Under Armour’s X Factor, and What Lady Gaga Can Teach You About Loyalty

1/4/2016

It took the tragic May 2015 Amtrak train derailment outside of Philadelphia to reinforce what Under Armour had accomplished.

Director of strategic procurement Mark Gillen, who lives in the Philly suburbs and commutes via rail to the Baltimore headquarters, received a flurry of frantic e-mails from senior executives at 3:30 a.m. the morning after the accident wanting to know which, if any, company employees were on that New York-bound train. “And then the messages stopped coming in, because they realized that I sometimes take that train and were worried that I could be one of the victims,” Gillen explains.

Springing into action, Gillen logged into SAP’s travel and expense management system Concur and quickly determined that no Under Armour employees were booked on the doomed train. It was a far cry from Under Armour’s haphazard days of workers booking travel willy-nilly, with employees securing flights and hotels through Expedia and Travelocity “even though we had a preferred firm,” Gillen says. Back then, he says, it was tough to sort out who was on the road and in the air. “God forbid something happens, how do I know if someone is in New York, Los Angeles, San Francisco?”

Under Armour made the switch to the automated system at a time when “we knew our brand was so much bigger than our business,” adds Gillen, who says the company generated revenues of $850 million in 2009, which jumped to $3 billion in 2014. While operating like a small company at the end of the aughts enabled Under Armour to be fast and flexible, the downsides such as manual back-office processes were holding the company back from where it needed to be. “We would literally hand off documents from one department to the next,” Gillen says.

In particular, procurement needed an overhaul. Typing up and hand delivering purchase orders can only work for so long. Sometimes when the order was finally placed and the goods received, an invoice would show up in the mail a few days later — but with the PO number missing. “We’d have to scramble to figure it out, which wasn’t a big problem when we were small because the majority of our workforce was within a 200-yard radius of each other,” explains Gillen. “You could just yell out, ‘hey Chad, is that invoice correct?’ ‘Yeah, Mark, it is, we’re good to go.’”

Of course, that system falls apart when your workforce swells from 3,000 in 2009 to nearly 11,000 in 2014, spread throughout offices around the globe. After automating procurement, today 98 percent of incoming invoices have a PO number, which Gillen says is valuable not only for tracking spending but also for learning how to operate and spend more effectively.

Under Armour found its spending increasing not just in terms of volume but also in complexity as it transitioned from being primarily a wholesaler to embracing the new wholesaler/retailer model. From store fixtures and shopping bags to lighting and flooring, the company encountered whole new areas of spend, notes Gillen. “We needed to be sure we could buy them efficiently and effectively without slowing down our retail organization, which is a huge part of our growth,” he adds.

On the indirect side of the business, Gillen says Under Armour is striving to create a metric-driven supply chain. He points to shopping bags as an example; while hours could be spent trying to forecast how many are needed for holiday shopping, what if the right number is tied to how many transactions the stores will complete over the season? The key is applying analytics and historical information toward creating an accurate forecast, Gillen says.

The same applies to implementing a design change when the company might already have 30 days of inventory in stock in global warehouses. “What’s the cost of making the change, and how do we build that into the cost of moving towards a new design?” says Gillen.

Under Armour’s goal is to have this all sorted out by 2025 at the latest. “We want this to be completely behind the scenes so our business centers don’t have to worry about that, they can worry about strategy,” he says.

There’s still one major X factor that’s proving difficult to solve. No one knew that a young upstart such as then 21-year-old golfer Jordan Spieth, sponsored by Under Armour since 2013 and re-signed in January 2015 to a 10-year contract, would capture the public’s imagination (and eyeballs) by first clinching the 2015 Masters Tournament and then going on to win the U.S. Open two months later.

“When that happened, what was he wearing?” says Gillen of the athlete, who from headgear to footwear was fully kitted out in Under Armour apparel. “How is demand going to spike for that product?” The main benefit to winning such major brand exposure is capturing the sales that almost inevitably will follow, yet the ability to optimize supply with demand remains elusive.

From followers to fanatics
If retailers are making one mistake with marketing and social media, it’s that they’re not focusing enough on their biggest fans. Pointing to results from a Forrester CMO survey, marketing expert and author Jackie Huba notes that many respondents said their priorities for the coming year included chasing new customers (59 percent) and new products (42 percent) and considerably fewer were focused on retention (30 percent) or lifetime value (26 percent).

Celebrities such as Lady Gaga have set a remarkable example when it comes to inspiring extreme loyalty, says Huba, whose book “Monster Loyalty: How Lady Gaga Turns Followers Into Fanatics” explores the singer’s success in cultivating and activating a diehard community of “Little Monsters.” Gaga does this by focusing on “one percenters,” though she has nearly 54 million Twitter followers and more than 61 million fans on Facebook.

“The most engaged fans are always a tiny percentage,” says Huba. “One hundred percent of a brand’s online mentions are from four percent of its base.” It might be easy to assume that one percenters are simply the fans who spend the most with a brand, but they also include those who talk a lot about a brand, whether online or in person. “You have to [factor in] their share of wallet and the value of their referrals,” notes Huba.

Costco has won the superfan jackpot in the form of Ron Susi, whose wife made him a Superman-styled “Costco Man” t-shirt to celebrate his all-consuming love for the warehouse shopping retailer, where he purchases underwear, socks, glasses and more. “He buys everything from Costco,” Huba says. “When they go on vacation, they have to visit the Costco in that city.”

Consumers gravitate toward authenticity, another reason why Gaga has such a passionate following. By “leading with her values,” Gaga has been careful not to forget the LGBT community that launched her career, instead honing in on issues important to them, such as anti-bullying campaigns and gay marriage.

And while Gaga’s infamous meat dress moment at the 2010 MTV Music Awards show was written off by many as just the latest in a line of wacky ensembles and publicity stunts, Huba says the singer donned the flank-steak frock to draw attention to her efforts to repeal the controversial Don’t Ask, Don’t Tell bill that was working its way through Congress. Her message was that “we all have the same meat on our bones,” explains Huba, and she used the spotlight to direct followers to tweet Democratic Sen. Harry Reid of Nevada with their ire.

Leading with your values can also be a good business decision, according to Huba. Former Procter & Gamble marketing chief Jim Stengel, now running his own firm, discovered in a 10-year study of 50,000 companies that the top 50 highest-performing businesses are those that are driven by brand ideals and values. “These companies had a 400 percent improvement in financial performance compared with the S&P 500,” notes Huba.

Ultimately, while your biggest fans may be happy to gush about you, they’ll eventually run out of things to say. It’s a brand or retailer’s job to “do remarkable things” that people will be eager to chatter about.
Because, says Huba, “no one talks about average.” 

Jessica Binns is a Bay Area Apparel contributing writer specializing in fashion, retail and technology.

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