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
In 2001 Cinnabon had no licensing program and no products for sale outside of their mall, airport and kiosk locations across the U.S. and International Markets. Today Cinnabon Licensing has grown to over 70 products with multiple world-class licensing partners like General Mills and Kellogg’s. The program has developed into a best-in-class model for restaurant brands that wish to expand their brand footprint, creating broader brand awareness and incremental revenue flows for the organization. This success and the long-term viability of the Cinnabon program came as the result of careful planning, research and development.
Choosing the right Cinnabon products was a critical first step for the brand. The Cinnabon Licensing team took several factors into consideration when defining their retail product/licensing program:
Product Lines – Should the retail product line include products sold in the restaurants or products developed exclusively for the retail channel? Are there signature ingredients that can be leveraged in complementary product categories?
Consumer Interest and Acceptance – Cinnabon understood that research findings related to consumer interest and affinity would not only help with product identification, but would prove useful during negotiations with prospective licensees and aid in the retail sales process. Moreover, research gave the brand “permission” to enter certain categories and thus was perceived as a good fit. Finally, consumer taste tests would be integral to ensuring the products met consumer expectations. Combined with intent to purchase measurements, Cinnabon was able to validate the proposed ROI and provide essential data for forecasting production.Read More
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.Read More
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
This past Friday, July 29, 2011, USA Today showcased an article on the front page of their business section titled Donald Trump Faces Lawsuit Over Business Deals. It seems Donald decided that the good work his agency, ALM International, completed when it signed apparel giant Phillips-Van Heusen aka PVH, to license Trump's name for a line of dress shirts and formal neckwear, no longer warranted compensation.
According to the article, Trump didn’t think ALM should be entitled to their fees that arose from royalties based on automatic renewals on their agreement. "I don't feel that these people did very much, if anything, with respect to this deal," said Trump. Trump even questioned whether ALM was entitled to any compensation because all he signed was an Memo Of Understanding instead of a full agreement.
I’m sorry. Maybe I misunderstood. I thought brands built their equity and desirability over time based on consistently delivering (at times over delivering) on their promises and that ethical businesses paid suppliers for the work they performed. To paraphrase Picasso after his fee was questioned on a particular drawing that took no more than 5 minutes, Donald, you hired ALM for their expertise, not their elbow grease.
Anyone who has worked in the field of brand licensing (as we have) knows that there is a substantial ramp up period for the manufacturer to develop the product, get it approved and convince retailers to issue a purchase order. If the product sells successfully, reorders come in and the program grows. Since the majority of compensation to the licensing agency comes in the form of royalty payments, it is industry practice that there are automatic renewals. In this way, the consultant or agency wins when their client wins.Read More
Best-in-class manufacturers, such as Coca-Cola, General Mills and Kellogg's, often license brands such as Disney, the NFL or the Beatles into their company to increase sales, reach a wider consumer base, and in general, improve their business results. To optimize the acquisition of these licensed properties, most of them employ a centralized business structure and approval process. The structure, which can take on many forms, typically looks something like this:
In this type of structure, each group interacts with the other to optimize the management of their acquired licensed properties, specifically:
- Brand Managers set their business objectives and then develop strategic plans to achieve them. Part of their plans may involve using licensed properties. When this occurs, they look to the Marketing Asset Managers to identify the right properties to help them meet their goals.
- Marketing Asset Managers (MAMs) are tasked with determining those licensed properties that will best help the Brand Managers achieve their business objectives. As part of the strategic planning process, the MAMs will meet with each Brand Manager to understand their objectives and their licensed property needs. They then compile a list of all the properties requested by the brand managers to determine whether a property has been requested by more than one brand manager and who else may benefit from these assets. From here, the MAMs lay out a plan to leverage the assets to help the brand managers meet their objectives. The MAMs then brief the Business Affairs Managers on the specific rights or deal terms they need for each licensed property to be acquired.
- The Business Affairs Managers (BAMs) are charged with negotiating all licensing deals. The BAMs are negotiation experts who have a deep knowledge of the licensing industry and the properties currently held by the company or desired to be held. Once the BAMs understand from the MAMs what terms they must acquire from the licensed property owners, they develop a proforma of the cost to achieve the license. The BAMs then brief a designated Approval Authority on what properties they have been asked to license.