BOSTON New Balance keeps running

New Balance continues to grow by selling function over fashion.
BOSTON (AP) -- Jim Davis still gets out there every day -- so long as the temperature doesn't dip below 15 degrees. The owner of athletic shoe maker New Balance believes being a serious runner is part of the job.
Still, the 60-year-old Davis quips of his running: "I'm using the term loosely as I get older."
So too, it seems, are New Balance's core customers.
It was the die-hard baby boomer jogging generation that helped Davis transform the family-owned outfit he bought in 1972 into an industry power with $1.3 billion in annual sales. But as boomers jog less and walk more, Boston-based New Balance needs a new strategy -- after years of explosive growth, worldwide sales were flat last year over 2002.
Davis wants to hook younger athletes on the New Balance brand. But he insists he won't abandon what has set New Balance apart: function over fashion, word-of-mouth marketing over celebrity endorsements and manufacturing a sizable percentage of its shoes in the United States even as competitors chase cheaper labor overseas.
Targeting teams
Davis thinks the way to achieve that is through the team market -- not the pros or big universities, but high school and smaller college teams. He expects at least 2,500 high school basketball teams to lace up New Balance this year, up from 1,000 in 2003.
"We don't want to get into the fashion game or the endorsement game, which our competitors do," Davis told The Associated Press in a recent interview. "We feel what we're best at is grass roots. We do the grass roots with these teams, we get the young kids in the shoe, even the kid that doesn't play basketball or run track sees all of his peers in those shoes, he or she might buy a pair himself."
He also wants to expand beyond basketball and track, the traditional New Balance niche. New Balance recently bought Warrior, the country's only company specializing in lacrosse shoes. The deal gives New Balance an inroad with a sport that's growing in affluent suburbs, and potentially opens up distribution channels for other sports with complementary seasons, such as field hockey and soccer.
The grass-roots marketing has worked before, Davis says.
"When we started as a running shoe company," he said, "that was our whole approach, going out to the races and giving people shoes and saying, 'What do you think?' and working with them. We're good at that. We're very good at that."
Tremendous growth
When Davis bought New Balance for $100,000, it was turning out 30 pairs of shoes a day. Traditional customers included runners as well as cops and retail clerks whose jobs kept them on their feet all day.
Under Davis, who owns the company with his wife, Anne, New Balance grew rapidly, boosted by the jogging craze of the 1970s. Sales jumped from $100,000 in 1972 to $361,000 by 1974 and $1.3 million by 1976. By 1985, they hit $80 million and by 2002 $1.3 billion.
Although revenue flattened in 2003, New Balance has still held its own in a tough footwear market. Though sales are measured in different ways, market researchers put the company in the top 4 worldwide, and NPD Group reports New Balance is No. 2 in the U.S., behind Nike.
Successful marketing
The dilemma of the aging customers isn't a new one, and Davis has already had some success confronting it. New Balance branched into walking shoes, and in the 1990s its trail-running line was both a fashion and performance hit, helping the company jump from No. 8 to No. 3.
Still, Davis refused to turn the company into a marketing and fashion specialist. By doing so, he actually helped his pitch to younger buyers, said Andrew Rohm, a Northeastern University marketing professor and former marketing executive at Reebok.
The younger consumers "saw New Balance as authentic, as credible," Rohm said. "They weren't being sold to in a way. Other brands may have come across as too aggressive."