How Under Armour Bet Everything on the Wrong Customer

The athletic-gear company made the mistake of obsessing too much over its most influential customers

A year ago, Under Armour founder Kevin Plank was as blunt as he could be about the company’s strategy: “We’re going to double down on performance.” At its core, this is a strategy many companies embrace when times are tough: Let’s do even more of what we do best. But as Under Armour would learn, that’s not always the right move.

Still, it was an understandable stance at the time. The “performance” corner of the athletic-wear market — meaning products made for actual sports use, not for sitting on the couch in front of the game — is where Under Armour made its name. Plank created the brand’s very first moisture-wicking garments as a direct result of his experience as a college football player and an understanding of what other athletes might want.

Under Armour went on to live out the axiom that if you win over the most demanding consumers (in this case, serious athletes), then the wannabes fall in line and follow whatever trend those influencers set. The consumer market rewards authenticity; that’s the conventional wisdom, at least. And for years, that was the story of Under Armour’s meteoric rise — from the then-twentysomething Plank selling gear out of his trunk in 1996 to around $5 billion in revenue in 2018.

For many consumers, it may be more important for sports shoes or athletic gear to pass muster at a weekend outing or the office than it is for it to dazzle on the track or the field.

But lately, the company’s strategy hasn’t been a winner. Just months after his declaration, Plank stepped down from his CEO role. Under Armour announced disappointing results and a gloomy forecast, its stock has suffered accordingly, and among other problems, a federal probe is reportedly exploring whether the company used accounting tricks to massage its sales-growth curve.

What went wrong? One compelling answer is that Under Armour misread the rise of the so-called athleisure trend and put too much focus on performance. In short, this maker of gear for authentic athletes may have been better off catering more to the poseurs and couch potatoes.

It’s not that a brand can’t be successful with a strict focus on performance, says Matt Powell, vice president and senior industry adviser for sports at research firm NPD Group. But a brand with mass aspirations shouldn’t get overly obsessed with an elite customer niche. “[Under Armour] clearly needs to understand that [performance] is very much the smaller part of the market,” he says. “And a shrinking part of the market.”

It is possible to obsess too much over your most hardcore, dedicated customers.

NPD regularly interviews consumer panels on a variety of marketplace behaviors, and last year, when the firm asked buyers of sports shoes how they intended to use them, only 15% offered an answer that involved actual sports or athletic activities. Similarly, just a quarter of buyers of activewear planned to use it for anything, you know, active. Powell says NPD has been asking these questions for about half a decade, and these are the lowest scores so far; just five years ago, 25% of shoe buyers mentioned sports use.

To be fair to Under Armour, Powell thinks most athletic-wear makers are still adjusting to the athleisure consumer. For decades, there’s always been at least one performance category that was attractive to a wide audience partly because of its performance: tennis wear in the 1970s, then jogging and running gear, basketball shoes in the 1990s, and so on. “We always had at least one performance category that we could say was in fashion,” Powell says. “And now we don’t. I think that’s a sea change that the industry has not fully grasped.”

Clearly, people still run, play tennis, and shoot hoops, but many of them are happy to settle for doing so in shoes that don’t offer maximum performance. “We used to have multiple wardrobes,” Powell suggests. “We had a wardrobe for work, and we had a wardrobe for the weekend, and we had a wardrobe for working out.” Now it’s fine to wear athleisure to social occasions, maybe even to work. For many consumers, it may be more important for sports shoes or athletic gear to pass muster at a weekend outing or the office than it is for it to dazzle on the track or the field.

Sometimes the needs of the hardcore, “authentic” superuser simply diverge from those of the more casual customer.

The larger point here, however, is that Under Armour seemed to dismiss a trend that was hardly obscure — the athleisure idea has been touted for years. Maybe the company thought this was irrelevant to its own product line? Or that its brand was immune? Or that athleisure would simply expand the number of followers attracted to Under Armour’s authenticity? Or that it would just be a passing fad? These are tempting reactions when a trend emerges that runs counter to your business plan. But such rationalization is a serious risk.

And there’s a deeper lesson: It is possible to obsess too much over your most hardcore, dedicated customers. Yes, performance always matters, in any business. And some customers will always seem more crucial, more sophisticated, and thus more influential than others. It seems only natural to give them the most attention and that if their needs are met, then everyone’s will be.

That’s true — until it isn’t. Sometimes the needs of the hardcore, “authentic” superuser simply diverge from those of the more casual customer. This is why the casual customer — the less-demanding wannabe follower — sometimes deserves special attention. If you’re looking for a mass audience, that’s who your business depends on.

All Rights Reserved for Rob Walker

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