Licensing: Trouble For Brands

One of the current siren songs of marketing is the opportunity to earn some extra money by licensing your brand name. Someone comes up to you and offers you a deal you can't refuse. After all, you're playing with other people's money. It's also long-term trouble for your brand.

It all begins, in many instances, with a licensing agency that goes out and hustles your brand. Here's an actual example from a Web site:

"We are the licensing agency for Pratt & Whitney Corporation. Pratt is interested in licensing companies the rights to produce and market products under the Pratt & Whitney brand name. Categories that we are currently in discussions with companies include power generators, aviation tools (power, air, hand tools), pilot accessories, welders, air compressors, power washers, tow units, engine stands, aviation electronics (headsets, GPS, radios, etc), outdoor power equipment and small engines. If you are interested in becoming a Pratt & Whitney licensee to capitalize on the worldwide recognition of the Pratt & Whitney brand, then please contact me."

There you go. Instead of focusing on being the No. 2 jet engine in the world and figuring out how to sell against General Electric jet engines, they want to become everything they can think of and then some. Not good marketing, but it's someone else's money.

Fashion's big guns will put their name on just about anything, writes Susan Chandler in a U.K. article on brands.

Designers aren't content to merely dress their customers anymore. They want to furnish their clients' homes, outfit their children and formulate the shade of lipstick they wear. American designer Ralph Lauren was a pioneer in the "lifestyle brand" trend in the 1980s, but nearly every A-list designer today, from Giorgio Armani to Stella McCartney, has his or her name on sunglasses, jewelry, handbags and perfume.

Those who do it well make a lot of money. But creating line extensions is a risky strategy that can dilute a brand's power if it is overdone. Calvin Klein and Bill Blass discovered that years ago when they signed a bunch of licensing agreements that allowed manufacturers to slap their names on inexpensive goods. Their cachet eroded.

Pierre Cardin has lent his name to just about everything--at the expense, say some, of much of his credibility. He is known all over the world due to his penchant for stamping his name on everything from golf clubs and frying pans to binoculars and orthopedic mattresses. While most designers content themselves with fragrance, accessories and underwear, Cardin has amassed more than 800 licensees around the globe, and earns royalties on Pierre Cardin luggage, ceramics and cooker hoods.

When he acquired Paris' famous Maxim restaurant in 1981, he made merry with that name, too, applying his creative talents to such Maxim products as flowers and sardines. (Yes, Pierre Cardin sardines.) One product you won't find around anymore is Pierre Cardin wine. People who tried it said, "It tasted all right, but it did have a perfumy smell."

Not good marketing ... but it's someone else's money.

Donald Trump is the current king of silly licensing. He made his name negotiating gold-plated real estate deals, but when it comes to selling other goods, the tycoon doesn't always have the Midas touch. A line of golf clothing sold in Macy's has been discontinued. And a fragrance unveiled in 2004, with fanfare and also sold at Macy's, is no longer in production. (Who wants to smell like Donald Trump?) Marty Brochstein, editor of The Licensing Letter, put it very well when he said, "If I'm a golfer, whose clothes do I want to buy, Tiger Woods' or Donald Trump's?"

Tracking the performance of Trump merchandise is not always easy, since sales figures are not made public. Ironically, the one area you can measure in performance are the Trump Casinos. They have been heading south for some time while losing a lot of money for a lot of folks.

Not good marketing ... but it's someone else's money.

Richard Branson is sort of a Donald Trump on steroids when it comes to licensing the Virgin brand. He has 50,000 people working on Virgin brands all over the world in all types of business. (One, Virgin Cola, is no longer with us.) But as the Brits would say, "Sir Richard is in a spot of bother."

In Branson's home base, the U.K., his Virgin empire is being battered from all sides, from its squabbles with Rupert Murdoch over satellite TV to loss of a cross-country rail franchise. Despite an advertising campaign fronted by actress Uma Thurman, Virgin Media, created out of the former NTL cable company, is losing customers and is also subject to a takeover approach from private equity company Carlyle Group that could see the Virgin name ditched. (Virgin Media's stock is also headed south.)

Meanwhile, in America and Asia, Sir Richard launched "Virgin" brands of discount airline service. For his name, he takes a 20% ownership stake and his partners put up the capital. All I can say is good luck in those discount airline jungles.

But the beat goes on ... with other people's money.

Toy company Hasbro has struck a deal to license its Playskool brand into baby-care products, including disposable wipes and diapers, and CVS drug stores will begin selling these products this fall at more than 6,100 national stores. A toy diaper? My guess is that theses baby-care products won't do very well against the likes of Pampers and Huggies.

Will it ever end? I doubt it. As my father once advised me, "There's a sucker born every day, and two to sell him."

Sponsored By: Brand Aid

Comments

[Andre Michael]

Any brand manager turning his/her most valuable asset into a prostitute, should be fired.
But that is not news, is it?

AM

[chuck]

I think it depends who you are and what products you are licensing. Disney licenses a lot of toys, lunch boxes, etc. and I don't think it has hurt their brand at all because their brand message, fun for the family, can be applied to anything fun. If you're Starbucks and your brand message is a better coffee experience, then it makes no sense to license liquor.

[Steven Ekstract]

Don't throw the baby out with the bathwater. Of course it does not make sense to be willy nilly with licensing your brand, but it saved the Sunbeam brand, it will help save Sharper Image; and Trump, by the way, has been the number 1 selling Men's Suit at Macy's for a number of years running. Its called Brand Power. A Smart Brand Manager does not "prostitue" his brand, he finds the right partners to compliment his brand.