The big Olympics gamble
With the 2012 Summer Games just months away, shoemakers are hoping the runners they signed to endorsement deals will lead them to retail victory.
WITH ONE LAP REMAINING in the women’s 1,500-meter final at the 2011 World Championships in track and field, US runner Jenny Barringer Simpson clung to the back of the lead pack. She was in ninth place. Then, halfway around the track in Daegu, South Korea, she shifted to the outside and started gaining ground. She exited the final curve in fourth place and accelerated toward the finish line. She passed one runner, then another, then another, and took the lead with 40 meters left. She crossed the line world champion. Half a world away, inside New Balance headquarters in Boston, a breakfast viewing party erupted, employees cheering the win.
At the stadium, Barringer Simpson celebrated by taking off her New Balance racing shoes. Striking a victory pose for photographers from around the world, she raised an American flag and both shoes. It was a shout out to the employees back in Boston, to the shoe designers and developers based in Lawrence, to all the people who support her and her running career. “You can’t just grab people out of the stands and thank them for everything,” says Barringer Simpson. “I immediately thought of my shoes as the closest thing to me to represent all the people that were a huge part of my getting to that point.” Covered in yellow-and-purple plaid, the shoes made their own statement, clashing brilliantly against the stars-and-stripes background. This was the image New Balance dreamed of when recruiting and signing Barringer Simpson in January 2010, the global exposure payoff on its endorsement bet. Recalling the moment and proudly noting how the plaid shoes popped, New Balance product line manager Claire Wood says, “The goal is to stand out in a sea of swooshes.”
Those would be Nike swooshes. In the ultra-competitive business of athletic shoes and sponsorships, it’s all about standing out, about brand- and profit-building through the triumphs of top athletes. And the biggest competitions present the biggest opportunities. For shoe companies and track and field athletes, there is no larger stage than the Summer Olympics.
Over the past few years, shoe companies have been signing runners, developing new products, and launching marketing campaigns in anticipation of the 2012 London Games – now less than six months away. Olympic success can change the trajectory of an athlete’s career and a shoe company’s profile, particularly a company like Boston-based New Balance, with a considerably smaller presence than giants Nike and adidas. Each company competes for a share of athletic shoe, apparel, and equipment sales, which reached $315 billion worldwide in 2010, marking a 4 percent increase from the previous year, according to market research compiled for the 2011 Global Sports Estimate Report. And shoe companies know that the 2008 Beijing Olympics attracted 214 million US viewers, making the competition this country’s most watched television event ever; they have hopes for a similar audience for the upcoming Games. Talk about potential product-placement gold. But like professional teams drafting players, sponsoring track and field athletes is unpredictable, a risky undertaking where some prized picks succeed and some don’t. Some shoes get international attention and some get ignored. “It is a gamble,” says Chris McGuire, director of sports marketing at adidas America. “But we always try to partner with athletes who are best in their class.”
New Balance wants a spot at that gaming table, but it doesn’t have the deep pockets of Nike and adidas and therefore can’t place as many bets. So it has developed a track and field strategy that focuses on middle-distance and distance runners, generally signing athletes overlooked by other companies. New Balance involves its small roster of sponsored runners in every aspect of product development and promotion. It’s not unusual for Olympic hopefuls to attend retailer gatherings like the one held in Chatham in September. New Balance sells not only the track success of its professional endorsers, but also their personalities and personal stories. “What athletes bring to companies, particularly running shoe and running apparel companies, is authentification,” says New Balance running marketing manager Josh Rowe. “If our product is good enough for Jenny, the world champion, it’s good enough for anyone.”
IN TRACK AND FIELD, Nike boasts an athlete roster in excess of 300 and, in many cases, offers endorsers the most lucrative contracts. That said, shoe contracts vary widely from athlete to athlete, event to event, with the runners in the marquee sprint and distance races – the 100-, 200-, 400-, 1,500-meter and marathon – typically receiving the biggest payouts. Most track and field athletes get deals far less lucrative than the multimillion-dollar offers made to National Basketball Association players. A top-tier track runner competing in a popular event might receive a base salary in the low-to-mid six-figure range, with performance bonuses for wins and record times, as well as travel and equipment expenses. Some athletes, especially in lower-profile events, might sign a strictly pay-for-performance deal.
“Shoe companies often pay on promise,” says Mark Wetmore, Boston-based agent and president of Global Athletics & Marketing. “They want to have the next great athlete.”
