Best Practices in Brand Licensing

Coffee's For Closers

2011-11-03T11:17:00.000-07:00

Summer’s over and Fall is in full swing so it is time to work our butts off again. People laugh at me, but I always say the busiest time in the US service economy always seems to be from Labor Weekend to Thanksgiving and from January 2nd to Memorial Day Weekend. It is really those 8 months out of the year that drive most of our productivity. Well now that I am in the stretch run of busy mode again, I thought I would make my last post of this year. It has to do with following up my Be A Closer Post.

As a corporate licensing professional, you can be the best closer in the world, but if you are not in the right place organizationally in your company, you have only a small chance of success. If you have ever seen the movie Glengary Glen Ross, you will remember the infamous line from the all-time classic 5 minute cameo of Alec Baldwin: “Coffee’s for Closers Only.” You can click on the link if you have not seen it; I warn you it has some very graphic language. Why do I bring this harsh scene up, well Alec Baldwin waltzes into a realtor’s sales office and says he is from the “downtown office” and he is firing all the sales agents in one week, denying them access to the best leads and to even a cup of coffee until they start closing deals. The sad reality of this movie is that this sales office is set up to fail because they are not aligned well with the downtown office. And this is the parallel that I can draw to your Corporate Brand Licensing Function. If you are a Director of Brand Licensing and setting up a new licensing function, you need to make sure your new organization is aligned in the best possible corporate department for success.

You need to take time to survey your company at the very start-up of your function and think about where your licensing organization will have the strongest support and air cover to succeed. Without it, you are doomed to fail before you even have your first prospective licensee meeting. Why do I say this, well because when you engage in brand licensing you are licensing your company’s most valuable asset. And while Brand Licensing done well can be a great brand building tool; Licensing done poorly can damage your brand badly. (See post “Why Good Brand Licensors Sleep at Night”) And people in your company will have a tendency to focus on the brand risks much more than the brand rewards, particularly if the rewards are not flowing back to them directly.

So how do you figure out where the best organization is for Brand Licensing to report to? Survey your company and pinpoint the organization that will be most threatened by your licensing function. It could be the area where your licensing deals will have the most overlap in the marketplace, or the area where most of the brand equity has been created that you are trading off of. Another possible landing spot could also be an organization that is already charged with managing your Brand companywide, trace back where that group reports to. Typically, you would want to align brand licensing with the senior most levels possible in your company so you have the air cover you will need. It is also at those levels where the decision authority will exist to actually sign a licensing deal for your company.

And THAT is really the hardest part of closing Corporate Brand Licensing deals: getting your Senior Management to “sign on the line which is dotted.” More on that next time…

BE A CLOSER

2011-08-02T14:43:00.000-07:00

I’ve just returned from a Summer Vacation and my batteries are again fully charged, so I thought I would return to my Blog for my 2nd posting of 2011. Just to pick up on my last theme of Internal Selling, I wanted to follow-up on the all important topic of closing corporate trademark licensing deals. Early on in my licensing career, I was lucky enough to meet a guy who became my mentor in the industry his name is Seth Siegel, co-founder of The Beanstalk Group Licensing Agency. To me, Seth is a legend in the industry. My relationship with Seth was not unlike the relationship that Jerry Maguire had with what he called his mentor, the late, great sports agent Dicky Fox. Dicky Fox is one of my all time favorite movie characters. His wisdom spread throughout the Jerry Maguire movie is one classic, but meaningful, cliché after another. Just to give you a few Dickyisms as I call them:

“The key to this business is personal relationships”

“If this [points to heart] is empty, then this [points to head] doesn't matter.”

“Roll with the punches, tomorrow is another day.”

“ Hey... I don't have all the answers. In life, to be honest, I have failed as much as I have succeeded. But I love my wife. I love my life. And I wish you my kind of success.”

