Tag Archives: Lance Armstrong

Zimmer and Deen – Are pitchmen still a good idea?

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Sort of weird that both George Zimmer and George Zimmerman are in the news this week.  One is defending himself, the other is a men’s clothing marketing icon and decidedly playing offense, and is the one we’ll discuss here.  We’ll also discuss the slow-motion self-destruction of Paula Deen, food celebrity.

The upshot of these stories:
– Companies need to realize that consumers tend to instinctively side with the person, not the company
– Increasingly, sponsors are cutting ties with celebrities at the first hint of controversy – – because they think they have no choice
– Ultimately celebrities get our attention but it’s harder than ever to have a 30-year spokesperson

Zimmer-Guarantee

Link to Men’s Wearhouse History

George Zimmer, founder of midscale clothier The Men’s Wearhouse and famous after umpteen years saying “You’re gonna like the way you look – – I guarantee it”, was booted from the organization last week.  The reasons have evolved into a sort of ‘he said, she said’ PR battle (one good summary is here).  In the end, though, the reasons aren’t important.  What’s important is that the company looks cold and heartless for mercilessly getting rid of the old guy who, yes, founded the place, but apparently can’t appeal to the more important younger shoppers.  And that has translated into consumer antipathy towards MW, which has decidedly lost the PR war.

We remember Wendy Kaufman, the popular straight-talking ‘Snapple Lady’ who was dumped right after the company was bought for $1.7B by Quaker Oats.  Quaker was 0-for-2 on that one – -it eventually unloaded Snapple for $300 million 3 years later to Triarc Brands, which immediately reinstated her as spokesperson, to the delight of consumers.

In January 2012, William Shatner (who has had more career changes than Madonna) was terminated as Priceline pitchman (‘The Negotiator’) after 14 years, apparently due to a change in their business strategy.  Credit to Priceline for offing Kirk in a suitably campy explosion.  On the other hand, a survey by Priceline.com discovered that 94% of customers wanted him back.  So this past January he returned, in different, but still amusing executions.  Good move, Priceline.

On the other hand, when celebrities clearly behave badly, a company is justified in letting them go.  O.J. Simpson, Lance Armstrong, Kobe Bryant (a seemingly endless list of pitchmen gone bad is here), which brings us to the case of Paula Deen.

Paula Deen Cries

Ms. Deen, longtime Food Network celebrity chef, is being fired by seemingly every sponsor she has (Food Network, Caesars, Smithfield Foods and now Wal-Mart).  Her crime?  Well, aside from glorifying heart-attack food, she admitted to using a racial slur several decades ago during a robbery.  OK, 30 years ago, she certainly could have moved beyond that mindset, right?  Well, she compounded the controversy by a continuing series of self-inflicted misfires in ensuing interviews.  She deserves to be heard and to have a chance for redemption, but she also can afford better PR advice.

Her sponsors, seeing this story take on a life of its own, probably figured that inaction on their part could be interpreted by some as tacit approval of using racist words.  So they needed to disconnect as a defensive play.  Fair?  Who knows; in this 24/7 news cycle the truth is less important than perception and reaction precedes facts.  But Paula Deen won’t starve, and business is business.  So it’s an understandable move by her sponsors.

On the other hand, the $1500+ Paula Deen cruise, where the food star mingles with guests and does cooking demos, has seen sufficient goodwill-fueled demand to require the cruise line to add another 500-person cruise to the schedule.  And her upcoming cookbook has seen a 1300% surge on Amazon since the incident.

Famous people can still move product – – but increasingly these relationships require caution – – and lawyers – – on both sides.

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Product Life Cycle Management: What do a cyclist, a horsewoman and NutraSweet have in common?

No, this is not a joke.  So what do they have in common?   Answer: a strategy that focused on optimizing profits in the moment.  At least one had a thought-out exit strategy.  Can you guess which one?

There is a lesson here about understanding your product’s practical lifespan.

Let’s examine the players.

The Cyclist — Lance Armstrong

By now we’re all very familiar with Lance’s story – – cancer survivor, fundraiser extraordinaire (almost $500 million), of course winner of 7 Tour de France titles, since vacated due to his now-confessed use of PEDs.  Ironically, prior to his cycling fame, Armstrong was a world-class teenage triathloner, and if he had remained clean it’s likely he would still have been world class in triathlon or cycling.  Of course, now we’ll never know.

