Did he lie a little or a Lochte? The precarious art of celebrity branding

American swimmer Ryan Lochte ignited an international firestorm this summer when he admitted to lying about getting robbed at gunpoint in Rio de Janeiro. Today, the United States Olympic Committee and USA Swimming announced that Lochte will receive a 10-month ban for his actions.

The 12-time Olympic medalist's metamorphosis from golden boy to ugly tourist left swim fans, Brazilian authorities and the general public cringing, but they weren’t the only ones to feel the reverberations of his drunken misadventure.

There were also likely many face-palm moments at the headquarters of Speedo and Ralph Lauren as the scandal developed. Both corporate giants had high-profile endorsement deals with Lochte, which were severed in short notice following the stunt.

Two other corporate sponsors — Japanese mattress maker Airweave and hair-removal company Syneron-Candela, also ended their partnerships with Lochte.

“It’s very difficult to estimate what kind of losses these companies incurred as a result,” says Bryan Barbieri, a marketing professor at Concordia. “But the fact that they acted so quickly to disassociate themselves from the behaviour says much about their concerns regarding negative repercussions.”

Lochte is far from the first celebrity athlete to be dropped by a major sponsor following a public fall from grace. A study by the University of California estimated that shareholders of Nike, Gatorade and other Tiger Woods sponsors lost a collective $5 to $12 billion in the wake of his extramarital affairs.

‘It is generally worth the risk’

However, that hasn’t stopped major brands from embracing the celebrity endorsement. As Barbieri explains, the gains from a successful partnership often outweigh the risk.

“Sponsors leverage the favourable associations surrounding an athlete and transfer these to their own brands. It’s a way to get into the target consumer’s mind more easily, ultimately increasing sales and profits." He adds that it’s estimated NBA star Steph Curry’s association with Under Armour could double the company’s financial value.

While Barbieri says privacy — and therefore the ability to get away with bad behaviour — is much more difficult in this day and age, the same technology that increases the precarity of connecting a brand to a person also bolsters the appeal of celebrity endorsers.

“One must remember that athletes also market themselves, they have their personal brand, and this is greatly facilitated by the evolution and prevalence of social media and modern technology. Net/net, it is generally worth the risk.”

‘Companies can usually recover’

Moreover, in the case of a celebrity endorsement gone south, morals clauses — which have been beefed up since the 2009 Woods saga — often act as shields to help absorb the blow of consumer backlash.

“Companies can usually recover from bad endorsement deals if they take quick enough action in canceling their agreement on the basis of the alleged violation,” explains Barbieri. “Of course, they will miss out on the what ‘might have been’ in terms of benefits if the agreement had not been violated.”

The morals clause is somewhat of a contentious thing, and usually the most heavily negotiated provision in an athlete’s endorsement contract.

While advertisers will push for it to be broad in order to provide discretion in determining what kind of acts constitute a violation, athletes usually vie for more objective language that only permits termination when specific acts occur — such as a felony conviction.

Riding the media wave

Either way, Barbieri says companies should tread carefully when it comes to cutting their ties with an athlete. “In the short term, they will benefit from the act of disassociation, but they must study the situation carefully to avoid being involved in legal proceedings relating to their interpretation of the situation.”

As for whether Lochte stands a chance at ever fully recovering his brand power, Barbieri says it’s unlikely.

However, while his pre-Rio sponsors have waded away from the disgraced swimmer, others are looking to ride the media wave.

Since the Olympics, Lochte has nabbed a deal with Pine Bros Softish Throat Drops and will be slugging their tagline, “forgiving on your throat.” He’s also the new spokesman for ROBOCOPP’s handheld sound grenades, which “can get you out of a bad situation.”

And, while Lochte won't be swimming in next year's World Championships in Budapest, he’ll still be appearing on Dancing with the Stars this season.

Find out more about Concordia's Department of Marketing.