Well I had a Dicky Fox moment one time when talking with Seth. Years after working with Seth and The Beanstalk Group, I asked him why he decided that AT&T would make a good licensing client for his agency and his response was something I will never forget. He said, “When I am evaluating whether I want to work with a client I look for closers.” My response was well what the heck does that mean? And Seth proceeded to tell me that he made sure that all his clients had at least one person on the Licensing team that he thought could get a deal closed internally at that company. He explained to me that my boss at the time was not a closer, but he had enough exposure to me to know that I was a closer and that sealed the deal for him. And to Seth a closer was a person who had the drive, enthusiasm and selling skills to get a negotiated licensing deal signed off on by senior management at their company. I thought that was a very shrewd observation because you see a Licensing Agent’s worst nightmare is to negotiate a major deal and get the licensee to sign off on it only to have his client, the licensor, fail to secure senior management sign-off. All the hard work is done to close the deal, but no one exists internally at the licensor to successfully sell the deal into senior management and get it closed. If you want to be a successful trademark licensor, BE A CLOSER. Be that person that is singularly and passionately focused on getting your deals signed off by your senior management. I was that person at AT&T and I was successful in getting signoff on 9-figure licensing deals as a result. So to create my own Dicky Fox line and to borrow from Seth:

“Remember people want to work with closers. So BE A CLOSER!”

Internal Selling, It Never Ends

2011-05-10T10:31:00.000-07:00

Well I am again returning to my blog with my first post in 2011. Sorry for the long break. My preference is to only post very useful topics however infrequent and I think I found another useful discussion.

I often work with large Corporate Clients in my consulting practice at Brandar and the one thing that always surprises me is that many Corporate Brand Licensing Programs fail because of the inability of its managers to sell the merits of a licensing program internally. This often comes as a surprise because Licensing Director’s often focus on chasing and getting new lucrative deals and think that will enough to be successful long term. I have news for you, it won’t. Why you ask? Because brand licensing royalties usually pale in comparison to the core revenues of your company, your royalties are usually a drop in the proverbial corporate ocean.

Well how do you rise above this problem? The simple answer is understanding from the get-go that Brand Licensing cannot be a bottom-up initiative. In order to be successful a Corporate Brand Licensing Director, you must engage the strong support of your senior management. And this does not just include Senior Managers in your direct chain of command; it also includes garnering the support of any Senior Managers in your company that your licensing activities will touch in some way. Having top level cross-organizational support for your Licensing Program is the surest way to get new licensing deals approved despite the protests of lower level managers. News Flash: If your company is big enough, someone is always going to step forward to try to block a licensing deal. You need to be prepared to handle this and rise above the detractors with strong senior level support at your company.

The best way to attack this issue is to build an internal selling presentation that you can use to sell the merits of a proactive Brand Licensing Program to your senior management and your peers. Your story needs to focus on the merits of licensing way beyond royalty revenues. Once you have built this story, don’t treat it like a static document, but instead have it top of mind all the time, be on the look out for anything that builds the strength of your story and add it to your deck continually. If you need help building your story contact a Licensing Consultancy like Brandar to assist you. It is in this critical area that most Licensing Directors falter. Most Licensing Program Managers fail to recognize that the process of internally selling the merits of your licensing program NEVER ENDS.

The larger the company, the more personnel that change seats and the more organizational shifts that occur. Each time a change happens, the Licensing Director needs to be proactive and schedule time with the new players to walk them through the internal Licensing Selling Story and ASK FOR THEIR SUPPORT. It is a story that can never end and needs to build over time. It is also a story that must be revisited with the senior managers who are still in place, but need to hear your latest chapter to continue their support. You can’t afford to get complacent as a Licensing Director; constant internal selling needs to be part of your daily routine. If it is not, your ability to quickly close signed licensing deals internally at your company will be severely impaired. More on the topic of Closing Deals next time.

Mike Slusar

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

email: mike@brandar.com

http://www.brandar.com/

The Best Story Never Told

2010-09-01T11:37:00.000-07:00

Well it’s September 1st and I'm returning to my Blog after taking a break this Summer with a story that has been on my mind for a few months. I work with a lot of clients and prospective clients who are new to the world of Brand Licensing and very often I see Brand owners going out to shop their Brands to prospective licensees or licensing agencies with no real story to tell. What happens all too frequently is the licensor just assumes that the prospective licensee or agent has heard of their Brand and knows its equity and just how strong that equity can be when extended into new categories. It is an assumption that is borne out being paid to be your Brand’s greatest champion day in and day out in your company. Unfortunately, it leads great Brand Managers to start to sell their Licensing program with no real story to tell at all. The thinking is: “I recognize my Brand is great and has been real successful in the marketplace so others will as well.”

