Under Armor has “Marketing Myopia”

The New York Times published an article on January 29th, 2020, entitled “How Under Armour Lost Its Edge.” You can read the full article here. The article details how Under Armour, once heralded as the next Nike, has been suffering from declining sales and stock prices. Under Armour has clashed with its brand ambassador Steph Curry and has been portrayed in a negative light due to its poor corporate culture. It occurred to me after reading the article that Under Armour is suffering from a case of “Marketing Myopia”.

“Marketing Myopia” is a seminal piece published in 1960 by the Harvard Business Review. In it, Theodore Levitt, a Harvard Business School Professor, introduced the now-famous question, “What business are you really in?”. In the article, Levitt goes on to argue that had railroads seen themselves as being in the transportation industry and not just in the railroad industry, they would have continued to grow. Levitt introduces the idea that businesses will do better in the end if they focus on meeting customer’s needs rather than just selling products.

Levitt states that business leaders who have Marketing Myopia accept any of the following four myths and, in doing so, put their businesses at risk of obsolescence. The following are the four myths Levitt discusses in his article:

Myth 1: An ever-expanding and affluent population will ensure the company’s growth.

You have probably heard the saying, “a rising tide lifts all ships.” That saying applies to Myth 1. When markets are expanding, business leaders assume they don’t have to think of new or creative ways to do business. They tend to focus on outperforming their rivals by improving on what they’re already doing. The result of this action is that the companies increase their efficiency of making their products, rather than increasing the value their products provide customers.

Under Armour has shown signs of accepting this myth by ignoring the sports apparel industry’s focus on the consumer that wears athletic wear for everyday activities. Instead, Under Armour is solely focusing on their “performance-enhancing” products. The New York Times article also states that Under Armour’s CEO and Founder Kevin Plank and his top lieutenants believed that nothing could stop the company’s rise.

Myth 2: There is no competitive alternative for our industry’s major products.

The belief that a company’s product has no rival can make them vulnerable to innovations and competition from outside the industry. This outside rivalry often comes from smaller, newer companies that focus on customers’ needs rather than the products themselves.

The primary product in the sports apparel industry is athletic wear. The barrier to entry into this market is high due to the steep research and development costs that are required. Athletic wear is playing an increasing role in consumer wardrobes. The millennial generation has shown a preference for casual sports attire that could increase the demand for sportswear. While Under Armour has an advantage over up-and-coming companies with newer visions and disruptive concepts, if they continue to focus on their products and not invest in their customers’ needs, they will miss out on this opportunity to meet the ever-increasing millennial demand.

Myth 3: We can protect ourselves through mass production.

Few companies can resist the idea of increased profits that result from decreasing unit costs through mass production. Ironically, by focusing on mass production, a company invests in only meeting its goals and fails to understand customer needs and changing trends.

Under Armor exhibited signs of accepting this myth with the mass production of their Curry 2 shoes. Curry 1 shoes had sold out and faced with the possibility of being able to sell the shoes out again; executives decided to overproduce the product. The Curry 2 shoes had poor sales because the company flooded the market with the product. The glut in supply resulted in the shoes ending up on the sales rack. Thus, further decreasing the demand for the product.

Myth 4: Technical research and development will ensure our growth.

This myth epitomizes the Under Armour business strategy. It’s based on the idea that when R&D produces breakthrough products, companies are tempted to organize their entire company around the technology rather than the consumer.

Under Armour made its name as a tech-focused sports apparel company. Their strategy was not just to make clothes for athletes, but to make clothes that focused on improving their performance. Its first product was a tee-shirt that wicked away sweat. From there, they branched out into sleepwear that focused on helping athletes recover from workouts. The problem with this strategy is that most consumers in the sports apparel industry are not professional athletes. The Under Armour strategy focuses on the smaller niche of professional athletes that need the products that they produce instead of the mass consumers’ of the sports apparel industry.

Further evidence that Under Armor is falling for this myth comes from the Times article. The article stated that three former Under Armour executives said that decisions around products were often driven by instinct, rather than consumer analysis of the market.

Conclusion

Under Armour’s revenue growth is relatively stagnant. Its stock price has fallen to around $21 a share from its all-time high of $51 in 2015. The most likely cause of their decline is Marketing Myopia. The company has lost sight of what business they are really in. Recently, the company has been able to get a handle on some of its spending and reduce its cost to produce their products. However, this will not help them with the risk of obsolescence. The only way they can avert becoming obsolete is to resist the urge to focus on their own internal goals and instead focus on the consumers’ needs.

Recently, the Founder and Executive Chairman of Under Armour, Kevin Plank told attendees at a conference, “The world did not need another competent apparel footwear manufacturer. What the customer needs is a dream.” If Mr. Plank would like to keep the dream of Under Armour alive, he will have to stop telling customers what they need and instead start listening to what consumers want and need from the marketplace. If he is unable to do this, Under Armour will experience the same fate as the railroad industry and other businesses that suffered from Marketing Myopia.

References:

Creswell, J. and Draper, K. (2020) ‘How Under Armour Lost Its Way’, The New York Times, 29 January, p.B1.

Levitt, Theodore (1960), “Marketing Myopia,” Harvard Business Review, 38 (July/August), 45–56.