Brand owners may find themselves in one of two categories in regards to brand licensing:
First, you may have been considering launching a brand licensing program for several months or even years. However, you may be hesitant as you just don’t know how much royalties your brand could generate and whether you would gain a sufficient return on investment from those royalties to make such a program worthwhile to your organization.
Second, you may have had an existing brand licensing program for quite some time and have been wondering if it is fully optimized. Perhaps you are wondering if most of your royalty revenue comes from only one or two licensees. If you believe your royalties are spread evenly across your licensees, you may be wondering if most of their sales are coming from one or two retailers. With the downturn in the economy you may be concerned if your licensees are on the brink of going out of business.
In either case, a brand licensing program audit should be considered.
If you find yourself in the first camp trying to determine how much pent up demand exists for your brand in categories that could be licensed, a brand licensing program audit is specifically designed to answer the following questions:
The Blake Project will work with you to evaluate what new categories your brand is ready to extend into, the range of sales your brand will generate through brand licensing and what the range of royalty revenue you can expect to be brought into your company. We will then evaluate what the cost would be to either launch the program internally or by utilizing a brand licensing agency. From this we will determine what your ROI will be. The audit focuses on how you can use your brand’s strength in the market place to generate royalty revenue for your company while extending the brand into new categories where your consumers and customers expect it to be.
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Branding Strategy Insider helps marketing oriented leaders and professionals like you build strong brands. To that end we’re happy to answer your marketing questions. Today we hear from Kim, a senior global brand manager in Los Angeles, California who writes…
“I’m frustrated with our brand licensing agency. The situation is the agency is not optimizing our program. The categories chosen are not reinforcing the brand’s positioning. The licensees are not fully exploiting their approved channels, limiting the distribution of the licensed product and the licensed products are not reflecting the brand’s attributes causing overall sales growth to languish and potentially damage the brand’s equity. We are considering bringing the brand licensing program in house and discontinue agency relationships altogether, but first I want to understand the key factors needed to ensure a successful transition.”
Thanks for your question Kim. Before making a switch you should have a good understanding of the following:
There are good brand licensing agencies and consultants Kim, talk to other agencies and you’ll see what I mean.
Thanks for your question, we wish you much success with your brand licensing program.
For brand owners interested in brand licensing start here.
Have a question related to branding? Just Ask The Blake Project
Sponsored by: The Brand Licensing Workshop
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Featuring John Sculley May 16-17, 2013 in San Diego, California
A unique, competitive-learning workshop limited to 100 participants
As in the marketplace — some will win, some will lose, All will learn
Regular readers of Branding Strategy Insider know we welcome and answer marketing questions of all types. Today's question comes from Ryan, a senior analyst with a private investment fund in New York City, New York. He writes:
"First question: I read today that Sears is thinking about licensing its Kenmore, Craftsman and Die Hard brands. Could you hazard a guess as to (i) the range in licensing fees such brands might generate, and (ii) the prospects that someone of substance would be interested in licensing those brands given their present distribution?"
Ryan, thanks for your question. My thoughts as a brand licensing strategist…
(i) Range of fees would go from $7.5 MM – $45 MM over three years (after commercialization commenced).
(ii) Prospects of someone interested – I think interest could be high based on my assumptions below. The key is how to not compete with the parent brand. After all, those brands are why people go to Sears.
Kenmore, Craftsman and Die Hard are mid tier brands that have a long history and substantial brand equity. Moreover, the brands are closely tied to the Sears name. While there may be some confusion generated in consumers’ minds if these brands were licensed for distribution in other channels, I still believe they would perform well.
Royalty rate: These brands should command somewhere between 5% – 10% depending on the product category, the channel and the region.
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Disney and Marvel have long been successful in licensing their brands. Is your brand ready to benefit from global brand licensing? You know you are ready for licensing in brands when you have:
A business unit with a minimum of $50 million revenue.
Best in class products that meet pent up consumer demand.
Products sold into the channels and regions in which you intend to sell the licensed product.
The capability of building the licensed brand’s essence into your products.
The ability to invest a minimum of 3% of your net sales generated from the brand licensing program into marketing the product.
An organization capable of following the requirements of the license, i.e. the approval process, testing requirements, audits, royalty reporting and payments.
From here, begin with a well thought out brand licensing strategy.
Sponsored by: The Brand Licensing Workshop
Branding Strategy Insider helps marketing oriented leaders and professionals build strong brands. We focus on sharing thought provoking expertise that promotes an elevated conversation on the discipline of branding and fosters community among marketers. BSI is a service of The Blake Project, a leading brand consultancy based in the United States.
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