Lance Armstrong’s Nike Deal Comes Crashing Down

You can say one thing for Nike — the company tends to stand by the troubled star athletes who front its products (Lance Armstrong, Michael Vick, Tiger Woods, etc.) far past the time when many other companies have cut and run. However, yesterday Nike announced that it was terminating its deal with Lance Armstrong.

A company release read: "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. Nike does not condone the use of illegal performance enhancing drugs in any manner."

It’s not hard to see how Nike executives would feel foolish over their affiliation with the disgraced cyclist. Back in 2001, the company released a commercial starring Mr. Armstrong. "Everybody wants to know what I am on. What am I on?" he asks. "I’m on my bike, busting my ass six hours a day. What are you on?"

Nike plans to continue supporting Livestrong, the cancer fighting charity that Mr. Armstrong helped found. He resigned as chairman of the organization yesterday.

Nike is not alone in parting ways with Mr. Armstrong. According to a USA Today report, at least seven separate sponsors ended their contracts with him yesterday.

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Discussion Questions

What lessons can retailers and brands learn from the way Nike handles problems that arise with its celebrity endorsers? Is dealing with star personalities more trouble than its worth for companies promoting a brand?

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Tony Orlando
Tony Orlando
11 years ago

If I was a Nike or Reebok marketer, I would look to the military and promote the real heroes, designing shoes that the folks would buy, AND giving a nice chunk of the profits back to the Wounded Warrior Project. Talk about a win-win scenario. There are many great warriors, who have amazing acts of bravery, that would love to promote a work shoe, or cross trainer, with the Marine logo to help the cause. Make them in the USA, hire and promote veterans in the plant as well. Anybody listening out there? It would be a huge success.

David Livingston
David Livingston
11 years ago

There is an endless supply of celebrities to endorse products. There is no lesson to learn. Getting caught juicing, dog fighting, or womanizing is no different than getting old and no longer able to perform.

Ed Rosenbaum
Ed Rosenbaum
11 years ago

Celebrity athlete endorsements are big for a brand, especially when the athlete or athlete’s team wins a championship. I can not see how a brand such as Nike will be hurt when the athlete’s star crashes. Nike survived Tiger Woods and Michael Vick. Terminating Lance Armstrong might even generate more sales in the short term.

Al McClain
Al McClain
11 years ago

Some conventional wisdom is that brands shouldn’t ink deals with celebrities, because they often crash and burn. However, big brands like Nike really don’t have much to worry about, as they cash in the popularity of celebrities while they are up, and then dump them when they are down. The public has such a short memory that no long-term damage is done. For retailers, it’s a bit of a different issue, as they typically don’t churn through celebrities the way some big brands do, so each deal is more important.

Gene Detroyer
Gene Detroyer
11 years ago

As long as the brand (like NIKE) is bigger than the endorser, it really doesn’t matter. While Armstrong was endorsing, they sold more. Now that he is gone, people will forget the connection immediately.

Same situation for Tiger Woods. His endorsement increased the awareness for the brands he was associated with. When he was cut out, that awareness did not go down nor did the companies lose the business they established.

Steve Montgomery
Steve Montgomery
11 years ago

Using celebrities to endorse your company and/or products comes with a both rewards and risk. This is true whether it is someone on a Wheaties box or Michael Jordan endorsing a line of shoes. When it works, it can allow the company to “borrow” equity from that individual. In the case of Michael Jordan this is the illusion that wearing the shoes will somehow endow the wearer some of his athletic ability. With Wheaties, consuming the product will make you a better athlete.

However, when things go wrong there’s the risk that some of the stigma from their actions will reflect on the company. If the company cuts out of the relationship and it turns out that accusations were false, then they are seen as non-supportive. If they continue to support the person too long, then they run the risk of being tainted.

All that being said, I don’t expect companies to stop the use of celebrities to endorse their products. This latest incident with Lance Armstrong may, however, make them more aware of when things appear to be going wrong.

