Nike can't seem to take a trick. Not only does it sponsor golf's fallen idol, Tiger Woods, but its has been forced to drop its long-time sponsorship of Lance Armstrong overnight.
For companies, sponsorship of high profile athletes and personalities can lead to massive increases in the company's profile and brand, while increasing sales of their products or services – that's as long as nothing goes wrong, which unfortunately, sometimes it does. Just ask Alan Jones' sponsors.
Sports giant Nike has recently announced that it was dropping its sponsorship of cyclist, Lance Armstrong, despite supporting him in August, when the US Anti-Doping Agency (USADA) banned him for life and stripped him of his seven Tour de France titles for doping.
Last week, USADA released a massive report, which included sworn depositions from 26 witnesses, 11 of them former teammates, and what appears to be overwhelming evidence that Armstrong used banned substances to help him win his seven titles. Personally, I found it so disappointing, having followed his career, spent many a late night cheering him on and read his inspiring book about beating testicular cancer.
Public perception matters
Public opinion of a company and its products matters enormously these days, and Nike was forced to drop its sponsorship of Armstrong, or risk a public backlash against the company, whether Armstrong was guilty or not. A company's reputation is built on how it is perceived by the general public. The problem with sponsorship is that the company has no control over the actions of the sponsored person or team.
BMW was recently forced to apologise after a sponsorship that went terribly wrong. The company sponsored a storm named 'Cooper' for its Mini Cooper, which went on to claim 100 lives in Poland and the Ukraine.
Olympian Grant Hackett was dropped as the public face of Westpac Banking Corporation (ASX: WBC) in February this year, after 13 years as an ambassador for the company. That was following several incidents, including allegations of a Derby Day drunken rampage, causing a ruckus during Channel Nine's Logies telecast and trashing of his apartment. While he hadn't done anything illegal, it's the public's opinion that matters.
Commonwealth Bank of Australia (ASX: CBA) named swimmer, James Magnussen, known as the "Missile", as its ambassador and the face of its 'Can' advertising campaign in the lead up to the Olympics. That backfired when the Missile failed to live up to expectations and had a dummy spit on national TV – immediately followed by an ad break featuring one of CBA's 'Can' ads.
Some companies opt to not sponsor athletes and sportspeople directly, others like Qantas Airways Limited (ASX: QAN) prefer to sponsor a team (Qantas Wallabies) , while Telstra Corporation (ASX: TLS) sponsors the National Rugby League (Telstra Premiership).
Sponsorship remains an important part of a company's marketing, and an equally important source of funding for athletes, many of whom couldn't dedicate their lives to their sport without sponsorship. Companies need to protect their reputation from the risks it faces – sometimes withdrawing sponsorship is the only step left.
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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
