Power Balance Plans Marketing Changes in Wake of Lawsuits

Is Moving Away From Popular -- and Controversial -- Wristband to Make, Market 'Performance' Tech Sportswear

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Power Balance, whose wristbands gained fame -- and controversy -- by touting powers derived from Eastern philosophies, is making a westward turn, with plans to launch science-based sportswear products.

The change in tactics has been under way for a while at the Southern California company, which has downplayed its original claims that the fast-selling bands interact with the body's energy field to improve balance, strength and flexibility. But in the wake of a pending legal settlement over false-advertising allegations, Power Balance appears poised to complete its transformation.

Power Balance team bands
Power Balance team bands

"The company is not trying to focus upon a product any longer. I mean we're going to be coming out with other product lines," Brent Granado, senior VP-corporate development, told Ad Age. "Internally we say 'from a band to brand' -- it's just where we want to head right now."

To that end, Power Balance, which was built on word-of-mouth buzz, especially among pro athletes, is spending more aggressively on licensing deals and partnerships more associated with traditional sporting-goods companies. For instance, the company recently struck a deal with the NBA that allows it to put team logos on bands. The first wave will hit stores soon covering seven teams: the Los Angeles Lakers, New York Knicks, Chicago Bulls, Miami Heat, Boston Celtics, Orlando Magic and Sacramento Kings. The company also has licensing deals with Rawlings, which makes Power Balance-branded batting gloves and apparel, and Taylor Made, which just released a Power Balance golf glove. And last January Power Balance paid to put its name on the Sacramento Kings NBA arena, a deal experts have estimated as worth $1 million a year. (The deal could end if the Kings move to Southern California, as some expect.) In 2010, Power Balance spent $352,800 on measured media, according to Kantar Media.

Mr. Granado declined to elaborate on the new products that are in the works, other than to say it will be "performance technology" sportswear. "Will it be a wristband with a hologram in it? No, we've already done that. We're going to move into other technologies." And here's the biggest change: The technology will "focus on Western science," he said. "And when I say Western science, supported by Western science, substantiated."

The company seems to have no choice but to change its tactics. According to the initial terms of an agreement awaiting approval by a federal court in California, Power Balance is barred from advertising its products as improving "balance, strength or flexibility" unless it can provide evidence. The powers supposedly come from a thin polyester film hologram that interacts with the body's natural energy field. The proprietary technology is "designed to mimic Eastern philosophies that have been around for hundreds of years," according to the Power Balance website.

But rather than defend the marketing claims, the company has opted to pay potentially hundreds of thousands of dollars, hoping to end the controversy. As part of the proposed settlement, Power Balance will provide full refunds to dissatisfied customers. The action settles a class-action lawsuit that alleges "false and misleading" advertising. Officials are setting up a fund with an initial balance of $500,000 to pay the refunds for the products, which range from pendants and wristbands retailing for $29.95 to a pack of holograms for $99.99, according to court documents.

Although it will make "select changes to product claims," and marketing, Power Balance said in a recent statement that "there is no acknowledgement, admission, liability, wrongdoing, noncompliance or violation" on the part of the company. Said Power Balance general counsel Nina Freeland-Ringel: "As with many early technologies, especially one involving Eastern origins, we recognize the potential for confusion in the marketplace, and concede we may have gotten ahead of ourselves with claims about our first product." The settlement still allows for Power Balance to say it has "always believed in the benefits of various holistic practices and Eastern philosophies and set out to develop a product to more easily and affordably embody these beliefs," according to court documents.

The lead plaintiff in the class-action lawsuit, Andre Batungbacal, bought a band at a Finish Line store in Los Angeles County. The company marketed "instant benefits" that turned out to be "misrepresentations," but led to sales of "millions of units in a relatively short span of time, amassing a huge wealth at the cost of innocent consumers," Mr. Batungbacal alleges in the complaint. (A plaintiff in another class-action suit who would be covered by the settlement if approved opposes the terms of the deal that Mr. Batungbacal's attorney's negotiated and is seeking to stop it, according to court documents filed this week.)

More scrutiny recently came from the American Council on Exercise, which recently tested the wristbands. The council tapped exercise scientists from University of Wisconsin, La Crosse, who put 42 NCAA Division II athletes through a series of physical tests, with the subjects wearing the bands for one trial and a placebo for another trial. The findings showed "no significant difference in flexibility, balance, strength or vertical-jump height between the Power Balance and placebo trials," according to a report released last month. "To me, it's just an absolute scam," said John Porcari, an exercise scientist at the university.

Mr. Granado acknowledged that "balance, strength and flexibility" marketing accounted for part of the product's early rise, but "we always said as well that it's an experience that one has to feel for themselves," he said. That's why "we always had that 30-day money-back guarantee, no questions asked. Because we felt that everybody had a different experience." And customers have largely been satisfied, with less than 1% seeking their money back, he said.

The criticism is not new. But despite the lingering questions, Power Balance has thrived, picking up steam every year since founded in 2006 by brothers Troy and Josh Rodarmel of Southern California. The company did not release sales figures to Ad Age, but said through a spokesman that it had "triple-digit revenue growth (on a percentage basis) between 2009-2010." Some 4,500 stores sell Power Balance products in the U.S., including chains such as Dick's Sporting Goods and Sports Authority. CNBC, which named the wristbands its sports product of the year last year, reported that Power Balance expected to do more than $35 million in sales in 2010, up from $5.6 million the year before and $187,000 in 2008. Since 2007, the company has grown its workforce from four to 70. Mr. Granado, a corporate lawyer by trade, joined full time last year.

The growth has been propelled by support from big-name pro athletes, dozens of whom began wearing the bands even without endorsement deals. Pro quarterbacks Carson Palmer and Mark Sanchez -- both from Southern California -- are among the early adopters. Shaquille O' Neal has been credited with bringing the bands to the NBA, where stars such as Derrick Rose, Paul Peirce and Blake Griffin wear them, sometimes gracing national magazine covers with their bands on full display. Even golfing great Jack Nicklaus was spotted wearing a band at the Masters last week. Some of the athletes are now compensated for their support and the company lists 35 "product ambassadors" on its website, from pro baseball and football players to snowboarders and surfers.

But Power Balance has barely spent anything on traditional media, only running a handful of print ads. The company has not hired an ad agency. Asked if it will soon take the plunge into traditional advertising, Mr. Granado said: "There's been discussions about those next steps." The company is "just trying to find the right avenue for doing that." He added: "We still have a young company [but] it's getting infused with more of a professional mindset."

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