Best Practices in Brand Licensing: 2012

Tuesday, December 18, 2012

In times of Crisis, Great Brands can still turn to Brand Licensing

Happy Holidays 2012. I just had an email from one of my Blog readers that has prompted me to include the topic of his question in my latest post. At times a great Brand can hit a crossroads in its life and become “defunct”. It may be because of a bankruptcy, a patent expiring, product substitutes, fads ending or years of business mismanagement. The result is that a Brand that has built up tremendous brand equity over a lifetime is no longer viable for its own core business. There are plenty of examples of such “defunct” brands like Sharper Image, Xerox, Polaroid, Linens N Things, Op, and Starter. When a crisis hits a brand, Brand Licensing should strongly be considered as a viable option to leverage the huge and expensive brand equity that has been built up over the brand’s lifespan. It would be a shame to simply walk away from this equity. Indeed, companies like Hilco Streambank, Authentic Brands and Iconix have made a business model out of buying up such brands and re-launching them to the market via licensing. The important point is that owners of Corporate Trademarks in crisis mode can use Brand Licensing to keep their defunct brands alive in the hearts and minds of consumers and make money off the equity they have built via royalties.

And the best place to start is to work with a company like mine, Brandar Consulting, so you can take measure of your Brand’s equity through market research; finding out what your Brand’s current awareness, opinion and preference numbers look like in the consumer’s mind today. If your Brand does indeed remain strong in awareness and equity , you can also use market research to determine what product categories that customers give your Brand “permission” to extend into via Licensing. The output from your research can then be turned around and used to put together a “Brand Selling” presentation to sell prospective manufacturers on licensing your brand into new product categories.

There is tension in success here though. As you build out your program, you will hopefully find some very successful licensees who are going to do better a job than you would yourself with your brand if you entered the same product category. This is part of the reason you license your brand. You find someone with much more core competency in a product category than your own company could ever hope to have. If a Licensee is very successful in a product category it becomes a new brand building experience for your “defunct” Brand. This is the holy grail of licensing. It is what you hope for. The partnership thrives because you benefit from new brand equity and royalty revenues and your Licensees benefit from borrowing your Brand name because it is too expensive for them to build a Brand on their own. While the licensee's operational excellence is a big part of the success of your licensed products, your brand is also playing a large role in their success; even if the mother company is now doing very little to build your own brand. Remember, companies license the brand equity you have already built through many long years of brand investment, not the brand equity you are going to build. Here’s where the tension creeps in; I have seen licensees start to feel like they are doing more to build the Licensor’s brand than the Licensor actually is. Over time, this can lead to Licensees deciding they can be a success without the licensed brand and they part ways and enter the product category with their own brand or a new licensed brand. The problem with this scenario is that you the Licensor can always turn around and re-enter the category with a new Licensee. A good example of this type of scenario is the company Avenues parting ways with the Wenger Swiss Gear brand license in the Cases and Backpacks segment.

The best bet to avoid this scenario as a Licensor of a “defunct” Brand is to reinvest some of your royalty revenue back into the Brand you are licensing and be very vocal with your Licensees about what you are doing to support the Brand they are licensing. The other thing you can do is build a broad-based Stable of licensees across product categories that are supporting each other at retail, so the rising tide of your Brand’s licensing program can lift all boats. Brand Licensing needs to always be treated as a two-way street. If you maintain this partnership mentality within your program, even if you start with a “defunct” brand, you will be successful in the long term.

Mike Slusar

Managing Director & Owner
Brandar Consulting, LLC
“Helping Brands Reach for The Stars”

email: mike@brandar.com

http://www.brandar.com/

copyright © 2012 Brandar Consulting, LLC All Rights Reserved

Monday, August 13, 2012

How Do You Define Success in Brand Licensing?

While attending Licensing Expo 2012 this year in Las Vegas, I moderated a panel on “How to Work Effectively with Licensing Agents and Consultants?” One of the questions from the audience was “How do you define Success in Brand Licensing.” My answer may surprise you. To me the ultimate signal of success is the number of long-term licensing partnerships an agent, consultant, licensor or licensee has. Why do I say this and not the number of deals we signed this year or the amount of royalty revenue we are earning. The reason I say this is because the real hard work in licensing starts after the deal is signed. While finding a licensee, negotiating the deal terms and drafting a licensing contract seem like hard work, it pales in comparison to having the drive and expending the effort to make a licensing deal successful in the long term. That’s where real brand-building occurs in your licensing program and making your licensing relationships build equity in your brand is the ultimate success in this business. Too often people in our industry sign a deal and then are off chasing the next licensing deal vs. expending the hard effort of making their existing licensing deals long-term successes. The real money to be earned in licensing is in cultivating long-tenured licensing success stories.

When I was running AT&T’s licensing program, one of the things I was most proud of is that our agent, The Beanstalk Group and our most valuable licensees (VTech for telephones and Citibank for the AT&T Universal Credit Card) were with us for the whole time I managed the program and all those relationships still exist today over a dozen years later. Unfortunately, this is the rarity in the licensing industry. But if you want to generate real value in trademark licensing you need balance your time in chasing new deals with expending the necessary energy to make your current deals long-term successes.

