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Brand Licensing

Should You Extend Your Brand Via Licensing?

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Apple Brand Licensing Strategy

Companies extend their brands via licensing for a variety of reasons. Licensing enables companies with brands that have high preference to unlock their brands’ latent value and satisfy pent-up demand. Through licensing, brand owners have the ability to enter new categories practically overnight, gaining them immediate brand presence on store shelves and often in the media. Let’s take a deeper look at the benefits that make licensing so attractive to brand owners.

By licensing their brands, companies are able to satisfy consumer needs in categories that are not core to their business. When Apple launched the iPod a number of years ago they revolutionized the way in which people listen to their music. The iPod was so successful that its quick acceptance created an immediate need for accessories such as armbands, adapters and auto chargers. Apple could have chosen to manufacture and distribute these accessories themselves. Instead, Apple decided that these accessories were not core to their business expertise and therefore chose to satisfy the need through licensing. By licensing the iPod brand, Apple enabled a tremendous number of companies to produce all kinds of terrific products to make the iPod more user-friendly and to enhance the listening experience. Examples of licensed products for the iPod include the Bose Sound System with iPod docking station, the Nike+ running shoe, auto adaptor kits, armbands and many other products. All of these accessories are sold by licensees.

Some licensors see licensing as an opportunity to “test” the viability of a new category without having to make a major investment in new manufacturing processes, machinery or facilities. In a well-run licensing program, the brand owner maintains control over the brand image and how it’s portrayed (via the approvals process and other contractual structures), positioning itself to reap the benefit of additional revenue (royalties) and brand exposure through product displayed through new channels and incremental shelf space. For example, Rubbermaid gained additional revenue and brand presence by licensing kitty litter containers that are sold in the mass channel core to Rubbermaid, and specialty pet shops core to United Pet Group, the licensee.

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Brand Licensing

Event Licensing Strategy

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Hello from Sochi, Russia. The Blake Project is here in support our client, The Coca-Cola Company, – we have been guiding their brand licensing efforts for these games. The assignment is at the intersection of brand licensing and event marketing a place where more marketers and brands should be paying closer attention.

Some are. More and more companies are choosing to sponsor events. They understand the connection between fans and events and wish to take advantage of the positive associations that consumers and fans get from attending events. When a company becomes intertwined with an event, as occurs with a long-standing sponsorship, that company name becomes synonymous with the event. This type of relationship creates powerful brand cohesion. NASCAR fans only know their championship as the NASCAR Sprint Cup. To not include the Sprint name in the title would be to omit part of the title. NASCAR fans appreciate the role the Sprint Nextel Corp. has played in supporting their sport. For this support, fans reward Sprint Nextel by buying their cellular phone products.

However, Sprint Nextel’s NASCAR product line does not extend beyond the cellular phone category. Wouldn’t it be great if Sprint Nextel created a complete line of NASCAR merchandise? If you don’t agree, keep reading. There is a huge opportunity waiting to be tapped if executed properly. For this reason Sprint Nextel should consider creating an event licensing program that compliments their existing Sprint Cup event marketing program.

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Brand Licensing

Brand Licensing And Brand Equity

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Branding Strategy Insider readers know, we regularly answer questions from marketers everywhere. Today we hear from Laura, a Marketer in New York, New York who writes…

“What is brand licensing and what is its effect on brand equity? Please give me a general overview.”

Thanks for your note Laura. Let’s take it from the top. The stronger a brand’s reputation, the higher the value of the brand and the greater revenue it will drive for its owner. Prospective licensees seek to license brands with the strongest reputation, as these are the brands consumers demand and retailers prefer most. The stronger the brand, the higher likelihood retailers will buy the licensed products and that they will be subsequently purchased by consumers. Brand loyalists and advocates look to their preferred brands to deliver more and better products year after year. When this occurs, the brand gains permission to extend into categories that complement its original offering. This is known as brand extension.

For example, the Mr. Clean brand, owned by P&G, was launched in 1963 as the first household liquid cleaner. Over time, the brand gained a strong reputation for its ability to clean effectively on a variety of surfaces. By delighting its consumers, Mr. Clean built significant brand loyalty and allegiance. When asked, consumers told the Mr. Clean brand team that they expected the Mr. Clean brand to offer additional products that simplified and enhanced the household cleaning experience. To satisfy these consumers, Mr. Clean developed a line of branded mops, brooms, and brushes.

These products were met with enthusiasm and eventually, consumers demanded even simpler and more effective ways to clean their homes. Today, the Mr. Clean brand can be found on an expansive list of products including scrubbing tub and shower pads, Magic Eraser cleaning pads, auto dry car wash systems, multi-surface disinfecting wipes, rubber gloves and many other products. Many of these Mr. Clean products are licensed. By owning a brand that can be extended into numerous categories, companies are able to attract and retain multiple prospective licensees. Using licensing to augment internal resources actually accelerates a company’s overall time to market.

