Handle Your Business

Marketing executives at sports apparel company Under Armour had a lot to cheer about this month as the American women’s soccer team made a run at the World Cup.

The team ultimately lost to Japan, but the international visibility the players received was priceless for Baltimore-based Under Armour, which has endorsement deals with three of them: Heather Mitts, Lauren Cheney and Becky Sauerbrunn.

Under Armour, which has built itself from a basement startup to a billion-dollar enterprise, wasn’t always able to afford the big endorsement deals of its more established competitors like Nike and Reebok.

The company instead turned to athletes like the soccer players to push its brand. The athletes were well-respected in their sports some of them rookies with the potential to become stars but not necessarily known to a broader audience.

“We have positioned ourselves as a brand for the next generation of athletes,” said Matt Mirchin, Under Armour’s senior vice president of sports marketing.

Athletic endorsements mean big money for sports apparel companies.

The first endorsement deal was thought to have been made in 1905 when Honus Wagner signed a deal with Hillerich & Bradsby Co., which put his name on bats, according to the Sporting Goods Manufacturers Association.

But it was Nike that proved the practice could be lucrative for companies, signing greats such as Michael Jordan in the 1980s and Tiger Woods in the 1990s.

Most companies, including Under Armour, don’t disclose how much they pay for endorsement deals, but the largest contracts can be in the tens of millions of dollars.

“The good athletes are walking, talking, breathing billboards for companies,” said Mike May of the Sporting Goods Manufacturers Association. “They become a great showcase for the brand.”

A study by a Harvard University professor and an analyst from investment banking firm Barclay’s Capital found that endorsement deals on average generate a 4 percent increase in company sales.

Endorsements can also increase a company’s stock return by 0.25 percent, according to the study.

And the economic rewards just get better over time. If an athlete wins a major championship, stock returns and sales increase even more, researchers found.

“It’s hard to imagine building a blockbuster sports brand and not having any major athletes connected to it,” said Anita Elberse, the Harvard professor who conducted the study. “It suggests that if you’re good enough for the athlete, you must be good enough for the masses.”

In the beginning, Under Armour used a grass-roots approach to getting its brand recognized, putting its product in the hands of little-known but hardcore athletes.

Under Armour’s first endorsement deal was struck more than a decade ago with Eric Ogbogu, a football teammate of Under Armour founder Kevin Plank at the University of Maryland.

Ogbogu wasn’t a star in the NFL he played for the Dallas Cowboys but he became known for his role in Under Armour commercials. Known as “Big E,” he made famous the company’s now-ubiquitous slogan: “We must protect this house.”

The company has since signed a variety of athletes, including last year’s Heisman Trophy winner, Cam Newton, and fellow NFL players Miles Austin and Anquan Boldin.

The company is using a small group of up-and-coming players to help build its basketball line. Under Armour recently signed Brandon Jennings of the NBA’s Milwaukee Bucks and NBA rookie Kemba Walker.

 

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