by Graham D Brown

Let’s face it – UA ain’t nearly as cool as it should be

Building a brand takes time. The best brands have done it one customer at a time by focusing on share of customer over share of market. Many of the best case studies can be found in markets where the premium to get it right are the highest – CPG and sportswear are but two excellent examples where marketing really is everything and little distinguishes one product from the next.

Under Armour – therefore – should be cool, it should be young and happening. It’s a modern product with technical pedigree born in R&D labs (think Nike). It’s intrinsically linked to fashion, sport and youth. So how did Under Armour get it so wrong?

How to stuff up a good product

It’s a long story and I’ll spare you all the details. In short, UA lost the plot and failed to remember the golden rule of youth marketing – one customer at a time.

Under Armour are to youth marketing what PetsPark were to the dotcom bubble – a lot of hype and little substance. Now in 2010, the hype has subsided the company has the opportunity to rebuild itself. But, let’s look at what happened first so you too can avoid the pitfalls.

When short term gain becomes the raison d’etre

Maybe you pity them, they had grand ambitions of expansion from their Baltimore home but it went spectacularly wrong when they got greedy. It’s a scenario I’ve seen play out many a time with mid-sized brands who are caught between accepting the reality that they lead a tier-2 category and investor needling that encourages the board to play in the big league with well established companies that have deep pockets and well established fans.

Rewind to 2008 and UA are growing at 65% per annum selling sportswear on the back of their successful underwear line for athletes. With NFL pro Eric Ogbogu in the line up and mainstream media heaping on the praise, UA were destined for the big time.

What happened next, however, was a classic textbook error in expanding your market:
a) move into a market already occupied by a beachhead (i.e. don’t try and take Nike on in the running shoe category)
b) try to buy youth trust and attention

Unless you’re planning to stay true to your Beachhead, don’t take on Nike

A is self-explanatory. You’d be crazy to take on Apple in the MP3 market. Often craziness is the product of greed coerced by the greater greed of investors. B, however, is something many brands are learning the hard way.

What Nike has that UA never had was a Beachhead to play from. If $18bn Nike were to take on a competitor less than 1/20th its size it would do well to commit most of its resources to its Beachheads – the passion centers – and use the surplus to play them in their own backyards.

“They connect better with the consumer than any brand we’ve seen in a decade.” said NPD’s Marshal Cohen in a New York Times interview back in 2008

But what Cohen and many of the UA cohorts failed to realize was that to enable UA to connect more, wouldn’t come as a result of injecting cash into the equation. If UA were to grow and compete with the big boys it would have to do it through organic growth.

Marketing Externalities can kill you

Buying youth trust and attention cost UA dearly; financial results following the media ramp up were disappointing at best, dismal at worst. According to their own declaration, one of the key factors contributing to their 75% decline in profits was “marketing expenses”.

And what exactly was UA trying to do buying its way into a Beachhead dominated by Nike (cross-trainers) with a $100k a second Superbowl advertising? Nike’s marketing budget alone exceeds the entire top line of UA.

The game has changed, despite what your agency says you can’t buy your way into a market lead

UA needs to follow Nike’s lead in the market – pull back from old school out-of-touch youth marketing and start investing in the grass roots. Unfortunately, “grass roots” doesn’t make the agency much money so the vast majority of agencies have a vested interest in keep these brands doing what they always did – buying youth trust and attnetion.

Where UA failed was taking for granted youth trust and attention in an era where they are no longer abundant. These things take time and while UA is turning the tanker of fortune around, its expectations will have to be kept in check with the reality that they’re in it for the long term.

Turning it round

The good news is that UA had a good product but poor execution in marketing and the marketing part is turning around due in part to internally regrouping their efforts. Financially, they’re in better shape than they were back then and analysts agree that they are on the buy side of the recommendation. A D2A ratio of 5% means they remain relatively debt free, enabling them to start taking risks and building for the long term.

My guess is however, that UA’s future won’t be determined by the people that run the show – it’ll be at the mercy of option traders for long time to come either speculating about a potential trade sale to Nike or expansion into new markets to sustain the double-digit growth story. It’s exactly what killed off Jones Soda and what is now the key challenge facing Monster Energy and Boost Mobile. Unlike Boost, Monster have had the resolve not to be seduced by the Super Bowl quick win. It’s not their fortunes in the next FY that will count, it’s what happens after that and the long term truth of youth marketing always plays out.

See my earlier video on Customers Are The Brand