In its lucrative roster of athlete endorsements, Nike Inc. is no stranger to scandal. But while it was not scared off by sexual assault charges, a dog-fighting scandal, or a formerly squeaky-clean celebrity cheating on his wife, it is drawing the line at cheating in sport.
The global sports brand released a strongly worded announcement on Wednesday that ended its business relationship with Lance Armstrong, one week after a U.S. anti-doping agency made public the doping evidence it used to strip him of his Tour de France titles.
"Due to the seemingly insurmountable evidence that Lance Armstrong participated in doping and misled Nike for more than a decade, it is with great sadness that we have terminated our contract with him," the company said. Sponsors Anheuser-Busch InBev NV and the company behind Giro bike helmets also cut ties with Mr. Armstrong on Wednesday.
But Nike stands apart, because of its track record of maintaining endorsements with the likes of Kobe Bryant, Michael Vick and Tiger Woods. Wednesday's announcement is part of a strategy by Nike to protect its brand, observers say. By reacting to scandal that occurs on the field of play, the company is distancing itself only from transgressions that violate its own marketing philosophy as a brand that is all about athletics. And while doing so, it is hanging on to deals with athletes that remain in their sports.
"Consumers have an amazingly short memory for this stuff for athletes that continue to perform," said Kevin Adler, president of Chicago-based Engage Marketing, which counsels companies on the use of athletes and other celebrities as spokespeople. "But I don't think brands are misguided to jettison [Armstrong]. I don't think there's a brand in the mix that has a choice."
Nike could credibly stand by Tiger Woods, because while that scandal exposed flaws in his character, it was not his character that Nike was selling, said Rob Tuchman, president of New York-based event marketing firm Goviva, which advises companies on endorsement deals. By contrast, his polished personal image did play a role in endorsement deals with other marketers, such as Accenture, which dropped him following his infidelity scandal. Similarly, after Olympic swimmer Michael Phelps was photographed with a bong in his hand in 2009, Kellogg Co. had to do damage control with its core demographic of moms and families. It cancelled its contract.
"It's amazing how quickly these things blow over – like Tiger Woods. The only reason that hasn't totally blown over is, he's not playing that well ... If he was playing well, absolutely everyone would be back on his bandwagon," Mr. Tuchman said.
Nike did say on Wednesday that it will continue to support initiatives tied to Mr. Armstrong's cancer charity, from which it licenses the Livestrong name for a line of products. That position was echoed by RadioShack and Anheuser-Busch. Since consumers have seemed willing to separate Mr. Armstrong's athletic conduct from his work as a philanthropist, marketers are smart to strike that balance, said Gord Hendren, president of Charlton Strategic Research Inc., which studies the value of sports sponsorships for its client base of marketers.
"There is equity with that, that is positive, regardless of Lance Armstrong and what's happened to him in cycling," he said. "That stands on its own. I understand why he's stepping away as chairman [of the charitable foundation, also announced Wednesday]. It takes the scandal out of the brand."
But all of those experts agree that they are counselling their clients more often to think twice before throwing too much weight into sponsoring a single athlete or celebrity. Endorsement contracts have become significantly more complicated in the past decade as marketers seek more escape clauses in case of scandal. Mr. Adler speculates that regular drug testing could soon be requested as part of those marketing contracts as well. Mr. Adler, Mr. Tuchman and Mr. Hendren all tell clients to consider sponsoring a family of athletes, as Gillette has done with its Nascar "Young Guns" for example, or Edge Shave Gel with its UFC athletes, to spread out the risk.
"We hold these guys in such high regard, because they can shoot a hockey puck really fast, or throw a baseball or ride a bike. At the end of the day, they're just human like everyone else … it's very difficult to live up to this ideal reputation," Mr. Tuchman said. "These guys are unpredictable. As a marketer, you've got to do a lot of due diligence. And then you gotta pray."