While it’s difficult to calculate how top performers directly affect sales, all shoe companies know that world champions, Olympic medalists, and record setters raise brand stature and desirability. Athletic footwear doesn’t sell itself – at least not very well. Call it the Michael Jordan legacy. While track and field’s most accomplished stars will never move product like Jordan, Nike and adidas athletes certainly catch consumers’ attention by repeatedly winning major races. Colin Peddie, owner of local running store chain Marathon Sports, says winning athletes offer “inspiration that can sell the product,” adding, “American athletes doing well spread good will across the board, and that cannot be underestimated.” Peddie regularly sees shoppers place brands in the try-it-on pile if endorsers win races. But, he notes, in the end, the shoe itself must fit the consumer’s foot and clinch the sale.
Because they sponsor large groups of elite athletes, it is virtually impossible for Nike and adidas to give everyone under contract personal attention. The companies focus on the best of the best with product development and promotional campaigns. Oftentimes, the rest get shoes, apparel, equipment, paychecks, travel expenses, and best wishes.
For Nike, the ideal championship final is one where its runners claim every lane. “That’s a validation of the hard work that’s gone into the athlete’s preparation and the company’s preparation,” says Nike spokesman KeJuan Wilkins. The spread-your-bets approach seems to work well for Nike Inc., with $5.7 billion in revenue worldwide for the second quarter ending November 30, 2011. In a conference call with investors, Charlie Denson, president of Nike Brand, reported that running revenues were up in that quarter by “strong double digits” and that the sport is attracting as much “energy” as it did during the 1970s running boom.
With more than 200 track and field athletes under contract worldwide, adidas is up there with Nike. Almost from the moment adidas founder Adi Dassler gave legendary US sprinter Jesse Owens a pair of track spikes before the 1936 Berlin Olympics, the company understood the benefit of athlete endorsers. And with adidas sales for 2011 expected to show almost 12 percent growth from about $15.3 billion in 2010, it’s easy to see why.
Only in recent years did New Balance rededicate itself to marketing with elite athletes, believing for a while that the product didn’t need that kind of promotion. (In the 1980s, it did pursue these sponsorships.) Now, the New Balance team numbers 40 track and field athletes. As a private company with an expected $2 billion in global sales for 2011 and with running shoes 48 percent of its total footwear sales in the US market, New Balance employs a different betting strategy than its competitors. Seizing on a roulette wheel analogy, the sports agent Wetmore sees Nike with 50 chips to play and New Balance with only a few. “But in our world, people who know what they’re doing, people who have experience are betting with knowledge,” he says. “Still, there’s a lot of luck involved.”
Lacking a roster deep enough to guarantee medalists at major competitions, New Balance looks for runners with interesting stories to tell. It invests in athletes who might need a second chance or time to develop. Barringer Simpson, however, was an exception; New Balance competed with Nike, Saucony, Brooks, and Under Armour for her talents. The Colorado-based runner turned down a more lucrative offer from Nike because, in part, she liked how “when you wear the New Balance logo, you become part of the New Balance family.” She says she was wowed and touched by a visit to the Lawrence facility, the only full-fledged factory on her recruiting tour. There, all employees wore T-shirts with her image emblazoned on the front and the words “Making shoes for Jenny B.” on the back. Barringer Simpson valued the manageable size, the close-knit feel of the New Balance team and operations. But there is nothing small or small time about the New Balance approach to the London Games. Just different.
“If we’re marketing with the intent of winning track meets with more people crossing the line in New Balance than anyone else, we’re not going to succeed, not in the near future,” says general manager of running Tom Carleo, who knows that both his former employer, Nike, and adidas have that approach covered. “It wasn’t, ‘If we don’t get Jenny, let’s get the next six girls because they’re pretty fast.’ That’s the difference between the strategies. I also believe the right thing to do with a finite budget is quality over quantity.
“What we’re trying to make happen is that consumers see a person with a brand versus just the brand. That’s where it translates into people talking about it.”
The New Balance advertisement featuring Maggie Vessey in only silver body paint and racing shoes is certainly a conversation starter. The 800-meter runner from California doesn’t hesitate to talk about the image, how it took nearly an hour to prime and paint her body, how the experience made her feel like a model. “People might ask you if you’d pose naked for Playboy, and I’m like, ‘No, but I will for my shoe company,’ ” says Vessey. “I remember thinking, ‘Man, this is probably the coolest thing I’m ever going to do.’ It could have taken many different turns, but it was a very tasteful photograph. I’d show it to my grandmother.”
