Martin Connolly, CEO of bicycle-wheel manufacturer Spinergy Inc., used a combination of buzz, product placement, and celebrity endorsement to cultivate one of the hottest brands around.
Martin Connolly had two months, $40,000, and an idea for a new bicycle wheel. But that was all he needed to launch one of the hottest brands around
As the compact and cocksure bicyclist begins his performance, the normally frenzied trade-show floor suddenly takes on a more focused exuberance. All eyes seem to track him as he eases his way through a succession of perches on a series of unlikely geometric shapes. His performance, sponsored by Cannondale Inc., is designed to draw attention to the bicycle maker's booth. But as they watch him, the attendees of Interbike--the annual trade show for the bicycle industry--may be overlooking a greater, if subtler, stunt that's also on display.
There are hints of it on the biker's wheels and even on his back, chest, and legs, where the word is plainly visible: Spinergy. Spinergy is a brand of bicycle wheel that, just five years ago, didn't even exist. Now, as Spinergy Inc. founder and CEO Martin Connolly tours Interbike, taking in row after flashy row of bicycle frames, wheels, components, and gadgetry, he notes with particular pride the number of booths showcasing Spinergy wheels on their display bikes.
The demo cyclist's bike features Spinergy's flagship product, the carbon-composite Rev-x bicycle wheel, as do many of the bikes that line the aisles. But Spinergy's new Spox wheels are also liberally represented throughout the cavernous hall. Of course, the Rev-x wheel is easier to spot, with the distinctive X shape of its four wide spokes and its bold logo and lettering. The Spox (rhymes with jokes) wheels look more like standard bicycle wheels, and as such aren't as noticeable as the Rev-x wheels until Connolly points them out. Fortunately for him, there are plenty to point out. "All those wheels mean sales," Connolly crows. "We didn't give them away."
Not that the Spinergy name pops up only at trade shows. The brand has begun to seem ubiquitous, turning up in venues as diverse as the 1996 Summer Olympics and New York City's Cooper-Hewitt National Design Museum (part of the Smithsonian Institution), which will feature a Spinergy wheel in an upcoming exhibition. Every week, when Pacific Blue--the USA Network's "Baywatch on bikes" series--airs in 80 countries, millions of viewers are exposed to the wheel as the comely cast fights to keep Venice Beach safe for muscles and melanoma. Well-established brands--Coca-Cola, Saturn, Ralph Lauren, Volkswagen--seeking to bask in Spinergy's newfound cachet have featured the wheels in their ads. One night in 1997, Connolly flipped on the tube to find actor Robin Williams visiting with Jay Leno, his toes cozily clad in Spinergy-logo socks. "It doesn't get much cooler than that," admits the 51-year-old Connolly.
Those cool wheels have created one hot company. Based in Wilton, Conn., Spinergy has seen its sales speed to nearly $10 million since 1993. That's especially impressive considering that Connolly, while hardly a novice at company building, knew next to zilch about the bicycling industry when he started the company. A cycling enthusiast, he did know that the industry had exploded in the 1980s--mostly thanks to the emergence of mountain biking--only to slow down considerably in the early 1990s.
Given those circumstances, Connolly and his crew have done an amazing job of getting the Spinergy brand up and, well, racing. And they've done so in an already-competitive category: high-end prebuilt bicycle wheels. "There have been people making these wheels for a long time," says Geoff Drake, editor of Bicycling Magazine. "Spinergy had a lot of marketing power behind them, and they became very prominent very quickly." According to Rick Vosper, publisher of bicycle-industry newsletter GorillaNet, some companies have been trying for 20 years to do what Connolly has done. "Marty has basically cleaned their clocks," Vosper says.
Even as they utter words of admiration for what Connolly has accomplished, those who have followed Spinergy's trajectory can't help wondering: How on earth did this guy pull it off?
In the summer of 1993 Martin Connolly presented graphic designers Robin Perkins and Clifford Selbert with a simple request. Or at least it sounded simple--to him, anyway.
What he had, as he told the cofounders of Selbert Perkins Design, was a new type of bicycle wheel that he felt certain could be a hit at the next Interbike show, which was only about two months off. He needed their help in coming up with a name for the product (and, it turned out, for his company), a compelling visual identity, and a marketing message to convey to competitors, distributors, and bicyclists. It short, he needed a brand. Oh, and he couldn't afford to spend more than $40,000. (While Spinergy was amply funded, Connolly felt he needed to reserve most of that cash for manufacturing, research and development, and sales promotions.)
Having branded products ranging from retail environments to garden implements, Selbert and Perkins were understandably leery. Typically, they'd get as long as six months to develop an entire brand identity. And they could have commanded as much as $250,000 for their services. But the product looked, at the very least, intriguing. And they didn't often get to work with an entrepreneur at the very beginning of the branding process.
