What You Can Learn From Under Armour's Billion-Dollar Coup
March 31, 2017
What’s more painful to a business, losing a big customer or losing a great employee?
Sure, losing a customer has an immediate revenue impact, like losing a fish off a line. But while it’s not great, you can generally overcome losing a customer.
Losing an employee though can have a dramatic and lasting impact, like losing a fishing pole. Losing one great employee – particularly if they go to a competitor – can embolden a rival and cost you billions of dollars in the process.
Don’t believe me? Just ask Nike.
How one lost employee cost Nike billions
Steph Curry is probably the second-most popular player in basketball behind Lebron James. At 6’3” and 190 pounds (minuscule for an NBA star), he embodies the underdog spirit and his otherworldly shooting ability makes him one of the most awe-inspiring athletes going today.
Clearly, he’s somebody you’d want to anchor your brand around. And Nike had that opportunity, considering they had him on the payrolls as a brand ambassador for the first few years of his career and they are the dominant player in the sneaker market.
But, in 2013, Curry’s contract with Nike expired. So the company sent their people down to convince him to sign a big dollar extension to keep the Davidson grad a Nike endorser.
The problem? When they met with him, Nike representatives mispronounced Stephen Curry’s name as “Steph-on.” Additionally, the PowerPoint presentation they showed Curry wasn’t updated from their last presentation with fellow NBA superstar Kevin Durant, so Durant’s name was still on some of the slides, according to ESPN.
Worst than even all of that, ESPN reported that the company “never gave a strong indication that Steph would become a signature athlete with Nike.” The meeting left Curry turned off and eager to find a home somewhere else.
His hopes came true in the form of Under Armour. Although Under Armour was new to the sneaker business, their presentation was much more personalized, expressed a much bigger vision for Curry and they even got his name right.
Curry was receptive and signed on to become a brand ambassador for Under Armour. The timing could not have been better for the company, as the agreement was immediately followed by back-to-back MVP seasons and a 2015 NBA championship for Curry.
During that time, Under Armour built their brand around Curry. And their business boomed because of it.
Overall, Under Armour’s revenue spiked from $2.33 billion in 2013 to $4.86 billion in 2016, with Curry as the face of the company. And their sneaker business specifically exploded, with sneaker sales for the company going up 95 percent in 2015 alone.
What did the vast majority of those basketball shoes have in common? They had Curry’s name on it.
"The sell-through on the Curry Two (the name of Curry’s sneaker) was like nothing we'd ever seen before, which is the same thing people say after they see Curry play," Under Armour CEO Kevin Plank said during a recent earnings call, according to Fortune.
Bottom line, losing Curry cost Nike more than just the money that comes with having one of the most relatable celebrities in their core demographic. Curry’s brand also turned Under Armour into a legitimate competitor eating into Nike’s market share.
What this means for businesses everywhere
What’s great about this example is it illustrates how important retaining employees can be. While Nike continues to do well, clearly they wish they had Curry still under contract, and Under Armour couldn’t be happier with him as a brand ambassador.
Curry also left Nike for the most common reason all employees leave: a lack of career development. Sure, getting his name right didn’t help, but Under Armour offered Curry a chance to be the face of their brand, whereas at Nike he’d be one amongst the crowd.
To be fair, you losing a single employee likely won’t have the same affect losing Curry had for Nike. But, a plethora of research shows losing an employee does have substantial costs.
In her course Organizational Learning and Development, Dr. Britt Andreatta cited research from SHRM on the high cost of losing an employee. Specifically, SHRM found that replacing an entry-level employee generally cost 50 percent of their salary and benefits, whereas replacing a technical or leader-level employee generally costs 250 percent of their salary.
Those are big numbers. It means replacing an entry-level employee with a $60,000 compensation package costs you $30,000. And replacing a leader at your company with a $125,000 compensation package costs $312,500!
And even that doesn’t tell the whole story. As in the case of Curry, some employees are essentially irreplaceable. If you lose a great leader, it can set your company back years.
Bottom line, attracting great talent is hard enough as it is. Losing it – and watching it flourish somewhere else – isn’t just painful, it’s costly.
*Image from Keith Allison, Flickr
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