The secret to how a company making 5 billion won a year could afford an endorsement deal with Girls’ Generation who cost 2.1 billion won
The price of a Hallyu star’s ‘body’ is expensive. They can run up to billions of won for modeling gigs on advertisements. It is general knowledge that a company has to at least be a middle-sized company in order to hire a Hallyu star as their advertising model. But even a wig company with yearly sales of around 5 billion won and other small to middle-sized Korean companies are beginning to seek Hallyu stars as their endorsers. How could this be possible? Minister Yoon, Ministry of Trade, Industry, and Energy, discussed this at a meeting of businesses supporting the vitalization of the export industry held on the 15th.
- Running guarantees on advertising models
A representative from Hair Couture, a company that was initially making wigs in America, Kim Minseok thought last year that in order to enter into the foreign market in areas such as China and Southeast Asia, it would be a good idea to use a Hallyu star as the company’s advertising models. The company went straight to SM Entertainment, the agency solely in charge of Girls’ Generation. SM demanded the company pay 2.1 billion won. This amount of money was over 40% of the wig company’s annual sales from 2013.
Kim didn’t give up, and decided to try another direction. That direction was the idea of ‘running guarantee’. Since Kim did not have the funds at the time to afford Girls’ Generation as the company’s models, she would use the profits earned after the group’s endorsement deals to pay for the group. To present this idea to SM Entertainment’s board of directors, Kim used the example of Goobne Chicken, a brand Girls’ Generation was already endorsing at the time.
Kim claimed, “Goobne Chicken sells about 100 million chickens in a year. Even Girls’ Generation’s contract with Goobne wasn’t a lump sum payment like it had been and instead, the group was based around receiving 100 won a chicken, Girls’ Generation would have earned over 10 billion won.”
SM Entertainment immediately signed a contract with Hair Couture, and assigned Girls’ Generation as the company’s endorsement models. It has been revealed that Girls’ Generation received somewhere between 3% to 5% of Hair Couture's sales. Since then, Hair Couture's sales have increased 60% in the last year, earning around 8 billion won.
- Minister of Industry “this is what creates market economy”
Kim started up an advertising agency called Star Collab that specializes in deals like this. As their first success story, they linked a small to midsized Vietnam company HNJ with Hallyu group SISTAR. SISTAR advertised the company’s sweatsuit line, and agreed to receiving 3-5% of the total sales.
Even if smaller companies are able to score Hallyu stars as advertisers of their products, they are still unable to air television commercials for their products with the stars. That is why Kim thought up SNS and home shopping. Advertising through the celebrities’ SNS does not cost a lot, and because these celebrities are very famous, they can expect the product’s name to travel fast. Once the product’s existence and name is spread through the stars’ SNS, the company will then sell the products through home shopping networks. Home shopping networks also charge by the sales per hour.
Representative Kim shared this success story at the meeting and said, “Small businesses can use the overwhelming power that Hallyu stars have to maximize their exports, while entertainment agencies discover a new way to increase their profits.”
Upon the end of Kim’s speech, Minister Yoon claimed this was the model for a Creative Economy.
Source: hankyung via onehallyu