Still, posing naked to sell shoes wasn’t what Vessey anticipated in her running career, though it’s been a career of surprises. Dropped by Asics after disappointing results, Vessey won the 800-meter at the 2009 Prefontaine Classic as a last-minute addition to the prestigious track event. With a personal best time, she defeated the reigning Olympic champion for the title. While other companies wanted to see more top results, New Balance saw a story and personality that fit its brand and signed Vessey. “New Balance was willing to take a risk on me,” says Vessey. “They had faith in me early on.” Last summer, she finished sixth in the 800-meter final at the World Championships.
Walking down Oxford Street in London last summer, top British miler Andy Baddeley spotted a New Balance advertisement on a telephone booth. Near the bottom of the ad was a photo of his namesake training shoe. “I’ve never been more excited,” says Baddeley. “You could read my name on the advert, tiny on the shoe.” He took a picture and tweeted it. And this is from an athlete who has competed before packed stadiums in the Olympics and World Championships. Until New Balance signed him six years ago, Baddeley ran in Nike gear without a contract. John Evans, who manages Team New Balance, remembers Baddeley as “a solid athlete, nothing spectacular” when the shoe company took an interest. At races, Evans saw a runner with a strong finishing kick and potential, enough potential to sign. New Balance embraced Baddeley’s minor heart condition as part of his story and, more recently, helped reconfigure shoes to ease pain from heel spurs. “As he developed, we developed with him,” says Evans. “It’s what we do, try and partner with developing young athletes.” By the 2008 Beijing Olympics, Baddeley had developed into an Olympic finalist.
Like Baddeley, Barringer Simpson called a New Balance shoe-spotting “one of the most exciting experiences in my life.” She saw a woman wearing her namesake training shoe in an airport. “When you see something that you’re directly a part of, that a random person picked off the shelf and decided to take home, that’s a really gratifying experience,” she says. And it is the ultimate prize for every shoe company that bets on athletes.
The tasteful nude advertisement and the namesake shoes illustrate a fundamental part of the New Balance marketing strategy: directly linking its athletes to its products. Most brands don’t push the names, faces, and stories of their professional track and field athletes into the commercial spotlight as aggressively as New Balance does. “It’s a much broader, more integrated approach, as far as putting the athletes into our messaging whether digitally or on the product in stores,” says marketing manager Rowe. “No other shoe company has a training shoe [for distance running] with an athlete’s name on it.”
TODAY, at the New Balance shoe factory in Lawrence, the Olympic track and field dream is under construction and on everyone’s mind, brightly colored prototypes spilling from cubicles and giant cardboard boxes. Product line manager Wood picks up a racing shoe in development and runs her fingers over the blue hexagonal design on the thin fabric upper. She extols its second-skin fit and lightweight structure as the qualities elite runners want when speeding around track turns. No ordinary footwear, the racing shoe is destined for big-time appearances at this summer’s US Olympic track and field trials and the London Games.
As Wood, designers, and developers discuss color schemes at the factory – drawing inspiration from recent runway shows, trend reports, and gut instinct – New Balance runners wear test products in workouts around the country. The company incorporates feedback from its athletes into its shoe design. And what New Balance learns from its athletes and translates into material and structure innovations in its shoes for Barringer Simpson, Baddeley, Vessey, and other professionals trickles down to products for the average runner. Peddie of Marathon Sports has noticed how designing for Olympians and Olympic hopefuls has helped New Balance produce hipper-looking shoes that appeal to younger runners. The racing shoes set to debut at the US Olympic Trials and London Games will be available to consumers, namely high school and college track runners, in November.
This summer, the best-case scenario is a Barringer Simpson moment. The worst case is a Dan and Dave situation. Prior to the 1992 Barcelona Olympics, Reebok ran a series of commercials featuring decathletes Dan O’Brien and Dave Johnson, co-favorites for Olympic gold. But catastrophe struck O’Brien during the pole vault at the US Olympic Trials; he failed to qualify for the Games. Ironically, a less-touted Reebok athlete from Czechoslovakia won the Olympic decathlon gold medal that year. Johnson won the bronze.
When the London Olympics take place, every shoe company will compete for the kind of ultimate victory shared by New Balance and Barringer Simpson at the World Championships. Nike-sponsored athletes finished in second, third, fourth, seventh, and ninth behind Barringer Simpson, with adidas taking two spots in the top 10. It easily could have been someone else’s shoes raised before the cameras. And that is a sometimes thrilling, sometimes sobering reality for shoe companies in their own high-stakes race.
Shira Springer is a Globe sports reporter who has covered the Olympics in Vancouver, British Columbia, and Beijing. E-mail her at email@example.com.