New Balance back in endorsement game

November, 15, 2012
11/15/12
12:55
PM ET
It happened 22 years ago today.

Then-Los Angeles Lakers forward James Worthy was arrested in Houston on charges of solicitation of prostitution. Worthy's actions not only resulted in the undoing of his endorsement deal with shoe company New Balance, it altered the path of the company itself.

For almost two decades, New Balance owner Jim Davis and his wife, Anne, stood firm on their stance: Pay small fees to get athletes, mostly runners, to make sure New Balance had a professional presence, but don't put them in any advertising. The company even boldly made a point of it with campaigns that had tag lines like "Endorsed By No One."

For all of those years, the Davises were fine with the fact that they were giving up impressionable youngsters who were getting pitches from the likes of Michael Jordan and Magic Johnson. And Jim and Anne were all that counted because they owned the company outright. As all of the other shoe companies rushed to Asia to make cheaper shoes, they had no shareholders to worry about. So they kept a quarter of the production in the United States to continue to be able to say "Made in the USA."

[+] EnlargeMiguel Cabrera
Scott Rovak/USA TODAY SportsForget the bat. It's all about the shoes for Miguel Cabrera.
But by the late 1990s, the effects of taking a moral stance on endorsements were noticeable. The average age of a New Balance consumer was in the early 40s. There was virtually no connection between kids and the performance side of the brand. If anything, young people would wear New Balance with a pair of jeans and flannel shirt.

Enter Mark Cavanaugh. Cavanaugh came from Nike to head sports marketing at New Balance and he found he couldn't do a good job without using athletes.

"The company realized that we were becoming known as just a running brand or my parents' brand and that's not an enviable position for us from a market share standpoint," Cavanaugh said. "We had a lot of brands that were coming on strong like an Under Armour from apparel into footwear and that 15-year-old kid that was growing up with all those other athletic brands wasn't experiencing us and that's a very magical time for you as a kid."

So in spring 2009, Cavanaugh and the board came up with a plan: Athletes would come back doing it the New Balance way. The solution? Each deal included a charity component in which New Balance would commit money, and the athlete would commit time and attention.

The Davises signed off on the plan.

Today, New Balance is on the feet of 380 players, roughly 220 of them on active Major League Baseball rosters, including some of the biggest names in the sport: Curtis Granderson, C.J. Wilson, R.A. Dickey, Dustin Pedroia, Nick Swisher and their newest athlete, Triple Crown winner Miguel Cabrera.

Cavanaugh said the company chose to go after baseball first by following the hedgehog model in Jim Collins' bestseller "Good to Great."

"We had to find something we could be great at, that we could be passionate about and that could drive our economic engine," Cavanaugh said. "We couldn't win at basketball and we couldn't pay the NFL to get onto the field. We knew we had a really solid line of baseball shoes, there were high participation rates in this country and there's a very affordable cost of entry."

Of the 380 players, Cavanaugh says about 30 percent of them are paid some form of cash, about 50 percent get free shoes and a merchandise credit with the company and the other 20 percent just wear the shoes for free with no contract.

In 2008, before the endorsement ban was lifted, the company said it had hoped to get from $1.6 billion in revenue that year to $3 billion by 2012. That's not going to happen. Exact numbers aren't known, as the company is private, but Cavanaugh says the brand is "inching closer" to that $3 billion goal.

Another lofty goal is to be No. 1 in the elite baseball cleat market at retail somewhere about 2017.

Cavanaugh said he is encouraged by the number of players, many of them All-Stars, going to New Balance asking for a deal.

As Granderson's deal with Nike was coming to a close, he started to talk to Yankees teammate Swisher about his New Balance deal.

Granderson noticed Swisher always had new shoes at his locker and would have specially designed cleats when he wanted them.

"With Nike, I just got regular cleats," Granderson said. "They always promised me there would be something bigger. That they'd make something special or they'd put me in the Swingman, but it never came. They once sent me the wrong size cleats. I've been the same size since the eighth grade."

Granderson said he was happy with the New Balance shoe and the attention the company paid to him. They made him a special shoe for Jackie Robinson day; they put his foundation logo on a shoe; they made him a special All-Star shoe and made special T-shirts for Swisher and him.

Wilson, who signed a five-year, $77.5 million contract with the Angels before this season, says no amount of money would have gotten him to change from New Balance. Money, Wilson reasons, isn't good enough to compromise your feet.

"I've had a lot of problems with my feet over the years," Wilson said. "I've had a stress fracture in my leg because there were a pair of cleats that I was wearing that were just bad."

Wilson says he's baffled by some of his teammates who will wear what they know is an inferior product for a couple of thousand dollars more in the deal.

"I've gotten into philosophical debates with guys who will say, 'I'll take whoever pays me the most money,'" Wilson said. "And I'm like, 'Dude, the difference is nothing compared to what your salary is, so what difference does it make?' My number one concern is what's going to keep me healthy and what's going to fit me best. We had a guy with the Rangers and he had this glove that looked like it was carved out of wood. It was so hard. I was like, 'How many balls are you going to miss because of that stupid glove?' If that costs us a win, I'm going to punch you in the face.'"

Wilson, who also left Nike after he says the company told him he had to make a certain number of All-Star teams to get a special shoe, says he likes New Balance's chances going up against his former endorser.

"Kids look at logos," Wilson said. "But it's also about the fit and how the shoe looks overall. If it were just about the logo, no one would go to Starbucks. They have a crappy logo. What is it, a mermaid? Is she wearing a shirt or not? People go to Starbucks because they like the experience."

Cavanaugh says being private allows the company to have goals, but not be pressured from the outside.

In spring training of 2011, Miguel Cabrera's Nike deal was done and New Balance was prepared to sign the superstar. Although a well-publicized DUI charge derailed that offer from conservative New Balance, Cabrera liked the shoes and wore them for two seasons without a contract.

When the this season was done, Cabrera, armed with all of the Triple Crown marketing dollars ahead of him, chose New Balance over at least one other company that offered him more.

"This wasn't about money for me," Cabrera said. "New Balance really took care of me."

Although still maintaining its core in the running market, the company is focused on spreading its wings a little more. The next sport that fits the model of big participation, value in sponsoring pros and a chance to gain market share? Tennis.

Said Cavanaugh: "We're going to sign someone big sometime soon."

Darren Rovell | email

ESPN.com Sports Business reporter

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