This thinking only torpedoes what could be great licensing programs before they ever have a chance to get started. Don’t fall prey to this syndrome. Start your licensing effort by working hard to pull together your Brand’s best selling story. Talk about its rich history. Present independent research that demonstrates your brand’s awareness, its equities, its strength and its extendibility. Pen your story as though you are selling to someone who has NEVER even heard of your Brand and sell them hard on why your Brand is right for their in-licensing program. Spend time talking about your Brand’s retail reach, depth and breadth. Provide examples of how & why your Brand is ripe to enter certain product categories. In essence, leave your initial meetings with prospective agents or licensees knowing that you told your Best Brand Story for that is the surest way for everyone to see the value of your brand as a licensable asset. Don’t assume others will see the value of your Brand; prove it to them with a well-researched and well-designed Brand Selling Story.

Often Brand Managers or Licensing Directors are too close to their Brands to be able to look at their Brand’s value objectively and then put together a competent Brand Story to prove it. If you are struggling with this, then I suggest you get help. There are many consultants in the brand licensing industry like my firm, Brandar Consulting, LLC, that can help you get your Brand Selling Story right and provide a strong start to your Brand Licensing Program launch or expansion. You often only get one crack at selling your Brand to a prospective agent or licensee. Don’t waste that opportunity; tell your Best Brand Story right out of the gates.

Why Good Brand Licensors Sleep at Night – Part 2

2010-06-16T08:24:00.000-07:00

I just returned from the International Licensing Expo in Las Vegas. While I was there, I was able to participate in Licensing University and run some seminars; one of which was Best Practices in Corporate Trademark Licensing. I met a fair amount of people who are new to brand licensing at the show and it was clear to me that this blog post: Why Good Brand Licensors Sleep at Night – Part 2 is long overdue for many. In my last post I spoke about the organizational structure of your Licensing Function being absolutely critical to your overall long term licensing success. Well in Part 2, I am cutting to the chase. You want to know the main reason I slept at night when I ran AT&T’s brand licensing program for ten years? I had outstanding Legal support and a world class Quality Assurance Function. To me, that is where the rubber meets the road in successful brand licensing functions. It was no accident that I had great support in these two areas because I went out to find, lobby and recruit that support.

My main legal support was Frank Politano, AT&T’s Senior Trademark Counsel. I really did not know just how skilled Frank was at brand licensing until I sought him out to see if he could support the proactive expansion of our Brand Licensing function. You see at times Trademark Lawyers may not have a lot of experience in actually doing Trademark Licensing. In Frank’s case, he was a tremendous resource for me as he had so much experience he has actually co-authored a book on the topic for Aspen Law: Drafting License Agreements, now in its Fourth Edition. I also negotiated supplementary legal support from my licensing agency as well. It was up to Frank to manage and utilize those additional resources. He did this quite often. I cannot stress enough the value of having a great Trademark Legal team to insure your contracts are drafted in such a way as to fully protect you as the licensor. Fortunately for me, Frank actually left AT&T and is now available for hire to all in the licensing industry at K&L Gates.

The other critical aspect to my being able to sleep at night when I ran AT&T’s licensing function was having a world class Quality Assurance function. Because of the nature of our program, we did a lot of licensing in the consumer electronics category. My first thought was to see if I could find a resource internally at AT&T Labs that could perform this type of Quality Assurance. I was lucky enough to find some Electrical Engineers who had spent 20 years designing and doing quality assurance for AT&T branded phones and cell phones. They were more than eager to help me. They were trained as ISO auditors and in Six Sigma Quality processes. I was able to pay them an annual fee to do all my quality assurance. Eventually, AT&T laid them off so they formed Quality Assurance Management Inc. www.pqam.com . The company is run by Jeff Lumpkin. Jeff has a passion for Quality Assurance. This blog post is really the brain child of Jeff as he used to introduce himself as “the reason I sleep at night”. He used to say that he didn’t sleep at night so I could. At the end of the day, Quality Assurance is the bedrock of any long-term successful Brand Licensing Program. Poor product quality has ended many licensing relationships prematurely and indeed, ends many Corporate Brand Licensing programs abruptly as well. So if you are building a brand licensing function, take the time to find extremely qualified Quality Assurance resources. Ideally, you want professionals who are trained in ISO and Six Sigma compliance, have a passion for product quality and have an engineering or quality testing background.

