The Blake Project, the brand consultancy behind Branding Strategy Insider, delivers interactive brand education workshops and keynote speeches designed to align marketers on essential concepts in brand management and empower them to release the full potential of the brands they manage.
Category: Brand Licensing
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.Read More
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
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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
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?Read More
As brand owners consider entering the global marketing via licensing, there are several points they should take into consideration. Some of the big ones include language, liquidity of their currency versus the dollar are their culture. Each of these can have a significant impact on brand owners’ ability to manage programs effectively.
The following chart helps articulate some of the differences between the US market and emerging markets. Each can have a potential adverse impact on business.
|Factors||US Market||Emerging Market|
|Currency||Uniform||Different currencies and exchange rates|
|Economy||Stable and uniform||May be variable and unpredictable|
|Government||Stable||May be unstable|
|Labor||Skilled workers available||Skilled workers hard to find|
|Language||Generally a single language||Different languages and dialects|
|Marketing||Many media, few restrictions||May be fewer media and more restrictions|
|Transport||Several competitive modes||May be inadequate|
Best in Class Brand Licensing Agencies and Licensees
One of the most important decisions brand owners will make is choosing the right agencies to represent their brand. In addition, choosing the right licensing partners is critically important. When choosing an agency or licensee, make sure each…
- Believe in the vision of the brand and see the benefit of establishing the brand in the respective category
- Understand consumer needs and are willing to invest in marketing
- Achieve category captain status (retailer recognition for their excellence)
- Have strong leadership, are well managed and have limited employee turnover
- Possess excellent references from licensors and retailers
- Focus on innovation and product development
- Deliver consistent financial results
Below is a checklist that can be used when evaluating brand licensing agencies and brand licensees. If these organizations can achieve these parameters within their markets, brand owners will have a foundation for success.
|Price||Aligned with channel|
As brand owners launch their brand licensing program, their goal should be to stimulate profitable, long term growth of licensing revenues, to maximize the efficiency and effectiveness of the licensing team, eliminate major risks and ensure that the right controls are in the place to keep their program running smoothly.
Strategic considerations should include brand equity protection and ensuring fair compensation based on segment/category value. From a financial perspective, brand owners should be concerned about financial compliance and the quality of the financial arrangement taking into account quality of the sales and royalty forecasts, licensee solvency and the timing of royalties. Legal considerations include legal compliance, the quality of the licensing contract and the due diligence conduct on prospective licensees (are they who they portray themselves to be?).
To separate the serious prospects from the curious we recommend brand owners get their prospects to fill out a robust licensing application. As part of the application process, they will need to collect business, financial and legal information for each prospective licensee. Key areas to evaluate include strategic, financial, legal, organizational and third party references.
From a strategic perspective, brand owners want the licensee or agency to have an understanding of the consumer, their brand, product development, market research, advertising and promotion. They should have a leadership position in their industry, have strong retailer relationships, significant channel presence and have demonstrated innovation capabilities. A good way to assess their innovation capabilities is to probe into their R&D efforts and how many new product launches did executed in the last three years.
From a financial perspective it will be important to look at prospective licensee D&B reports, credit references, bank references, licensees past three years of financial statements. They should take a good look at their debt coverage, growth, cash flow and debt-equity ratio.
From a legal perspective, brand owners should try to assess their legal compliance. Do they have any past and pending law suits? In addition take a look at any prior product liability and what level of due diligence they use to assess their vendors.
From an organizational perspective, brand owners should be most concerned with their company leadership. Are they well managed? What kind of organizational structure do they have? Is their internal alignment between the senior management team and their employees? Finally, what is the cultural fit between the licensee and their company?
There are two types of reference checks: licensor references and buyer references.
When speaking to other licensors about a prospective licensee brand owners should inquire about their Product Quality and Product Development. Also, they will want to assess their Design, Sales and Distribution Capabilities. Find out if they use an internal or external Sales group. What is their service ability? How strong is their marketing and packaging competencies, payment history, business planning and forecasting? Finally ask about their customer service procedures and capabilities.
When speaking with retail buyers, ask about their product quality, service levels, marketing capability, pricing, category leadership, product Innovation, warranty and return policy.
Finally, brand owners should evaluate their program from a macro and micro perspective. Find the right markets to enter with their brand and then look hard at who can help them enter those markets. If they stick to the well-developed markets initially, that will minimize problems from an intellectual property perspective while giving them the greatest chance for growth. Tying up with strong partners in those markets and following a rigorous brand licensing process will ensure long-term success.