Young Lance

The relevance?  Post-cancer (and by some accounts before), Armstrong decided that he would pursue world cycling dominance at all costs.  Success required use of PEDs, intimidation of colleagues, and repeated lying.  But during that time, it paid off handsomely — Armstrong was estimated to have earned $20-30 million annually during the roughly 10 years that he dominated, so perhaps $300 million, not counting the fame and celebrity.  His worth is currently estimated at $125 million.

Lance A Foundation

The exit strategy?  Whether Armstrong expected this ride to end well is unknown; increasingly it seems that he didn’t actually give much thought to his exit strategy and in fact just put his head down and worked to get the next title that he was seeking.  What is clear is that the gravy train has now developed into a bad case of road rash.  Including his volunteered restitutions and lost future endorsements, it’s estimated that he has lost $200 million of future earnings, and it is not clear what the nature of his future will be.  But he is still young, 41, and while he may have difficulty along the way, it’s possible he can re-establish public support.

So – he went all-in for success, and achieved it at the cost of longer-term viability.  A medium-length life cycle with a sharp drop-off.  Worth it?

The Horsewoman – Rita Crundwell

If you live in Illinois you know the story – – the long-time comptroller of little Dixon, IL (pop 15,000) was found to have embezzled over $53 million from the town over 22 years (!).  Crundwell continued this deception for years and stopped only when she was caught.  The ill-gotten gains were used to support a lavish equestrian lifestyle, including among other things an 88-acre estate and ranch, 3 additional homes, over 300 champion horses and a $2 million RV.   After her arrest, Crundwell faced certain loss of all of her possessions as well as as up to life in prison.  An excellent account is here.

Crundwell 1

The exit strategy?  In November 2012, rather than drag the state through a long and expensive trial, Crundwell pled guilty to embezzlement and wire fraud and faces up to 20 years in prison.  Sentencing is in February.  In this case, realizing that she successfully made hay while the sun shone, Crundwell has taken as close to the high road as is possible, and has gained some measure of respect for it.  But she’s still going to jail for a long time.  Worth it?

Crundwell 3

NutraSweet

NutraSweet, the brand name for the sweetener aspartame, was a much better tasting product than its predecessor saccharin, and supplied the missing link that enabled diet sodas to finally go mainstream, a huge profit machine for the soda makers.  Its introduction strategy was as innovative as its taste, and set the bar for future branded ingredient launches (such as Intel Inside).

At launch, NutraSweet was priced at a high multiple of saccharin, and required that customers put the then-unknown NutraSweet swirl logo on the front panel of their famous products.  In exchange, NutraSweet spent as much as $50 million annually to promote the brand, driving awareness and consumer demand for its customers’ products.  Customers, which included Coca-Cola and PepsiCo, had no choice but to agree to NutraSweet’s terms, but did so grudgingly.  In fact, NutraSweet purposely pursued a strategy that ensured at best a cool relationship with each of its major customers.  An excellent NY Times account can be found here.

diet pepsi

Why the unconventional take-no-prisoners approach, counter to the typical goal of generating customer loyalty for the long term?  Well, NutraSweet knew exactly what its sell-by date was:  December 1992, at which point the patent on the aspartame molecule would expire and lower-cost producers would enter the market.  (and in fact, this has happened – – at its peak NutraSweet sold for $150/lb; it is currently around $5/lb.).  There was no long term.  NutraSweet management, with essentially a one-product portfolio, decided that the aggressive pricing strategy maximized overall profits.  This seems to have been the right move – – NutraSweet was remarkably profitable during its lifespan, and the market has demonstrated that trying to retain customers post-patent at premium pricing would have been difficult at best.

The lesson?

Managing a product’s life cycle is about maximizing net present value of future profits.  This in part means understanding the expected premium that a product can command over its lifecycle, based on advantages vs competitive offerings, and managing pricing, promotion and product improvements to realize this premium. When a product can no longer produce an acceptable profit, it is time to sunset or adjust the strategy (reducing investment, etc).

Lance Armstrong certainly had an extremely powerful brand for a good number of years, and maximized profits over that time period.  However, he didn’t seem to envision any consequences of his maximization strategy and therefore has shortened his own marketability life cycle.  Said another way, he killed his own golden goose.

Rita Crundwell also maximized profits over a significant time period, and clearly did nothing to change things.  It is likely that she fully realized that when her marketability life cycle ended it would be irretrievably over, which led to her pleading guilty.

NutraSweet assessed its profitability life cycle very early, as part of its pricing/marketing strategy, and stuck to its strategy successfully.  And while the logo has essentially been retired, it stands as one of the more innovative, and profitable, chapters in marketing history.

Net, managers need to carefully assess how a product’s pricing power may shift during its lifecycle, and plan pricing and support appropriately to maximize profits.