Brand Equity and Extendibility

Companies that know their brands well will have a good understanding of the equity of each brand. A brand’s equity is derived from the awareness and image a brand holds with its consumers. Often brand managers will leverage a brand’s equity to enter or extend their brands into new product categories to help drive strategic growth for the company. For example Crest extended its brand from toothpaste into whitening. Before Proctor & Gamble (P&G), who owns the Crest brand, launched Crest Whitestrips, they conducted research to understand if the brand had ‘permission’ to enter into the retail whitening category, long held by established brands such as Rembrandt and Aquafresh.

P&G wanted to find out if consumers would expect Crest to offer a whitening product and if so, purchase this new product based on their preference for the Crest brand. As many of us are aware, Crest Whitestrips have performed well in the marketplace, achieving high rankings and advocacy ratings. While P&G decided to enter the whitening category by sourcing the product overseas and distributing globally, they could have chosen either to manufacture it themselves or enter the market through licensing and have their licensee manufacture and distribute the product.

In the case of Mr. Clean, P&G discovered that consumers expected the company to offer cleaning accessories under the Mr. Clean brand. In this instance, they decided to enter the market by licensing the category to Magla, a company that already had expertise and presence in this category. When we say that P&G entered the cleaning accessories category through licensing, we mean that P&G allowed Magla, a manufacturer of cleaning accessories, to use the Mr. Clean brand in exchange for a licensing fee.

Best in class brand licensing programs are designed with a highly strategic process that aligns the meaning of your brand with the licensed brand. In other words, if the alignment is not there strategically you do not do the deal.

Laura, you can find more on brand licensing here.

Have a question related to branding? Just Ask The Blake Project

Sponsored by: The Blake Project’s Brand Licensing Audit

Join us at The Un-Conference: 360° of Brand Strategy for a Changing World
May 6th and 7th, 2014 in South Beach, Florida
A unique, competitive-learning workshop limited to 50 participants (Selling Out Quickly)
As in the marketplace — some will win, some will lose, All will learn
~In Partnership with the American Marketing Association and the Miami Marlins~

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

FREE Publications And Resources For Marketers

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Brand Licensing

Brand Licensing Strategy Today

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Branding Strategy Insider helps marketing oriented leaders and professionals like you build strong brands. BSI readers know, we regularly answer questions from marketers everywhere. Today we hear from Jennifer, a Reporter in Chicago, Illinois who writes…

I have an assignment for Gourmet Business, an ezine read by gourmet food and housewares retailers, to write about the biggest licenses in 2013. I am hoping you could share some of your brand licensing insight with our readers.

In general, how important are license agreements today?

Hi Jennifer, thanks for your questions. License agreements are getting more and more important as the world economy forces brands to exist in a non-conventional structure. What I mean by this is that the traditional manufacturer of the 1950s and 1960s which built and sold branded products over decades has become less and less commonplace in today’s marketplace. As companies lose profitability in certain categories due to competition, they are choosing to keep their brand presence in that category via licensing to avoid product exits. Motorola licensed their two-way radio business and Rubbermaid licensed their brand for kitchen tools & gadgets – two foundational categories for each brand. Companies like Iconix are buying up brands and licensing them out – they don’t manufacture anything. For companies to survive they must be innovative and licensing offers them such an option.

Can you offer any comparisons between how licensed products drive sales and create brand awareness versus sales and awareness of unlicensed products?

Licensed products borrow the competencies and resources of best in class manufacturers (licensees) to extend brands into categories that they would otherwise not normally be in. This creates additional brand presence on shelf, in advertisements and with consumers – in their homes or on their person. By licensing, companies can use licensees to keep their brand on the shelf and competitions’ off.  While the sales of licensed product are posted to the brand’s licensing partners P&L, they are often reported in the footnotes of 10K and 10Q filings. The royalties (normally calculated as a percentage of sales) hit the brand owner’s P&L. Licensed products are marketed and sold by the licensees, which often are category captains in their industry. This means they have strong teams to promote the licensed products. Unlicensed products rely solely on the manufacturer, or their distributor, to reach the retail shelf. This usually means less resources and, if the product is relatively unknown, the chance of success is greatly diminished.

Has the influence of licensing grown or diminished in recent years?

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Brand Extension

Brand Advantage Through Brand Extension

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Not too long ago here on Branding Strategy Insider, one of my co-authors, Nigel Hollis shared three basic ways a brand can change the brand game to its advantage:

1. Expand the category

2. Disrupt the category

3. Exceed the category

I would argue there is a fourth strategy to go along with expanding, disrupting and exceeding the category. That would be to “extend” the category.

Take Colgate for example. Not only have they been successful in disrupting the category by adding Colgate® Total® to their line of toothpaste, but they have been successful in “extending” the category with products such as Colgate® Peroxyl®, a rinse for minor mouth irritations and Colgate® Orabase®, a pain relieving paste. By extending the brand experience, Colgate also extends the consumer experience while increasing their overall brand awareness through additional shelf space in the retail aisle.

There are several ways for a company to extend a brand. A company can choose to manufacture or source (often from less expensive manufacturers overseas) the new category of product. These two methods require existing sales and marketing teams to drive demand and customer commitment. However, if the company is not familiar with the extended category, they will have to invest in building a minimal level of competence or risk a possible failed brand extension.

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