Companies walk a tricky line with endorsements
NEW YORK — Nike forgave Tiger Woods after he apologized for cheating on his wife. It welcomed back Michael Vick once he served time for illegal dog-fighting. But the company dropped Lance Armstrong faster than the famed cycler could do a lap around the block.
What's the difference? A marketer's prerogative. The world's largest clothing and footwear maker has stood by athletes through a number of scandals over the years, but this week it became the first company to sever ties with Armstrong in the wake of allegations that he used illegal drugs to boost his performance during his 20-plus year racing career.
At least five other companies followed Nike's lead, highlighting the tricky relationship that evolves when marketers sign multimillion-dollar deals for celebrity and athletes to endorse their products.
“The tighter the association and the more intimate the relationship, it can sort of be like breaking up a marriage,” said Allen Adamson, managing director of branding firm Landor Associates.
Endorsement deals have been around for decades. The value of such deals are a closely held secret, but companies often are willing to shell out millions of dollars for celebrities to wear their shoes, use their equipment or appear in their commercials.
When a company does decide to end the relationship with a celebrity endorser, the stars often bow out without a fight. But sometimes letting go of a celeb can cause even more problems.
For example, Hanes underwear company dropped Steelers running back Rashard Mendenhall from its lineup in 2011 after he made controversial remarks about the death of Osama bin Laden and the Sept. 11 terrorist attacks over social media web sites. Mendenhall is now suing the company for breach of contract, claiming Hanesbrands wrongly terminated him and seeking $1 million in damages. The case is still being heard in the U.S. District Court in North Carolina.
Nike spends millions on endorsements. Of the $7.4 billion it spent on advertising, promotions and endorsement deals in the fiscal year that ended in May, 11 percent or $800 million, was for endorsements.
In the latest incident, Nike on Wednesday said that it would end its relationship with Armstrong, 41, a week after the U.S. Anti-Doping Agency released a massive report last week detailing allegations of widespread doping by the seven-time Tour de France winner.
Anheuser-Busch beer company, 24 Hour Fitness health club operator, Trek Bicycle bike manufacturer and Honey Stinger athletic products maker all followed the move, while Oakley sunglass maker said it would withhold judgment.
Steve Rosner, partner at sports marketing firm 16W Marketing in East Rutherford, N.J., estimates that Armstrong could have lost as much as $30 million in earning potential.