When people ask me the key to successful Brand Licensing Programs, I tell them its making sure you secure and utilize strong legal support and quality assurance functions from your program’s very start. Why? So you can Sleep at Night!

Why Good Brand Licensors Sleep at Night – Part 1

2010-04-21T11:04:00.000-07:00

I know from my many years of running AT&T’s brand licensing program that it can be tough to learn to live with the risk that is associated with licensing your company’s most valuable asset; its brand. While I was licensing AT&T’s brand to other firms to use on their product or service, I had to live with the fact that if my licensee screwed up, AT&T’s brand could be severely damaged in the marketplace. And that damage could be very visible to my senior management. I always lived under the mantra that I was one bad licensing deal away from ending AT&T’s brand licensing program. The reason I made this connection was because I knew that the royalty revenue I could earn AT&T from my licensing program paled in comparison to the monetary damage one of my licensees could do to the AT&T brand. You see royalty revenue is usually a drop in the corporate ocean of revenue and with AT&T generating $123 Billion in Revenue annually, my tiny royalty stream was less then a drop, it was a molecule. Hence, if any of my deals ended extremely badly, it would probably mean the cancellation of my licensing program entirely and the end of my career at AT&T. While I was running AT&T’s program, one of my contemporaries at a competitive company met this fate when the wife of the CEO of that firm noticed one of their licensed products in a close-out bargain bin at a Consumer Electronics retailer. She bought the product and shared the story and the product with her husband. It was the end of the brand licensing program at that firm and the end of that Brand Licensing Director’s job.

So that begs the question, why did I assume the Director of Licensing role at AT&T and bare that level of risk. The simple answer is that brand licensing done well can be tremendously successful, rewarding personally and value-added for you company both in terms of brand building and revenue generation. The problem is that it takes tremendous vigilance and hard work to do brand licensing really well. And far more deals fail then succeed. The key is working hard to build a licensing organization around you that is filled with extremely talented people all working toward the common goals of: 1) attracting only the best licensees to your brand, 2) choosing the right categories to enter into, 3) doing extremely thorough due diligence to choose the “right” licensee, 4) negotiating a thorough contract and 5) proactively managing & partnering with your licensee to insure their marketplace success. If you do all these things well, you sleep well at night. BUT you must surround yourself with the right team to make that happen. This is not to say your team always sleeps well at night. ;-) There are always going to be issues to manage, but if you pool the risk of brand licensing around a talented licensing group, everyone is better able to manage that risk appropriately and succeed. The key is how you build that organization.

More on that next time in Part 2 of this thread.

Choosing the RIGHT Licensing Agency

2009-12-27T10:28:00.000-08:00

My lost blog post dealt with how to sell the use of a brand licensing agency into your company. This blog post will deal with how you choose the right licensing agency to bring to your senior management for approval.

The process for choosing the right agency for your Corporate Brand Licensing Program is very similar to the very reasons that justify hiring a licensing agency at all. You hire a licensing agency for: 1) their experience in the categories you want to enter, 2) their strong network of manufacturers in those categories, 3) their ability to negotiate lucrative licensing deals in the past in those categories and finally 4) their track record of long term success.

