The Loop

Study: Nike's investment in Tiger profitable

December 03, 2010

A study conducted by researchers from Carnegie Mellon University's Tepper School of Business concludes that Nike Golf has benefited from its relationship with Tiger Woods, pre- and post-scandal.

It employed sales figures of Nike golf balls starting in 2000 (the year Woods began endorsing Nike golf equipment) and extrapolated its findings over the entire Nike golf equipment line.

"In golf ball terms, the endorsement of Nike products by Tiger Woods, which began in 2000, resulted in the acquisition of approximately 4.5 million customers and $60 million dollars in profit (in 1997 dollars) for the last 10 years," a news release on the study noted.

"From the findings of this study, which involve one specific product, we conjecture that similar market impacts have been realized across a full line of golfing equipment, which Tiger Woods was paid $180 million for 10 years (in 1997 dollars) to endorse," said Kevin YC Chung, a doctoral candidate and one of three from Carnegie Mellon involved in the study. "Having found that $60 million was recovered in the golf ball sector alone, we project that this would intensify the overall profits and losses across the golfing industry."

The fact that Nike retained Woods in the wake of his off-course controversies also paid a dividend, the study showed. "In the six months following Mr. Woods' highly publicized personal scandal," the news release state, "Nike lost approximately 105,000 customers. However, these losses were not gained by other brands as the negative publicity resulted in a net loss to the golfing industry, overall, of $7.5 million in profit."

"Although several major sponsors cut ties with Tiger Woods -- Nike did not," said Timothy Derdenger, assistant professor of economics and strategy at Carnegie Mellon."So we examined the net effect on Nike's sales and market share. What we found is that by maintaining their relationship with Tiger Woods, Nike's overall profit in golf ball sales was $1.6 million greater than it would have been without him."

The study in its entirety was completed last month and is awaiting publication, according to the news release, which can be read here.

-- John Strege