Sponsored by: The Blake Project’s Brand Licensing AuditRead More
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:
- What kind of royalty revenue can my brand generate?
- How much will it cost for us to get started?
- How long will it take to reach critical mass?
- What will the ROI be?
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.
To help you properly evaluate the viability of launching a brand licensing program, together we will:
- Identify the top 5 – 8 categories in which to extend your brand
- Prioritize those categories by potential consumer engagements, royalty revenue and customer interest
- Identify 2 to 3 prospective licensees (manufacturers) for each category
- For each category, define an expected set of licensing deal terms including royalty rate, minimum sales, minimum guaranteed royalties, territory, channels and term
- For each category, estimate the total sales and projected royalty revenue
- Based on the findings, make a recommendation as to the viability of brand licensing as a go-to-market strategy
- Articulate the investment needed and the actions required to launch a brand licensing program
- Summarize and present the findings and recommendations in a PowerPoint presentation
Specific input is critical to this audit. As such we will be interviewing team members and other key stakeholders including retail partners. The input will be designed to answer the following questions:
- What is the strength and equities of the brand?
- What new categories can the brand enter that will leverage its strength and equities?
- What is the market size for each new category and expected growth over the next 5 years?
- What company is the category leader and what is its market share?
The deliverable for this audit is clarity on the ROI of a brand licensing program. The ROI forecast will be calculated by determining the cumulative royalties projected to be generated through the third year of commercialization divided by the total costs to launch the program.
If you are in the second camp wondering if your existing licensing program is optimized, we will work with you to answer the following questions:
- Does the licensed product reinforce its brand’s positioning?
- Do consumers have access to the licensed product through every designated retail channel or region authorized in each licensees’ contract?
- Are the net licensed product sales and royalty revenue growth balanced across retailers and Stock Keeping Units (SKUs)?
- Are the licensees in good financial health and do we have strong processes in place to find qualified replacements?
Our optimization audit is designed to gain clarity on whether you brand licensing program is indeed optimized, and if not, what steps can be taken to alleviate any major gaps.
We will work with you to evaluate what areas are out of balance and by how much. You will gain a good understanding of any hidden risks in your brand licensing program and how much they can impact its viability. We will then evaluate what the cost would be to remedy those risks and how quickly you must take action. From this we will determine what your ROI will be.
Here are the eight areas we will evaluate to determine your brand licensing program’s level of optimization and what is needed to get it on track:
1. Portfolio Balance
a. Is the overall brand licensing portfolio properly balanced?
b. How many licenses does the program have?
c. What percentage of the licenses comprises 80% of the net sales?
2. Category Alignment
a. Is your program licensed in the right categories?
b. Does the brand have permission to be extended into the existing licensed categories? (internal research – brand research)
c. If so, are there category positioning statements written for each category?
3. Licensee Search and Suitability
a. How are you prospecting licensees to ensure you are finding the best suited to support your program?
b. Where do you look for information when prospecting licensees?
c. What parameters are used to shortlist licensees from the universe?
4. Licensee Health
a. What is the overall health of your licensees?
b. When was the last time you checked their audited financial statements?
c. Do they have any current or pending law suits that could seriously impact their business?
5. Category Management
a. How often are reviews conducted with each licensee to ensure they are meeting their objectives? Annually? Quarterly? Monthly?
b. What questions are being asked in the review?
c. Who from the licensee is attending the reviews?
6. Licensee Orientation and Alignment
a. Is there a robust orientation program in place?
b. If so, who attends the orientation and when does it take place?
c. How often do you meet with the licensees individually and collectively?
7. Business Planning
a. Is there an existing business planning process in place?
b. Do you use a licensee summit to review the planning process?
c. How often do you discuss the plan with the licensees?
8. Contract Quality and Accuracy
a. How robust are the contracts you currently have in place?
b. Do they accurately reflect the deal terms and procedures being practiced?
c. When does each of your contracts expire? Is there proper succession planning?
The deliverable of this audit will expose any vulnerabilities of a brand licensing program across the eight areas of evaluation and what actions are required to correct them.
In both audits we educate clients throughout the process so that all program managers are speaking a common language. For instance, we will provide a glossary of brand licensing terms as an easy reference guide. We will make sure members of your team understand how the licensed product and the royalty payment each flow. Finally, we will make sure that everyone has a clear understanding of standard brand licensing deal terms and what are the customary royalty ranges they can be expected for their brand.
A brand licensing program audit should be high on the list of priorities for those with an existing brand licensing program and those considering a program. Contact us for more.
Sponsored by: The Blake Project’s Brand Licensing Audit
Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand EducationRead More