There’s a budgeting strategy at New Balance that Chris Davis likes to call “50-30-20.”
“Fifty percent of our budget is allocated toward proven tactics, 30% is directed toward calculated risk-based initiatives, and 20% is purely experimental with a high probability of failure, encouraging our associates to take a fearlessly independent approach,” says Davis, a 14-year veteran of the footwear and sports apparel company who was elevated to chief marketing officer and senior vice president of merchandising in 2020.
The budget structure allows room for experiments to turn into long-term strategies, as investments in the 20 or 30% brackets can often make their way to the 50% bracket of proven tactics. “Feeling uncomfortable, taking a risk and adapting quickly to new times is something we’ve tried to ingrain within the cultural expectation of our marketing department,” Davis says.
Striking that balance helped New Balance emerge from the first year of the pandemic with its “most profitable and highest revenue year ever in 2021,” Davis says of the privately owned company, which saw its chief rival Nike admit to fears that it was losing customers to New Balance in a leaked presentation to company executives last fall. The business milestones coincided with many first-time industry accolades, including Hypebeast’s Sneaker Brand of the Year in 2020 and 2021, Footwear News’ Athletic Brand of the Year and Fast Company’s 10 Most Innovative Brands of the Year.
Up next, Davis is adding superstar rapper Jack Harlow to New Balance’s roster of ambassadors, as well as experiments with cryptocurrency, blockchain and the metaverse. Brand Innovators caught up with him from his home office near New Balance’s Boston headquarters to learn more about his “fewer, bigger, better” approach to marketing in the pandemic era, his criteria for celebrity partners and why, in the wake of the company’s record revenue growth, “we haven’t even begun to scratch the surface of what we’re capable of.” The conversation has been edited for length and clarity.
You were promoted to CMO at New Balance just a few weeks into the pandemic lockdowns of 2020. What were some initial priorities or initiatives you put in place during a time of such sweeping change?
At the beginning of the pandemic, we knew we had to assume a radically agile mindset and that we had to use our culture as a weapon to make decisions and drive calculated risk. So when the pandemic first hit, our first instinct wasn’t necessarily business-related. Our first instinct was: how can we ensure that all of our people are safe? And then, what can we do with our resources to help mitigate this pandemic in any way that we can?
So we transformed our domestic manufacturing footwear facilities into making masks in a period of weeks. We worked collaboratively with Tufts Medical, Harvard Medical and Massachusetts General Hospital and literally in the course of three weeks we transformed our manufacturing facilities into making masks. And we transformed our organizational structure. Instead of having very linear, traditional infrastructure, we quickly pivoted to cross-functional pods that ultimately had 90-day sprints with different goals. We tore down the ways we worked in order to keep up with the pace of business and really with the pace of and change of information and uncertainty the world was experiencing at the time.
How have those initial pivots evolved or sustained in the two years since the pandemic began?
Today we still utilize pods, it’s a major component on how we operate. It’s all about speed and coming to market with swift decisions and calculated risk taking to really realize our fiercely independent mindset.
If you look at the combination of marketing and merchandising, it really is the guts of the go-to-market process. When supply was low, for all industries across the world, we found ourselves in a position where we had to lead with storytelling vs. leading with product. And really ensuring that our consumer is at the center of everything that we do.
So we took on an even more selective approach with a “fewer, bigger, better” mindset and focused on prioritizing the most important initiatives from a business standpoint in the organization first. This focus actually led to New Balance’s most profitable and highest revenue year ever in 2021, as well as back-to-back Hypebeast Sneaker Brand of the Year awards. We really were able to take a step back and focus on the consumer.
What impact have you seen on your direct-to-consumer and ecommerce business as a result of changing shopping behaviors?
Prior to the pandemic, New Balance had invested a tremendous amount in ensuring that the operational infrastructure and global connectivity of our D2C digital platforms were more integrated. We distribute product in over 130 countries — 70% of our business is outside of the U.S. — so we began this globalization process prior to the pandemic. You can say this is about site enhancements, load time, reduced steps to checkout, personalization, segmentation, automated lifecycle communications, direct mail — all of these tactics and demand creation initiatives were in place prior to the pandemic. So we were really able to capitalize on everybody being at home and shifted our new technologies to a digital focus and abandon brick and mortar when nobody was allowed to go to stores.
From a demand creation standpoint, we had a tremendous shift in our media strategy, and our content and media strategy. We moved more dollars and created more content geared toward the top of the funnel and strived to connect with consumers on a more emotional level with topical conversations that were being had. We were looking at real-time sports and culture moments, investing a lot of money there. Focusing on mental health and wellness and that connectivity to running, as well as continuing to drive sustainability and brand purpose messaging in everything we do.
From a mechanics standpoint, we had the largest ever upfront media buy in our company history for 2022, the majority of that was focused against live sports. It was our largest ever Q4 media buy, primarily focused on the upper funnel, and we continued to drive a more cohesive omnichannel strategy and invest in that regularly. We’ll stay hyper aggressive in sports marketing, entertainment ambassadors and finding great representatives of the brand who are reflective of our values.
You’re a big proponent of taking a “50-30-20” approach to your budget. What’s in that 20% experimental budget bracket right now – is there a role for the NFTs or the metaverse?