As you evaluate licensing agencies, you want to do your due diligence in each of these 4 areas:

1) Their experience in the categories you want to enter
You really want to find an agency that has staff that has worked in the categories you are looking to license into. If your brand’s equity is fashion-based, you may want to find an agency that has shown success in soft goods, furniture, jewelry and fragrances. If you brand is food-based, you may want an agency who has expertise in licensing food categories and household goods. Perhaps your brand is a kids-based entertainment property, well then you would want to find an agency who has a good track record for success in the toy and gaming category. Or maybe your brand is a technology brand, you may want to look at an agency who has shown great success in licensing in the consumer electronics category.
A critical note of caution here. While you want an agency with experience in the categories you want to enter, you need to make sure that they are not already under contract with a brand that would be a direct head-to-head competitor with your brand across many categories as this would be unmanageable conflict of interest.

2) Their strong network of manufacturers in those categories
As part of your agency due diligence, you need to get an understanding of the strength of your agencies network in the categories you may want to enter. They may or may not have current deals going on with their network, but you will want to understand where their network is and how strong it is. Most agents probably won’t tell you the names of the licensees and manufacturers they work with until after you have hired them. But if you are a good sleuth, you may be able to piece things together from current deals they have and past deals they have done over the years as there will likely be a track record of PR around those deals.
3) Their ability to negotiate lucrative licensing deals in the past in those categories
This is where the rubber meets the road. While you want your licensing program to be first and foremost, a brand building exercise, you will be judged by how financially successful your program is. You are hiring an agent to be your sales force to bring in new licensing deals. You want to find an agent who has a track record of negotiating larger, financially successful licensing deals. When I ran AT&T’s program, I used to always say it took me the same amount of time to prospect, close and manage a 6-figure deal as it took me to do a 7-or 8- figure deal. Why would I want to spend my fixed amount of time on 6-figure deals. You need an agency that understands this and can deliver you the larger deals relative to your brand’s potential.

4) Their track record of long term success.
This is last in the pecking order because it is the order that I think you should attack your agency due diligence. It is the MOST important criteria for you to evaluate. You want to see that the agency you are looking at has a lot of long term clients. You want to see licensing deals that have lasted many years. You also want to see a lot of long-tenured employees. You want to ask the agency, precisely what personnel will be working on your account, what are their backgrounds in the industry and how long have they been with the agency. You a paying an agency to have seasoned employees with relevant backgrounds working on your account at the most junior levels. Very often agents are hired because of the strength of their senior leadership team during their sales pitch, but the reality is that you may only get a small fraction of senior leadership time working on your account. That’s OK if the agency’s junior managers have a strong track record of industry success. It’s also important to find out during due diligence just how much time will be devoted by all levels of agency management to your account. Long term success means an agent who: is able to find deals that last, has good people in their agency nurturing relationships with both licensors and licensees, retains valuable employees and retains valuable clients.

You may be asking yourself how in the world do I find all this information out about an agency during the due diligence process. Ask for references. And make sure to get references from both current and former clients. You may find this surprising, but a good agent will easily have former satisfied clients to use as references, companies where the agent grew and established their programs to a point where the client grew out of the need for an agency. You also want to make sure you get references from both current and former licensees as well. Lastly, you can hire an industry consultant, like myself, who has a great handle on the agents that are out there, what they are good at and which one might be the best fit for your licensing program.

I hope you have found my insights helpful here. I leave you with this applicable anecdote. In Indiana Jones & The Last Crusade, the culmination scene has Indy choosing the Holy Grail from a sea of chalices in all shapes and colors in an ancient temple. Before choosing, the Immortal Knight Templar guarding the Grail for centuries warns Indy, “But choose wisely, for while the true Grail will bring you life, the false Grail will take it from you.” The same goes here. Choose wisely, as an agency that is a good fit will breathe life into and grow your brand, while a bad fit could harm your brand and cripple your licensing program for years to come.

My next post will look at how to structure your licensing organization for success.

Mike Slusar
Managing Director & Owner
Brandar Consulting, LLC
“Helping Brands Reach for The Stars”
email: mike@brandar.com
http://www.brandar.com/

Selling a Licensing Agency In for Your Corporate Brand Licensing Program

2009-12-09T12:35:00.001-08:00

My last blog post dealt with the lack of adequate resources being one of the major impediments to building a successful Brand Licensing Program. At the end of that post, I talked about one of the best ways to supplement the resources of your Corporate Licensing Function is to research and hire a good brand licensing agency. The process of finding the right agency and compensating them at a fair rate can be the topic of my next blog post. This post will deal with how you sell hiring an agency to your Senior Management once you think you have found an agent that meets your needs at the right price.

