Tiger Woods and the Dollar Value of a Reputation

January 16, 2009

Turning to the MARKETPLACE page of this past Thursday's Wall Street Journal (Jan 14, 2010) the first thing that caught my eye was a color picture of an elephant standing upright on its hind legs on a surf board ridding the waves.

This picture was partially covering a color photo which I had seen in ads previously. The partially covered ad was one that Accenture, the global management and consulting firm, had been running featuring Tiger Woods.

The Wall Street Journal article went on to describe that after deciding on December 13, 2009, following Tiger Woods' now famous Thanksgiving weekend car crash to end its six year use of Woods in its advertising.

Now, instead of using Tiger Woods to convey its message of High Performance, Delivered, the company will use images of animals rising delivering high performance in tough spots.

Accenture is one of the many major corporations to dump Tiger from its ads and this is having a major impact on Tiger's income as will be shown below, his annual income from commercial endorsements is six times that of his record breaking earnings from Pro Golf.

Even if Tiger Woods continues to play and win on the Pro Golf Tour, an activity he has currently suspended for the time being, the hit to his income would be substantial.

Image and other people's perceptions, which are key ingredients in a person's or business's reputation, are important and can have a major effect on income and revenue.

Two homes that are identical in every respect, including the costs of the land, labor and materials that went into building them, but are located in different parts of town will often sell for widely different prices.

A masterpiece by a famous artist can be worth millions while a exact duplicate so exact that only a trained expert can tell the difference, will, once it is known to be a forgery, be lucky if its price exceeds the cost of the paint and canvas used to produce it.

Tiger Woods, in addition to being a great golfer, was also a global brand which was valuable more because of his image than his golf skills.

Sure, without his golf skills, his reputation for hard work and for the intense concentration he brought to his golf game, he wouldn't have been able to achieve the fame needed to create and capitalize on his brand.

The above factors were key ingredients in his getting to where he is now.

But Tiger still has all of these and can probably return to pro golf at any time and make a decent income. However, like the home in the so-so section of town that is identical to the home in the exclusive section, his income will be considerably lower than when his stellar reputation was intact.

In accounting there is the concept of goodwill. Goodwill is the difference between the market value of the company as a whole and the value of its assets. Goodwill is usually used today by companies when they purchase another company for a price higher than the value of the assets of the company being acquired.

Things like a strong brand or loyal customer base bring in good revenue but in and of themselves are not tangible assets despite their often significant contribution to the company's bottom line profit.

However, a good brand or customer loyalty can be easily lost which is why companies go to great lengths to cultivate and protect them. Basically things like a good brand and customer loyalty boil down to reputation and reputation is how the buying public perceives the company.

In Tiger's case, his golf skills, along his hard work and extreme concentration on his game both of which contributed to his meteoric rise in the sport, all combined to make him exceptional. In addition to these Tiger came across as a decent and very nice guy.

Sure he was probably the greatest golfer in history but he let his record speak for itself while he continued to work on his game. He was good, he knew it, the public knew it and he saw no need to brag about it nor allow it to swell his ego.

Tiger was also an extremely private person. Despite the sharp line dividing his public from his private life, he was always courteous and friendly, took time to talk to fans and media and was willing to give back in the form of charitable works without making a big deal about it for publicity reasons. Finally, once outside the public eye he stayed out - unlike many celebrities, he didn't flaunt his private life in public.

Here again, his image helped in maintaining his privacy because he came across as being so normal and decent that there appeared to be nothing for the paparazzi and tabloids to pick up so the left him alone.

People, whether they were interested in golf or not, liked Tiger and what he represented.

Tiger Woods was the epitome of middle class virtue and values and during the course of a 13 year career. A mere three months prior to his 34th birthday this public image and reputation made Tiger Woods the world's first sports billionaire.

Tiger Woods moved from amateur to professional status in August 1996 at the age of 20 and, as of September 2009 at the age of 34 (Tiger was born December 30, 1975 so he wouldn't turn 35 for another 3 months) Forbes.com calculated that the $10 Million bonus he had just received from winning the FedEx Cup pushed his career earnings just over the $1 Billion mark.

I mentioned above that Tiger's endorsement earnings have dwarfed his golf winnings. This is most clearly shown in a February 2008 article by Ron Sirak entitled The rich get Richer:... which includes a table showing Tiger Woods' golf and endorsement earnings for each year from his start in 1996 through 2007.

According to the table in Sirak's article, in this first year, 1996, as a pro Tiger earned $894,060 in golf winnings. Not bad for a 20 year old just beginning his professional career. However, this was dwarfed by his $12,250,000 endorsement earnings that same year. Reputation pays and has paid big for Tiger Woods.

Reading down the table in Sirak's article, one sees that in each of the following years, especially the early ones, Tiger's endorsement earnings ranged from five to nine or ten times his golf earnings. For the twelve year period that the table covered as a whole, Tiger earned a total of $100,890,709 in golf winnings and a whopping $668,550,000 in endorsement earnings.

However, the sex scandal that emerged in the wake of his November 27, 2009 early morning car crash. In the matter of days the squeaky clean reputation he had protected for years vanished and, with it, hundreds of millions of dollars worth of endorsement contracts. More than 50% of his earnings potential vanished.

Reputation is important and, in the case of Tiger Woods, it is possible to put a fairly accurate dollar value on his reputation. Tiger, whose reputation has generated as much as $100,000,000 in income in recent years, is an exception in terms of the magnitude of earnings it generated, can still serve as an example of the importance of reputation for all of us.

While most of us don't have reputations with the earnings potential of Tiger's, our reputations can still have an impact on our earnings potential. Increasing numbers of employers now routinely check applicants out on the Internet as a part of their hiring process. And there have been instances of people not getting a job or even losing an existing one because of damaging material these people have posted on the Internet.

However, making decisions to hire or not hire a person, or to do business or not do business with a person or firm based upon reputation is nothing new and has probably been used ever since people began interacting with each other. In this the Internet, like previous improvements in communication and data management, has only added a new dimension to the process.

If nothing else, Tiger Woods has provided us with a very clear dollars and cents example of the value of a reputation and the cost of losing it.

On a more positive note, Tiger Woods just turned 34 and has time to try to repair his reputation.

This, plus his demonstrated capacity for hard work and his ability to focus intently could be of help in this if he chooses to turn his life around.

So, while he is currently a good example of the cost of losing a good reputation, he also has the potential to show us how to regain a once lost reputation.