For Nike, sticking by tainted athletes good for business
PORTLAND, Ore. - It’s the corporate pride of Oregon, but Nike doesn’t seem to flinch when it takes heat for sticking with athletes in trouble.
For the first time, a study conducted by Carnegie Mellon University measured, in terms of money, what’s likely driving Nike to make business decisions that aren’t based on moral grounds.
Pittsburgh quarterback Ben Roethlisberger’s third Super Bowl came in the same season he was suspended for four games after being accused of sexually assaulting a college student. But Nike stuck by him.
And the company never turned its back on the Lakers Kobe Bryant when he was accused of rape.
The company also kept golfer Tiger Woods even after he cheated on his wife, but Gillette Razors dropped him and so did AT&T.
Additionally, Woods’ image will be removed from the upcoming new version of his own video game.
Researchers at UC Davis found Woods’ infidelity was hurting the sponsors’ bottom line. Shareholders lost $5 billion to $12 billion compared to companies Woods did not endorse.
But other researchers, like Timothy Derdenger with Carnegie Mellon University, decided to measure whether Nike was smart to stick with Woods. He said the university’s analysis was sophisticated.
The researchers looked specifically at Nike golf ball sales and concluded the company lost 105,000 customers after Woods’ scandal made headlines. That’s 1,128,000 golf balls Nike didn’t sell, which is a loss of $1.3 million in profit.
Nike made a bad choice, right?
“No,” said Derdenger. ‘We found that Nike was very smart in their decisions to stand by Tiger after the scandal.”
The researchers discovered that Nike would have lost even more – another $1.6 million in profit – on its financial scorecard if it had given Woods the boot.
“Their decision to stand by Tiger Woods was a profitable decision,” Derdenger said.
But why is that?
“I think people in sports enjoy, when they crash – the comeback,” said Dr. Lynn Lashbrook, a sports agent who runs a Portland-based online school to teach others to do the same. He watches closely what Nike does.
“I think that it creates a following, a loyalty, and as you can see in the study, they’ve benefited from that,” he said. “So I think that they stand by it because the frailties of an athlete are a reflection of a society, and I think sometimes, Michael Vick included, the message is we’re all going to make mistakes and fall, and the comeback is as big a story as the success before the tragedy,” he said.
Meaning sports fans are more forgiving than customers of non-sports products and are more willing to overlook Facebook campaigns like: “Make Nike Drop Ben (Roethlisberger).
Or they may be more willing to ignore The New York Times editorial about Roethlisberger that asks: “Is there anything creepier than a big, beer-breathed celebrity athlete exposing himself in a night club and hitting on underage girls …? Well, yes. It’s the big, corporate sponsor – Nike … that continues trying to sell product with the creep as their role model.”
For the most part, Nike ignores public outcry. The researchers say it’s probably because Nike does its own research.
“There’s a prestige effect of playing the same brand that Tiger Woods plays, and that effect will get larger as people start to forgive Tiger Woods or as Tiger Woods starts to play better,” Derdenger said.
Representatives at Nike declined to comment for this story.