The US Postal Service spent an estimated US$6 million this year to sponsor Lance Armstrong's professional cycling team.
The financially troubled agency may have been better off using the money to keep mail rates down and improve employee morale, several sports marketers said.
PHOTO: REUTERS
Armstrong, a cancer survivor who won his third straight Tour de France last Sunday, has been used in only two major advertising campaigns by the postal service in the past three years. Now, even with Armstrong at the peak of his career, the postal service has no immediate plans to capitalize on the 29-year-old cyclist because it doesn't want to "exploit" him.
Sports marketers question that strategy by a quasi-government agency that has eliminated 21,000 full-time jobs since 1999, halted construction projects and increased postage rates twice this year. It expects its operating loss to widen to US$2 billion for the fiscal year ending Sept. 30 from US$199 million a year ago.
"If you're going to spend the money to sponsor the guy, then you want to exploit it to the hilt," said Jim Andrews, editorial director of
IEG estimates that the postal service's four-year contract with Armstrong's team, which expires in 2004, cost about US$25 million. The agreement covers about 60 percent of the cycling team's expenses, said Mark Gorski, chief executive of Tailwind Sports LLC, the Mooresville, North Carolina, company that owns Armstrong's team.
The postal service agreed to begin sponsoring a cycling team in September 1995 to help boost its business overseas, where the sport is much more popular than in the US. Armstrong, who was then a member of a team sponsored by Motorola Inc, started racing for the US Postal team in 1998.
He joined the team after recovering from testicular cancer that was diagnosed in 1996. At the time, he was given a 50 percent chance of surviving after the cancer spread to his lungs and brain.
His remarkable recovery has made him an inspirational figure to many cancer victims, as well as a hero to cycling fans.
The postal service has used Armstrong's image on the side of delivery trucks, on packaging for priority mail and in newspaper advertisements congratulating Armstrong on his Tour de France victories. It has also used corporate hospitality tents to promote the sponsorship.
Otherwise, the agency has taken a hands-off approach to its most recognizable endorser, who appears on the cover of the current Sports Illustrated in his US Postal cycling team uniform.
"The postal service doesn't want to exploit Lance," said Gail Sonenberg, senior vice president of sales for the postal service. "Using him at every turn isn't necessary. He represents an awful lot of positive affiliation and you're not going to see us exploiting that."
Gorski said the postal service can use Armstrong for marketing as often as it wants. Critics wonder why it doesn't.
"Why would a company like the postal service go out and spend money on a sponsorship just to spend it?" said Steven Levitt, president of Marketing Evaluations Inc, a Manhasset, New York-based company that advises advertisers on which celebrities to use in promotions. "They have to see a return."
The postal service buys state-of-the-art buses for the 21-member cycling team and pays for Armstrong's bodyguards, required for a star of his magnitude in Europe at an event that allows fans direct access to athletes. Sonenberg said the postal service turns a profit on its cycling sponsorship, although she wouldn't give specific figures or examples of business generated by the agreement.
Tom Weisel, founder of merchant bank Thomas Weisel Partners and a major investor in the postal service's cycling team, said the sponsorship has helped the agency gain new business with companies such as Staples Inc.
"Because of the team, they've been getting new contracts," Weisel said.
Armstrong's team has agreements with 28 other companies, including Visa International Inc, Yahoo Inc, and Volkswagen AG.
But the American knows he doesn't get the kind of mega-sponsorships offered to stars in major US sports such as basketball, baseball and football.
"Cycling isn't golf, it isn't baseball," said Armstrong, whose endorsements are worth US$17 million a year, according to the Italian newspaper Gazzetta Dello Sport. "But people recognize the effort, they recognize the story, they recognize the illness. That's nice. That's an honor."
Even though the postal service may have missed some marketing opportunities, it's still looking for new ways to take advantage of Armstrong's success.
The postal service said it may use Armstrong to promote its new three-year agreement with Lynx Express, a closely held shipping company based in Great Britain. The agency and Lynx will work together to ship mail to the US from Europe, a business that generates about US$3.5 billion a year in revenue. The companies have said they hope to win about 5 percent of that market within the next three years. Yet it may not be easy for Sonenberg and Gorski to convince the postal service's board of governors to spend more money on its sponsorship.
"We've had to justify the sponsorship's existence almost since the day we signed it," Gorski said. "You have to understand the environment at the postal service. They've been through tough times."
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