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
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.Read More
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.Read More
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.Read More