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Passion Play

Pallotta TeamWorks inspires intense loyalty from its customers by disrupting their lives, demanding their money, and subjecting them to physical pain. What is Dan Pallotta’s secret?

It’s the business model, stupid.

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That may be the mantra of the next economy, but it hasn’t stopped Pallotta TeamWorks from achieving stunning success with a mission statement that values passion over profit and vision over venture funding. An exception to the market rule, Pallotta TeamWorks inspires intense loyalty from its customers by disrupting their lives, demanding their money, and subjecting them to physical pain.

So what’s the hitch?

Pallotta Teamworks is the force behind the Tangueray AIDSRides and the Avon Breast Cancer 3-Day events. Since 1994, it has raised $140 million for AIDS and breast-cancer charities. Meanwhile, the company has grown from 1 to 250 staffers, increased its revenue each year, and inspired about 75,000 die-hard customers to tackle millions of miles of pavement in the name of scientific research. (Nearly 30% of those folks return to participate in another event.)

How does a company that asks so much from its customers inspire such devotion and financial support? By creating a bold vision, marketing that vision with panache, and valuing every participant, says Dan Pallotta, president and CEO of the Los Angeles-based for-profit startup.

“It’s all about creating human relationships with the people who participate in our events,” Pallotta says. “They are our customers, and they deserve to know that we believe in them.”

During the summer of 2000, Pallotta TeamWorks orchestrated 13 events across the country, including its flagship AIDS Vaccine Ride across Alaska. In 2001, Pallotta TeamWorks will produce 16 events, including three Vaccine Rides — 500 miles across Alaska; 400 miles from Montreal, Canada to Portland, Maine; and 575 miles across Montana. In 2001, Pallotta says the company expects to raise $130 million for charitable causes — $30 million more than this year. The company turns over about 55% of funds raised to AIDS and breast-cancer charities — the remaining money pays for marketing, participant support, and production fees, which total nearly $200,000 per event.

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Following is Pallotta’s three-step process for turning a vision into a business that does good by doing well.

Vision: An Incentive to Believe

“Every business must stand behind a bold vision,” says Pallotta, whose own vision was ripped from the playbook of Martin Luther King Jr. King’s civil-rights marches, bus boycotts, and fearless leadership inspired Pallotta to think beyond the possible. To Palotta, the inaugural AIDSRide through Los Angeles was more than a bike trip for a good cause. It was a bold statement made by 478 pioneers, undeterred by government squabbling or health-care inefficiencies, who believed determination could win over disease.

Beginning with that first event in 1994, Pallotta broadcast the vision of his fledging company to anyone and everyone who would listen. In essence, he worked to create a self-fulfilling prophecy.

“Vision isn’t about taking people to a place that they don’t think they can reach,” Pallotta says. “Vision is about taking people to a place they haven’t yet dreamed of. I learned that when John F. Kennedy sent American astronauts to the moon in 1969.”

Marketing: An Investment in Vision

In 1994, Pallotta TeamWorks spent about one-sixth of its total income on marketing, a controversial move for a company with charitable intentions. In the aftermath of this year’s dotcom blowouts, it might appear downright suicidal. Still, Pallotta TeamWorks continues to invest more than 15% of its total income in full-page print advertisements, subway billboards, and radio spots — all in an effort to entice consumers of the products called AIDSRide, Vaccine Ride, and Breast Cancer 3-Day.

“In key markets like Washington, DC, we may spend half a million dollars on print and radio advertisements publicizing just one event,” Pallotta says. “That marketing budget may seem insignificant to Budweiser, but it knocks the wind out of local charities.”

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So why do Pallotta TeamWorks’ marketing efforts flourish when others’ fizzle? Because, Pallotta says, “At some deep level, our ads provoke people to realize their full potential. They aim for the soul.”

Pallotta insists that all marketing messages convey the boldness and importance of each event. He models his marketing efforts after high-caliber brands like Lexus and Sony, and he unabashedly chases the baby boomers and gen-Xers with money and an adventurous streak.

“If you’re going to entice consumers to take part in a daring seven-day ride from San Francisco to Los Angeles, you need a full-page, four-color ad in the Los Angeles Times that enhances that aura of boldness,” he says. “Creative marketing brings success to your vision. Out of that success, you can create structure to grow the enterprise.”

Structure: A Community of Resources

In an effort to build an unparalleled support structure, Pallotta TeamWorks has galvanized grassroots leaders in various cities — participants who help organize training rides, workshops, and pub nights prior to an event. In addition, Pallotta himself often pitches in to work the phones. Last month, he spent countless hours calling each of the 560 people registered for next summer’s Alaska AIDS Vaccine Ride, frequently reporting for work as early as 6 AM to speak with the customers who mean so much to his company.

“Many businesses lack soul because they have isolated themselves from their customers,” Pallotta says. “And that isolation is completely artificial. There’s no reason the president of a company and all the managers underneath him can’t create relationships with consumers and make an immediate impact.”

The importance of human relationships is a theme that permeates all of Pallotta TeamWorks’s communications with its customers. Pallotta’s “rigorous experiment in kindness” almost sounds too touchy-feely for these hardened times. Perhaps that is why it works.

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“I met a participant during last summer’s New York AIDSRide who said, ‘I fixed 11 flat tires on this ride, and none of them was my own,'” Pallotta says. “Riders and walkers tell us that the community we create for three or six days during an event feels like the world they always wanted to live in. We have the audacity to promote kindness, and that rubs off on our customers. People treat each other decently during these events, and I think that’s an important reason why so many of them come back.”

Contact Dan Pallotta by email (pallotta@pallottateamworks.com).