Cos. walk a tricky line with endorsements

NEW YORK — Nike forgave Tiger Woods after he apologized for cheating on his wife. It welcomed back Michael Vick once he served time for illegal dog-fighting. But the company dropped Lance Armstrong faster than the famed cycler could do a lap around the block.

What's the difference? A marketer's prerogative.

The world's largest clothing and footwear maker has stood by athletes through a number of scandals over the years, but this week it became the first company to sever ties with Armstrong in the wake of allegations that he used illegal drugs to boost his performance during his 20-plus year racing career.

At least five other companies followed Nike's lead, highlighting the tricky relationship that evolves when marketers sign multimillion-dollar deals for celebrity and athletes to endorse their products. Everything a celebrity endorser says and does could negatively impact the company they represent. And when something goes wrong, companies act as the judge and jury when deciding whether to continue those deals. They consider everything from the offense itself to the fallout.

"The tighter the association and the more intimate the relationship, it can sort of be like breaking up a marriage," said Allen Adamson, managing director of branding firm Landor Associates.

Endorsement deals have been around for decades. The value of such deals are a closely held secret, but companies often are willing to shell out millions of dollars for celebrities to wear their shoes, use their equipment or appear in their commercials.

The practice is even more common in the world of sports, where companies are willing to do almost anything to have their brand associated with the high performance of a top athlete. Think: Adidas sneaker maker's deal with soccer player David Beckham or General Mills deal to have Olympic Gold medalist Gabby Douglas appear on a box of Wheaties cereal.

Companies typically include some sort of "morals clause" in the deals. The specific language can vary, but the clause basically allows a company to cancel the contract if a celebrity does something that reflects poorly on the brand — or the celeb themselves.

History is dotted with companies dropping celebs after their indiscretions. In 1986 the American Beef Industry Council dropped Cybil Shepherd as its spokeswoman when she told an interviewer she tried to avoid red meat in her diet. And in 2007 Verizon severed ties with singer Akon after he drew widespread criticism for a sexually charged dance onstage with a 14-year-old girl during a spring concert in Trinidad.

"It's really hard to know today when an issue will spin out of control or just go away," said Adamson, the branding expert. "The cost of a celebrity endorsement is huge, so pulling the plug is a really big decision."

When a company does decide to end the relationship with a celebrity endorser, the stars often bow out without a fight. But sometimes letting go of a celeb can cause even more problems.

For example, Hanes underwear company dropped Pittsburgh Steelers running back Rashard Mendenhall from its lineup in 2011 after he made controversial remarks about the death of Osama bin Laden and the Sept. 11 terrorist attacks over social media web sites. Mendenhall is now suing the company for breach of contract, claiming Hanesbrands wrongly terminated him and seeking $1 million in damages. The case is still being heard in the U.S. District Court in North Carolina.

Perhaps no other company is better known for its history of having to decide the marketing fate of the celebrity endorsers that it's staked its reputation on. The company has been endorsing athletes for most of its 48-year history.