While Connolly didn't have industry-related experience, he had started three companies since 1971, mostly in office-automation products. His foray into bicycling dated back to 1990, when he set out to build an automatic bike transmission, founding a company called Hamlin Transmission. He had no trouble raising venture capital, to date amassing a total of $14 million. Investors didn't care that his most relevant experience was as a bicycle rider. "The bicycle industry is largely driven by enthusiasts," says investor Brian Jacobs, a general partner at St. Paul Venture Capital, based in Bloomington, Minn. "There's not a lot of management depth." Connolly, by contrast, had a solid management background.
Two years--and $750,000--into the venture, Connolly was approached by employee Rafael Schlanger with an idea for a strong, lightweight, shock-absorbing bicycle wheel. Reviewing Schlanger's sketches, Connolly saw the carbon-composite wheel as a much quicker source of revenues than the automatic transmission, which was proving tough to develop. Not that Connolly abandoned the transmission. What he hoped was that the wheel could, in effect, bankroll further development efforts.
Given Connolly's interest in developing products beyond the wheel, Perkins and Selbert recommended what they call a "superbranding" process. Rather than naming the company after its first product, they suggested building an overall brand identity and then using the power of the superbrand to launch subsequent products. Connolly agreed. "It allows for growth of the company," he says. "It's like Callaway versus Big Bertha. Everyone knows both of those names."
To come up with a name for the superbrand, Perkins and Selbert researched Greek mythology and the physics of motion and energy, and generated a list of name possibilities, with the words "spin," "energy," "motion," and "revolution" as recurring themes. They initially thought about names showcasing the wheel's singular X design, but rejected them in favor of giving Connolly more product flexibility.
Not that they were all that systematic. At one point, Connolly recalls, flip-chart papers covered with thoughts and sketches lined the walls of the conference room at the Cambridge, Mass., offices of Selbert Perkins Design. "It was definitely exciting and nerve-racking," he says. Connolly's characteristic directness, Perkins says, was both helpful and intimidating. "Marty really made decisions very quickly," she says. "He either liked something or he didn't." Perkins felt so rushed that she remembers "actually getting a speeding ticket on the way to see the exhibit fabricator."
After two weeks of brainstorming, the group ultimately chose the name Spinergy because it was short and memorable and captured the sense of innovation that Connolly and the design team hoped to convey. "Just the word Spinergy itself is innovative," says Perkins.
Then Selbert, Perkins, and Connolly turned to naming the wheel. "That was easier," says Perkins. "Everyone agreed we were going to focus on the X shape." So the designers started riffing on what they called the "X factor," coming up with names like Axiom, Xponent, Xorb, Xcellerate, Orbix, X Axis, and X Force. They eventually decided on Rev-x (short for revolution, in terms of both the wheel's function and its technology) for the road version of the wheel, Rev-x-Roks for the mountain-bike version (get it? Mountains? Roks?), and such names as X-wax and X-tender for accessories.
For a logo, Perkins and Selbert wanted an image that conveyed motion and energy, something as visually distinctive as the wheel itself. "Marty wanted it to be aggressive, slick, and high-tech," says Perkins. "But he didn't want it to look trendy." Perkins and Selbert played around with logos that combined the X and S shapes. But one of the letters needed to be dominant. The design they opted for was an attenuated letter S. And the wheel itself offered the opportunity to showcase the logo, because its spokes had relatively fat, flat surfaces facing the side--unlike most wheels, whose thin spokes render graphics impractical.
With no time to convene focus groups, Perkins and Selbert relied on Connolly's sense of the market, which he had gleaned--over a two-month period--through industry contacts and by reading various magazine studies. And they had time to produce only one series of print ads, which was all Spinergy used in the first year of selling the Rev-x. "It's unusual, but it can be done," says Perkins. "You can have the same set of shots, then vary the graphics and design in the ads. Very inexpensive, but it can still have great impact."
But while the ads were inexpensive, the wheel itself was not.
Connolly examined existing carbon- composite wheels selling for $2,000 and up and calculated that competitive racers would readily pay $1,000 for wheels that he--and, he hoped, they--considered to be even better. So, by necessity, Connolly aimed for a small niche: the high end of the market. But once he had established a stronghold, Connolly hoped to take the Spinergy brand "horizontally" into different cycling applications, such as mountain biking, bicycle motocross, and cyclocross. Then he planned to expand the brand "vertically," with lower-priced products.
The high price point also determined Connolly's distribution strategy. Since bicycle manufacturers depend on bikes that sell in volume (retailing, say, for less than $1,000) to generate profits, most were unlikely to take on wheels that added another $1,000 to the selling price. So Connolly would have to sell in the aftermarket, directly to high-end bicycle retailers in the United States. In Europe, which would ultimately account for more than 40% of the company's sales, and in the Pacific Rim, which would ultimately account for another 20%, Connolly would sell through distributors. "It would cost too much to set up our own distribution in each individual country," he explains. (Of course, original-equipment-manufacturer sales, whereby bicycle manufacturers would spec Connolly's wheels as regular equipment on their fully assembled bikes, would remain the key to long-term growth. That dictated that Connolly would need to find a way to bring Spinergy's prices down.)