What’s the recipe for long-term success? Well it starts with taking the time to give your licensee a brand immersion presentation so they come to learn the essence of your brand as well as you do and, most importantly, understand how to work within your brand management processes. You see the only hope you have of achieving the ultimate goal in licensing, “the customer never ever suspecting that a licensed product is not coming from the mother company”, is to make sure your licensee understands your brand well enough to fully replicate your branded product experience. What follows is a list of important steps to making a licensee a long-tenured successful partner.

· Engage in brand immersion with your licensee

· Participate in the licensee’s Product Development Process

· Support your licensee’s Sales efforts with retailers

· Assure that the licensee’s marketing materials and packaging are consistent with your style guides

· Monitor the licensee’s customer service center to make sure the service experience is consistent with your brand and service metrics

· Test and approve all products with a defined process before they are released in the marketplace

· Continue to test products bought at retailers to make sure they are maintaining quality over time

· Inspect the factories where the product is being made

· Keep close tabs on the licensee’s Sales results over time

· Cross-market licensee product with other licensees and your core business

· Participate in your licensee’s annual product and market planning processes

If you work hard at all these things you will have a chance at having long-term successful licensing relationships.

One of my mentors in the industry was down on Licensing as a profession when he retired. He felt that licensing was just a “grand ruse” on the consumer; deceiving them into believing that a licensed product was legitimately being produced by the branded company itself and that was really not a fun way to make a living in his mind. I take a different view. If you take the time to really do brand licensing well, you the licensor are actually providing a service to the licensed product consumer because you are extending your branded product experience to well-managed licensees delivering that same experience to the marketplace in wider product categories. You see the Licensor’s core competency is really that branded product experience and successful licensing is all about extending your already popular branded product experience to your licensees’ products over the long term.

Look out for my next post coming this Fall on: Licensing: Brand Building or Brand Busting?

Mike Slusar

Managing Director & Owner
Brandar Consulting, LLC
“Helping Brands Reach for The Stars”

email: mike@brandar.com

http://www.brandar.com/

copyright © 2012 Brandar Consulting, LLC All Rights Reserved

Thursday, March 29, 2012

Getting 'em to Sign on the Line which is Dotted...

Welcome to my first post of 2012. I want to return to the theme of closing deals and try to fulfill Alec Baldwin’s famous line from his cameo in Glengarry Glen Ross: “Because only one thing counts in this life: Get them to sign on the line which is dotted!”

Well you or your licensing agent have done all the hard work: you’ve found a licensee in an attractive product category, you’ve negotiated great business terms, done all your due diligence to qualify your licensee and you have written and negotiated the contract. All that is left is getting your Senior Management to sign on the dotted line of the contract. This is the easy part, right? WRONG. This can be the very hardest part of the licensing process. It’s what puts gray hair on Licensing Agents’ heads. This part of the process is very often taken for granted by Licensing Managers at Corporate Licensors. Most assume that a licensing deal will just sell itself on its face and the process of getting Senior Management sign-off is just a formality.

Often Brand Licensing Managers/Directors don’t take the time to sell their key management stakeholders on the merits of a new licensing deal. And what results is you and your agent’s worse nightmare; a fully negotiated licensing deal that never gets signed. The reason for this is what I call the “drop in the ocean effect”; the $ value of the royalties your new licensing deal will collect is a mere drop in the corporate ocean, hardly enough to cause a blip on the corporate revenue radar. Very often your management’s response can be: “you are licensing our company’s more valuable asset, our brand, to a no-name company for how much money?!”

How do you avoid this situation and get your Executive Management committed to your deal. First off, you start the process by talking with your Senior Management long before they need to sign your deal. You explain what it means to license your brand, the partnership you are seeking, and the product category you are targeting. You may want to share the results of your Brand Extension market research showing that customers were very accepting of your brand entering this product category. You should also explain why you are talking to certain business partners. Next check in periodically with your management apprising them of your progress in striking a deal. By the time you get to the point where you are ready to ask for their signature on the contract, your management will hopefully have heard about your deal a few times already.

When presenting the contract for signature, put the signature page upfront with a short 3-5 page presentation outlining the merits of the deal and the critical points contained in the contract. Your overview should not only focus on the royalties the deal will generate, but also demonstrate how your licensing deal will cause a bigger wave in the corporate ocean through: 1) stretching your brand into a new product category whereby building new brand equity, and 2) creating new brand impressions from the retail distribution and advertising of your prospective licensee. Typically these brand impressions will drive far more value to your brand than the royalties you generate. Figure out a way to quantify the number of brand impressions that will be created and put a monetary value on it. When I ran AT&T’s licensing program, we were able to put a precise monetary value on our licensee brand impressions and they were 15 times more valuable to AT&T than the royalties we generated annually. If you need help modeling your royalty revenue potential, running your Brand Extension market research, calculating the amount of brand impressions a new licensing deal will generate or valuing these brand impressions consider hiring my firm, Brandar Consulting, to assist you.

The key here is to prove the value of your licensing deal beyond the obvious royalty revenue and also to prove to your management that you’ve written your contract in such a way as to mitigate the brand risk to your firm so the upside deal potential clearly outweighs the downside brand risk. Doing all this will get you that signature on “the line which is dotted” and enable you to “be a closer.”