Branding Scandals: Lance Armstrong, Tiger Woods

In the cutthroat world of competitive advertising and brand endorsement, companies fall over themselves to sponsor celebrities to endorse their products and become their brand ambassadors.

The saying ‘What’s in a name?’ does not apply when the names are David Beckham, Lady Gaga, Madonna or Ashwariya Rai. Even deceased stars like Michael Jackson, Elizabeth Taylor and of course Elvis Presley still have immense star power posthumously and people still identify themselves with them.

For brands, the need to latch on to a big name becomes greater in proportion to the celebrity’s fame.

However, there is also a negative side to this whole scenario. What happens when an iconic star becomes embroiled in a scandal of any nature whether it is about sex, money, marital infidelity or drugs?

Does this diminish the star value as far as brand products are concerned and do companies scramble to withdraw their sponsorships, or it does not matter at all?

In a nutshell, yes it does matter. However, the impact of scandal is reduced by the larger than life of image of the celebrity in question.

Some recent incidents include the cases of two iconic stars of the sporting world, golfer Tiger Woods who was involved in cases of marital infidelity and cyclist Lance Armstrong, the 7-time winner of the Tour-de-France who has now been stripped of his titles on charges of doping.

Tiger Woods is probably the best known golfer in the history of the sport, having won 14 major professional championships in his career as well as being awarded PGA player of the year 10 times.

Woods has been called the world’s most marketable athlete and he has signed endorsement deals with numerous companies, includingGeneral Motors, Titlist, General Mills, American Express, Accenture, and Nike, Inc. In 2000, he signed a 5-year, $105 million contract extension with Nike described as the largest endorsing deal ever signed by an athlete at that time.

Sales of Nike Golf had skyrocketed and Woods’ endorsement has been credited with playing a significant role in taking the Nike Golf brand from a ‘start-up’ golf company earlier in the past decade, to becoming the leading golf apparel company in the world, and a major player in the equipment and golf ball market. Nike Golf is one of the fastest growing brands in the sport, with an estimated $600 million in sales.

The scandal, however, created a huge setback for nine of Woods’ sponsors who suffered a loss of almost $12 billion in the stock market.

It seems that Nike, despite its losses, had faith in Woods’ ability to regain his iconic stature and stuck by him through thick and thin. This proved to be a prudent decision. Collective memory is short and such scandals soon disappear into the dustbin of history.

Lance Armstrong, the super cyclist who has staved off cancer, is another unfortunate person caught in the lime light. He has been accused of doping charges and stripped of his 7 Tour-de-France titles.

In Armstrong’s case as well Nike is standing by him and has decided not to withdraw its sponsorship, while others are pursuing a wait-and-see policy. The scandal will surely have quite a negative effect on Armstrong’s endorsement career.

They say that in life we have to pay for our mistakes, but in cases like that of Woods and Armstrong brands literally end up paying for their misdeeds.