For sure. We have a number of gaming initiatives as well as digital asset initiatives that can be considered either 20% or 30% concepts. From a digital asset perspective — meaning NFTs, crypto, blockchain — our intent is to more prominently and effectively bridge digital and physical and reinforce the values we stand for in the physical world into the digital world. And within gaming, we have some exciting partnerships coming up, which would be an industry first on our end, within the footwear and apparel athletic space that we’ll be announcing soon.
What role do talent partnerships and influencers play in your current strategy, and why?
As a brand, we don’t sponsor anyone. We just have partnerships. And all of our partnerships with global ambassadors — whether they be in the sports or entertainment space — we take a co-authored approach. We coauthor our strategy, content and our product. We really like to have long-term relationships with our ambassadors because we don’t want advocacy. We want authenticity. And authenticity comes from mutual storytelling, creative tension and co-activation. So that’s the approach that we take.
That being said, we do have hundreds upon hundreds of ambassadors globally — about 700 if you consider all sports, ranging from NBA superstar Kawhi Leonard to some of the best world football players – Raheem Sterling, Bukayo Saka and Tim Weah, to world record holder Sydney McLaughlin, tennis phenom Coco Gauff, and then a number of individuals within the entertainment space including Jaden Smith, Storm Reid, and Jack Harlow. We have many athletes and ambassadors within the portfolio who are tremendous partners who all say something authentically about our brand, and we truly strive to utilize them in sport and in culture. We would never look at someone like a Kawhi or a Coco or Sydney as purely representative of their individual sports. We look at them first as a brand ambassador as we’re a brand that’s constantly striving to bridge that gap between sport and culture.
What are some of New Balance’s latest commitments to DE&I and sustainability at a corporate level, and how are those manifesting themselves in your messaging as a marketer?
For us, we’ve always been a brand that strives to walk the walk. Starting with sustainability – within that, I would say that has been a passion point within the organization and associates across New Balance globally over the course of the last 10 years. Over the course of the last 24 months, we have operationalized our sustainability goals in a uniformly replicable manner, and strived to communicate clear, simple and actionable outputs that will create tangible progress within the world. Some of our goals are 100% renewable energy in all of the factories that we own by 2025, 50% recycled polyester in every single product, 100% environmentally preferred leather. We’ve instituted two programs I’m very excited about. One is called the Remade Program, whereby we utilize recycled factory scraps to create new shoes. All the products are totally individualistic because they’re utilizing different factory scraps, each shoe is 1 of 1 using recycled material that wouldn’t normally make its way into products. We also have a program where you can send in your shoe and get it refurbished.
We’re using solar-powered roof panels in some of our owned factories, as well as exploring wind turbines. We have the ability to think longer-term because we’re a privately owned organization and can consider the impact of our decisions. But the ultimate goal is to harmonize our corporate behavior and improve with each day, also set goals that are actionable and have timelines against them to hold ourselves accountable.
From a DE&I perspective, we have done a tremendous amount over the course of the last 24 months through a lot of internal as well as external commitments. Over the course of the last 24 months, we have established an internal DE&I governance board made up of cross-functional New Balance associates who are essentially serving in a capacity representing the organization of our DE&I based initiatives. We have accelerated the implementation of ERGs across our organization to not only have an impact on cultural best practices, but also in the work that we do every single day.
And I would say an industry first and something that’s pretty innovative from my perspective is we also established an athlete-specific board. We have long tenured New Balance athletes who understand our brand and are truly a reflection of our values compiled into meeting quarterly across multiple sports and helping us provide a perspective on where we should be donating our cause marketing dollars, what issues are topical within their communities that we should be addressing through statements or content, and other ideas that we could implement from an internal standpoint. [Baseball player] Curtis Granderson is actually the board chair here, a longtime New Balance athlete who’s just a wonderful person. A broader focus on cultural moments, Black History Month so we will have a large campaign as well as cause marketing efforts that correlate to that. For us it’s all about inclusivity, transparency and supporting our athletes and ambassadors on causes they care about.
We’ve always had a dedication to community. The New Balance Foundation has donated over $100 million to underserved communities, specifically fighting childhood obesity. DE&I has always been at the forefront of what we care about as a brand. We are learning everyday about how to talk about the issues more effectively and action ourselves more effectively against universal issues that impact individuals across the globe. And our goal is to get better every single day, listen and learn to our associates, ambassadors and consumers.
What new initiatives or launches are you most excited about for the year ahead, and why?
The thing I’m excited about is we’ve seen our long-term strategy come to fruition over the last 36 months. I’m most excited about the fact that we haven’t even begun to scratch the surface of what we’re capable of. So I would say the level of heat you’re going to be seeing from New Balance over the next 24 months will far surpass everything we’ve done in the previous 24 months – ranging from collaborations with key partners like Teddy Santis, Selehe Bembury and Stone Island to new athletes joining our roster, and doing cool unique activations with heroes in culture. I think the next couple of years are going to be very special for our brand and our enterprise.
Andrew Hampp is an entertainment marketing consultant for Brand Innovators and the founder of consultancy 1803 LLC, based in Berkeley, California.
