardment" of her friends and family, saying he was worried for her safety.
While personally hurtful, the negative attention has likely not affected Ms. Markle's image for commercial purposes, Mr. Haigh saidd.
As her star rises, the question now is whether Reitmans can take advantage of a halo effect for its current campaign.
"They need to approach it quite conservatively," Mr. Haigh said. "They definitely don't want to give the impression of being seen to exploit this."
According to a Reitmans spokesperson, the company – which was reaching out to reporters for coverage of the Meghan Markle campaign last month – has suspended interviews focusing on the campaign for the time being.