To build awareness among high-end bicycle dealers and consumers, Connolly decided to get the product underneath as many big-name racers as possible. That involved providing teams and racers with sets of Rev-x wheels, as well as sponsoring a team, to the tune of about $750,000 a year. The strategy grew out of Connolly's awareness of what the established companies were doing, particularly those in Europe. "The people we were going to be competing against were sponsoring teams," he says.
Connolly has also backed individual racers, such as international-road-race champion Linda Jackson. When Jackson was competing in the 1996 Summer Olympics, in Atlanta, she was profiled on NBC, prominently displaying her Spinergy wheels. And when 76-year-old Spinergy-sponsored Ironman triathlete Bill Bell appeared on The Rosie O'Donnell Show, he presented the garrulous host with a bike equipped with wheels made by you-know-who.
In cycling, much of what drives hot products is the trade and consumer press, which influences consumers and, more important, the oh-so-skeptical salesperson at the bike shops. That salesperson, Connolly notes, "is the guy directly interacting with the consumers. He knows how to communicate the value of the wheel." To get shop personnel interested, Connolly offered them deep discounts. Besides getting good product reviews from the cycling magazines, the Rev-x was featured prominently in their pages and on their covers. Bicycling Magazine, the cycling magazine with the largest circulation, chose it as the best overall road wheel for 1998. Beyond the cycling press, BusinessWeek singled out the Rev-x as one of the best new product designs for 1994.
Connolly capitalized on any opportunity he saw to create buzz. When he noticed that the big hitters at the Spinergy Web site were employees from the likes of Hewlett-Packard, Boeing, Intel, and Microsoft, he devised a series of corporate cycling seminars featuring champion cyclist Dylan Casey. Casey gives in-house lunch-hour motivational talks. His attire and cycling equipment leave little doubt about who's sponsoring the event.
And when, at an industry trade show a few years ago, the creator and executive producer of a TV show under development appealed to Connolly for 25 sets of complimentary wheels, the CEO opted to take the gamble. Pacific Blue, now in its fourth season, turned out to be worth it.
Such gambles helped make the Rev-x wheel, and by extension the Spinergy brand, cooler than cool. As proof, Connolly points to the wave of serendipitous product placements--in ads for Motrin, Mighty Dog, and the U.S. Postal Service, to name a few--that the wheel has received. In 1995, with sales pushing $6 million, Connolly also started hearing from dealers that the wheel was catching on with the famous and the fashion conscious, including former Seinfeld star Michael "Kramer" Richards and news anchor Tom Brokaw.
Given the company's fast growth, it's perhaps not surprising that Connolly has suffered the entrepreneurial equivalent of "road rash," the term cyclists use for the scrapes they sustain when they kiss the pavement. In the past couple of years, Connolly admits, Spinergy's internal operations have been riddled with problems: incorrect invoicing, delayed shipping, unpaid bills. And his crew fell behind in customer service, taking too long to repair and return wheels to dealers and customers. "As you grow from 300 to 3,000 dealers, naturally your systems growth has to keep pace with your company growth," he says. "The past 18 months, we've been fighting, trying to improve these systems."
Such distractions have cost the company on another front. After helping to grow the market for high-end wheels, Spinergy lost market leadership to Mavic, a division of Adidas-Salomon, the $6.2-billion maker of athletic equipment. Mavic, which introduced its Helium wheel in 1996, now sells twice as many wheels as Spinergy does. Not that Connolly hasn't tried to boost Spinergy's volume. His attempt to steer the wheel into the massive mountain-biking category--the Rev-x-Roks wheel, introduced in 1995--didn't exactly rock. After two and a half years, Connolly decided to discontinue the line. The product was heavier than a comparable set of Mavics, and while the wheel was more aerodynamic, that proved insignificant to mountain bikers, who prefer a lighter wheel.
Then, at last year's Interbike, Connolly met Richard Campbell, then a 19-year-old engineering prodigy who had developed a new, lighter bicycle spoke. By December 1997, Campbell had joined Spinergy as R&D manager for its newly christened Spox line of lower-priced wheels. Connolly hopes that the more-conventional-looking wheels will enable Spinergy to expand further into such areas as mountain biking and bicycle motocross. Last July investors--who don't expect to see a profit until the second quarter of 1999--pumped in another $2 million to fund the effort. Connolly has also brought in additional management. Tucker Mays, who came on board in May 1998, is now chief operating officer and has taken over sales, marketing, and operations from Connolly, freeing Spinergy's founder to concentrate on what he likes best: R&D.
Which is why, in September 1998, he's prowling the annual Interbike show in Las Vegas. Stopping at the booth of a high-end frame maker, Connolly sees that one of the company's bikes had been outfitted with Rev-x-Roks wheels. A representative at the booth tells him that someone wanted to buy the bike and was particularly interested in the Spinergy wheels. Connolly, while pleased, admits that the company is ditching Rev-x-Roks. He suggests pushing the new Spox line. "We are really psyched about it," he says. "Our goal is to come back next year and have Spox all over this convention floor."
Christopher Caggiano is a staff writer at Inc.