George Anderson
George Anderson
11 years ago

You almost have to be the size of Nike to deal with the downside of working with celebrity endorsers who, based on my experience, seem to have a sense of entitlement that most of the rest of us do not share. My message would be buyers beware when it comes to hiring celebrity talent. Here are a couple of horror stories from my past.

Many years ago while working for an advertising agency, we hired a coach of a championship professional sports team to be a spokesperson for a regional retail chain. The deal involved phoning in some copy for radio spots and appearing at a small number of store events over the course of the year. Everyone was happy until an event when said celebrity proceeded to hit on every female that walked through the door. One of the “hitees” turned out to be the wife of a very large corporate customer. Let’s just say that the event was the coach’s last for my client and the contract was not renewed.

Later, working as the marketing and merchandising lead at a wholesaler of electronic security products that operated stores in the U.S. and Puerto Rico, our CEO hired an Indy 500 racing legend to help “drive” company sales. At our very first event, the largest trade show of the year, the driver was set to show up, shake some hands and sign autographs of our new catalog for customers who represented about $80 million a year for our business. When he showed, 15 minutes later than scheduled, he refused to sign autographs unless he had a specific writing instrument. This led to people running to stores throughout Manhattan to find the desired pen. About 30 minutes later with writing instrument in hand and the line of people to our booth cut by more than half, he was ready to go. Of course, he was scheduled to sign autographs for a 90-minute period. He was very punctual when it was time to leave.

Carlos Arámbula
Carlos Arámbula
11 years ago

The lesson is to be deliberate and never let the personality of the athlete eclipse the achievements in the sport. Notice that Nike ends relationships with athletes when their personal issues become the main focus of the athlete’s brand.

Star endorsements can help a brand, but it can never be equal to the brand. The brand must be able to stand on its own and not borrow entirely from the celebrity’s brand equity.

David Biernbaum
David Biernbaum
11 years ago

Nike has a track record of neither over reacting nor under reacting to events that change celebrities’ reputations and endorsements. Nike knows when to simply suspend endorsements for matters that appear only topical or temporary vs. when it’s time to cut them off, due to a certain permanence of a ruined reputation. Lance Armstrong’s image appears to be permanently soiled. Nike knows when to say when.

Craig Sundstrom
Craig Sundstrom
11 years ago

Many of the commenters here have focused on the specifics of Nike — which I suspect would be more forgiving than Jesus if there’s still a dollar to be made — but the more relevant issue is smaller companies that AREN’T bigger than their spokesperson, and who have pinned most/all of their hopes for success on an endorsement; the question then becomes, “are go-for-broke ideas worth it?” The answer is, it depends on how much you can stand to lose.

Janet Dorenkott
Janet Dorenkott
11 years ago

Celebrity endorsements are here to stay. I think Nike is a good example for other brands. They stand by their endorser and don’t drop them until the evidence is obvious. I think that’s admirable. But I really like Tony’s idea of hiring veterans to endorse your products. They really are the true heros and I think he’s spot on when he says it would be a huge success!

Mark Burr
Mark Burr
11 years ago

What lessons can be learned? How about not thoroughly knowing what you are getting when you buy it? I would suggest that much was known in advance and ignored by most where celebrity endorsements have gone south. Does Tiger Woods come to anyone’s mind?

There seems to be more and more stories like this one where brands try to latch on to the latest “Hot” celeb and end up having it go down in flames. The more important question is the later: is it worth it? Is there a difference in using a celebrity in an ad versus an endorsement? Does anyone really think Shaq would have picked a Buick? Really? A mid-sized LaCrosse? Come on! However, the image of Julia Roberts in a perfume ad is much different. It’s not a spoken endorsement. It is just an image.

Shouldn’t your brand stand on its own? The distinction should be clearly drawn between paid advertising and endorsements. If you are going to endorse it, is a two way street. It is saying something about the company and the brand itself.

Sell your brand, not someone else.

John Crossman
John Crossman
11 years ago

I would love to see more retailers highlight less known but still exceptional athletes. There are a ton and many never get regconized.