We regularly answer marketing questions here on Branding Strategy Insider. Today we hear from Rick, a senior marketer in Los Angeles, California who writes…
“I work at a large utilities company where we are exploring the feasibility of licensing our brand. Specifically we are interested in engaging an agency that can develop brand licensing agreements and manage the entire program. We want to be sure that a brand licensing agency will create the value needed to make this worthwhile. Where would be a good place to start?”
Thanks for your question Rick. The first criteria in your search for a brand licensing partner is to be sure the agency understands how to extend into categories that will reinforce the position of your company’s brand. A deep understanding of brand strategy and positioning is critical to help avoid extensions that may damage your brand. Second, be sure the agency knows how to find best-in-class vendors to commercialize products that will deliver against your brand’s promise.
If the agency gets these two things right, the rest will take care of itself. By selecting categories that deliver against the brand position, every licensed product purchased will reinforce that position in the mind of the consumer, thus strengthening their brand loyalty and allegiance. By having best-in-class vendors as licensees, the execution will be top notch which means the program will grow faster and more successfully, delivering value to all stakeholders.
You should also check that the agency has a rigorous brand licensing process to eliminate the guess work and a robust standardized contract to protect the company and the brand in case anything goes wrong. Moreover, the agency should be expert negotiators who know how to extract the maximum value for the brand owner in terms of royalty rate, minimum guaranteed royalty and net sales.
For this, most agencies require a substantial upfront fee to get the program up and running and then a percentage of royalties collected. The agency manages the collection process on behalf of the brand owner. Some organizations, like ours (The Blake Project), are open to receiving a retainer in lieu of an upfront fee to mitigate the company’s costs and the adverse impact on their cash flow. Unlike most firms, we also develop a plan to transition management of the licensing program to the brand owner when they are ready. When this occurs all future royalties go to the company.
Rick, here’s an example of a successsful brand licensing program.
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