THE PROB­LEM WITH HE­ROES

How Nike were blinded by their bright­est star

Golf Asia (Malaysia) - - SCENE -

Nike is in the hero busi­ness. Since its in­cep­tion as a run­ning shoe com­pany, it has used its mar­ket­ing bud­gets to turn ath­letes into idols. Tiger Woods and Rory McIl­roy are part of a long-stand­ing tra­di­tion that in­cludes Michael Jordan, Lance Arm­strong, An­dre Agassi and Cris­tiano Ron­aldo.

But there are two prob­lems with he­roes. First, they some­times fail. And in the case of Arm­strong and Woods par­tic­u­larly, the fall­out can be spec­tac­u­lar, re­veal­ing the gap be­tween the hu­man be­ing and the mar­ket­ing myth. The sec­ond prob­lem is that he­roes can be so com­pelling that they en­cour­age even the most hard-nosed busi­ness brains to fall un­der their spell. In Nike’s case, the in­cred­i­ble global pop­u­lar­ity of Tiger Woods was a cat­a­lyst for the brand to ven­ture in to a sec­tor in which they had no ex­pe­ri­ence or ex­per­tise.

Nike is the world leader in sports cloth­ing and shoes, but it has found that golf is not the only hard­ware busi­ness not to its lik­ing. The com­pany en­tered the ice hockey busi­ness by buy­ing in­cum­bent brand Bauer and then at­tempted to build a po­si­tion in the nascent mar­ket for wear­able track­ers by mak­ing its own FuelBand de­vice. Both ven­tures, like its golf

equip­ment busi­ness, failed.

The rea­son for these high-pro­file fail­ures is that the link be­tween sports equip­ment hard­ware and cloth­ing/ shoes is ten­u­ous at best. Just be­cause we wear a Nike polo shirt does not mean we’ll buy their clubs. If you look around a pro shop, you’ll see a di­vide be­tween the ma­jor cloth­ing brands and those sell­ing equip­ment. Un­der Ar­mour, Adi­das, Puma, and Oak­ley have all built large golf cloth­ing, shoe and ac­ces­sory busi­nesses with­out go­ing to the enor­mous ex­pense of sell­ing clubs un­der the same brands.

“Nike has a his­tory of en­ter­ing a new sport and then with­draw­ing,” says Tim Crow, an ex­pert in sport spon­sor­ship and chief ex­ec­u­tive of the Syn­ergy Spon­sor­ship agency. “Not that long ago Nike had a ma­jor pres­ence in rugby, with the li­cense to make and sell the Eng­land and France rugby team shirts. They ex­ited that mar­ket and now have no deal with any of the ma­jor rugby na­tions.”

In ad­di­tion to this lack of growth, Crow points to fac­tors out­side of golf that have im­pacted on Nike’s busi­ness de­ci­sions. Sig­nif­i­cantly, they are fight­ing ex­pen­sive bat­tles in other sports, par­tic­u­larly foot­ball and the ma­jor league sports in the US. “They have big­ger fish to fry else­where,” says Crow, who points to “es­ca­lat­ing prices for the big con­tracts in those sec­tors”. He’s not kid­ding. Nike re­cently agreed to pay Chelsea FC £900mil­lion over the next 15 years to de­sign, make and sell the west Lon­don foot­ball team’s kit. This was on the heels of a sim­i­larly huge con­tract re­newal with Span­ish club FC Barcelona.

Ac­cord­ing to Sports Busi­ness Jour­nal, Nike’s fi­nan­cial obli­ga­tions to sports teams, leagues, as­so­ci­a­tions, col­leges and ath­letes reached nearly $6.2 bil­lion last year, up a whop­ping 32% over the same time a year be­fore. This spike in spend­ing on spon­sor­ship was due to the pres­sure from Un­der Ar­mour and adi­das. Be­tween 2013 and 2015, Nike’s spend­ing rose an in­cred­i­ble 72%, or nearly $2.6 bil­lion.

“The re­al­ity is you see a bit of a jump be­cause they can,” said Jay Sole, a re­search an­a­lyst for Mor­gan Stan­ley. “The busi­ness is per­form­ing very well; the prof­its are con­tin­u­ing to grow.” In di­rect con­trast, even with Tiger at his peak Nike never had more than a sin­gle-digit mar­ket share of the golf equip­ment busi­ness.

In the end, the de­ci­sion to leave was bru­tally quick, with even con­tracted play­ers caught un­awares and left seek­ing new deals with other club­mak­ers. With Nike’s mar­ket­ing spend re­duced, the go­ing rate for golf en­dorse­ments will fall, and the other man­u­fac­tur­ers, such as Call­away, Titleist and Tay­lorMade will seek to soak up mar­ket share.

“It just goes to show how tough the golf mar­ket is,” said Tom Stine, co-founder of Golf Datat­ech, which tracks in­dus­try sales. “It’s a steady mar­ket. It isn’t go­ing any­where, but if there’s one less com­peti­tor, then there are more dollars to go to the other com­pa­nies.”

Paul Hedges agrees. “Any brand that wants to suc­ceed in golf has to re­ally un­der­stand the mar­ket. I think Nike had been push­ing wa­ter up­hill from day one; and af­ter many years and sig­nif­i­cant investment, they have clearly de­cided that it was just not worth the ef­fort.”

‘A PGA club pro is eight times more in­flu­en­tial than a top tour pro’

Los­ing face: Tiger ’s as­so­ci­a­tion with Nike may have in­creased brand aware­ness, but it didn’t drive sales of golf clubs or balls.

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