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 Kate, a business reporter for National Public Radio in Rochester, New York who writes…
"Kodak cameras and related products will be back in the marketplace this year, but they won't be made by Kodak. The photo pioneer stopped making digital cameras about a year ago. Now it is licensing its brand name to another camera maker. Please answer a few brand licensing questions for me."
1. What if any concern should Kodak have in licensing their brand?
As with all brand owners, Kodak should be aware that JK Imaging or any other licensee will have certain rights to the Kodak brand and through their licensing relationship, JK Imaging could adversely impact Kodak brand equity. This could result from the sale of poor quality products, the sale of the Kodak licensed products in an unauthorized channel or region, or from not ensuring the manufacturing facility used by JK Imaging complies with safe international working standards. To mitigate this risk, Kodak should have first vetted JK Imaging through a rigorous due diligence process to ensure JK Imaging can deliver against the Kodak brand promise in all products they manufacture. Second, Kodak should ensure they have a thorough approval and auditing process to affirm that all products sold in the marketplace meet their standards and that all facilities are compliant with government and trade guidelines. By picking a best in class brand licensee, Kodak will continue to reinforce their brand equities as they engage with consumers across all channels and regions where the brand is licensed.
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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.
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Today on Branding Strategy Insider, we're taking another question from the BSI Emailbag. Lawrence, a brand marketer in New York, New York writes:
“How do I license a brand name? I have the idea to connect a cartoon name to an alcoholic beverage. MGM is the owner of the rights. What is the best way to start? And what are things to keep in mind when approaching MGM?”
Thanks for your question Lawrence. Here are some of the things you should do to prepare for licensing the MGM brand name:
1. Determine whether the cartoon character has the permission to extend in to an alcoholic beverage or not. Think of the cartoon character as a brand. Do the consumers of the brand expect to buy alcoholic beverages? If the cartoon character has an adult fan base, then maybe. Conduct research within the core fan base that you can share with MGM.
2. What will be your business plan? What retail channels will you sell them in and at what price? What sort of marketing efforts will you put towards the brand licensing program. As a licensee, you should have answers to these questions ready. Also, have a sense of what sales numbers you will be able to achieve. You will eventually be asked these questions by MGM.
3. Be ready with a ballpark idea of what royalty rate you will be expected to pay MGM. Research what percentage comparable brands demand. Know your financial structure, i.e. expected MSRP, margins etc.
Lawrence, you'll find more on the basics of brand licensing here. For brand owners interested in the benefits of brand licensing start here.
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Brand extension is the way to get the best financial return out of a strong brand. By extending a known and much loved brand into new countries and categories, the brand owner reduces risk and maximizes the return on their investment. But extension is not without risks of its own. These days I can’t help wondering if many brands are extended too far, too fast.
Extension into new product categories poses an interesting challenge for a strong brand. There needs to be a good fit between what the brand stands for and what people look for from the new product category. But the fit between the brand and the category does not need to be based on a direct application of the brand’s functional credentials. The fit can be more conceptual. Sometimes this makes for giant leaps into categories not remotely connected to the brand’s origins.
A recent example that comes to mind is the Dirty Jobs heavy duty cleaning products spawned by the “Dirty Jobs" show on the Discovery Channel cable network. In each program, the show’s host, Mike Rowe, explores a dirty job, and attempts to complete the same task as the people whose job it really is. The fit between the well-known TV show and a line of cleaning products makes good sense. After all, Mike doesn’t just get dirty he has to clean up somehow.
A similar “leap of faith” extension would be Wolverine World Wide’s Cat Footwear, the global footwear licensee of Caterpillar® Inc. There is no real functional connection between giant, yellow, earthmoving equipment and footwear, but the connection is there. From durability to traction the benefits of machines and boots have a lot in common. The conceptual linkage has allowed a small collection of work boots to grow into a wide range of casual footwear selling in more than 150 countries worldwide.
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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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