Five things brands can learn from Lance Armstrong's fall from grace

The allegations that the world's most famous cyclist, Lance Armstrong, became the most accomplished athlete ever in his sport through the use of performance enhancing drugs has stunned the world.

And the scandal that has erupted has sent shockwaves through the offices of the brands associated with Armstrong.

Not surprisingly, Armstrong's sponsors are cutting ties with the now zero-time Tour de France winner as the sports world comes to grips with the tactics he allegedly employed to win.  

For the brands associated with Armstrong, his fall from grace is a sponsor's worst nightmare, but it does provide lessons for other brands engaged in sponsorship.

Here are five of the most important:

1. Celebrities are human too

High-profile celebrities may carry with them super-human characteristics, but it doesn't take much effort to find evidence that they're human too.

Brands sponsoring high-profile entertainers and athletes should remember that when they sponsor a celebrity, they're sponsoring the whole individual, flaws and all, and not just the best parts.

2. The bigger the name, the higher the risk when something goes wrong

For many brands, bigger is better when it comes to sponsorship. And for a logical reason: the best brands want to be associated with the most recognizable names.

But as any brand that sponsored Tiger Woods or Lance Armstrong knows: when a big name becomes the subject of controversy, the uncomfortable spotlight on the brand shines even brighter.

While this doesn't mean that brands should shy away from major sponsorship deals with the highest-profile names, brands should factor this in to their risk management strategy.

3. Diversification can be costly, but not diversifying can be even costlier

For brands engaging in sponsorship, it's worthwhile to consider the benefits of diversification. To be sure, most companies can't employ a Nike-like strategy, which entails numerous big-money sponsorship deals, but brands should be careful about putting all their eggs in one basket.

Exploring alternative options that ensure the brand is not too closely tied to one individual is an approach worth exploring.

4. Sponsorship opens doors, but scandal doesn't have to close them

The scandal that has engulfed Lance Armstrong is certainly a major disappointment for the brands that had sponsored him, but that doesn't mean those sponsorships were worthless.

Whether deserved or not, Armstrong had been one of the most respected athletes in the world for some time and that gave the brands associated with him had great opportunities to use his popularity to connect and build relationships with consumers.

Brands that took advantage of those opportunities while they existed may be losing a brand ambassador in Armstrong, but that doesn't mean that they're necessarily going to lose the consumer relationships they built.

5. When handled correctly, scandal isn't always as bad as it looks

The charges levelled at Lance Armstrong are significant. If true, which they appear to be given the evidence presented, the world's most famous cyclist ran what was perhaps the most sophisticated and most successful doping operation yet uncovered in all of sport.

Taken along for the ride, and taken for millions upon millions of dollars: Armstrong's sponsors.

It's not surprising that every one of Armstrong's sponsors have dropped him like a bad habit, but there's good news for those sponsors: the scandal probably isn't as bad for them as it might first seem.

Severed ties with the now-disgraced cyclist may not eliminate the disappointment and embarrassment of his sponsors, but at the end of the day, it's unlikely that consumers will consider the brands Armstrong used to represent anything more than victims too.