My experience running AT&T’s licensing program for a number of years taught me that you must sell your Agency to Senior Management for that model to be a success over the long term. Each time a new Chief Marketing Officer came in, I had to bid out and resell the merits of using a licensing agency as part of my licensing program. The cold reality is that many Senior Managers in Corporations view the use of an Agent as a cop-out by the Licensing Director. In their minds, farming out the License Prospecting Function to an outside group is handing over a responsibility that the Licensing Director should be doing on their own. This gets compounded when Senior Management sees the size of the agent commission. They view the commission as giving the company’s money away. Opposition can be strong and once you sell your agent in, the process never ends. You must constantly continue demonstrating their worth to Senior Management.

So what are the best ways to sell having an agent for your Corporate Licensing program. First it is important that you work together with your chosen agent on their Sales presentation making sure it is customized to your industry and has examples in it that you know your Senior Management can relate well too. If you have chosen your Agent wisely, they should have a lot of examples of prior success that fall in or close to your industry. At the same time, it is very important that you document just how much time and equivalent headcount it would take internally to perform the role that your agent would fill. As I explained in my last post, it is very likely that your company will give you no where near the headcount you need to build a successful Licensee Sales function. Licensee Sales is the most time consuming function in your licensing program. What results from your under-resourced function is a Licensing Program that flounders; growing very slowly and certainly not at a level Senior Management expects. Use the Agent’s presentation to Senior Management to demonstrate the size and power of the Agent’s network and the value to be exacted by putting that network to work for your company!

Make sure that you bring your Prospective Agent in for a meeting when all the key Senior Management stakeholders are available. If an important stakeholder cancels, re-schedule the meeting. Also I always found it best to allow time for Senior Management to get to know the key players from the Licensing Agency on a personal level. So if at all possible, see if you can schedule a lunch or a dinner around the meeting, even if the lunch is sandwiches brought into a meeting room. Hitting it off on a personal level with Senior Management is one of the best selling tools there is. I always wanted my Senior Management and my Agent to feel like they had built a relationship in that very first meeting. And I wanted that relationship to lead to talking to each other directly down the road without my presence or facilitation. I never felt threatened by my Agent and my CMO having direct conversations; to the contrary, I actually felt better about my position in our organization because my management would dial up my agent at any time to ask them a question. It gave my Senior Management more of a stake in my success and I felt like I created a new resource for them to tap.

The final critical area you will need to tackle will be paying the agent’s commission. This is not a topic that your Agent should deal with in their presentation. You should address this with your Senior Management yourself after the meeting. Make sure you have done your homework and gathered benchmarking data on standard agent commissions. Try to demonstrate how the commission structure you negotiated with this agent is unique and slightly below the average. The going rate for most corporate licensing programs is 35% of the net royalty stream. This commission rate is for a full service agency; by this I mean an agent that does license program planning, licensee prospecting, due diligence, deal negotiations, contract drafting, contract administration, royalty administration and assists with marketing & product approvals as well as ongoing quality control. You can get lower commission rates for less services from your agent. I don’t recommend this approach and a good agent won’t like it either. You see a good agent will recognize that your success is their success. They only get paid if a license turns out to be successful. A good agent will want an involved role in insuring success. Lower commission rates can also be had for more established or promising brands where the agent sees a large upside. I digress though. The main thing you need to sell your Management on in terms of paying a commission is that they are paying a commission on NEW revenues. Yes a good agent should be able to find and close deals that you could not get or negotiate on your own. So getting 65% of new revenues is better than getting 100% of no revenue at all. The other point to make to your Management is that a 65% margin is likely to be a much higher margin than the standard margin for the core business of your company. Even with these points their may still be reticence in your Management to bring the agent on board to represent your WHOLE licensing business. When this hurdle came up with my own AT&T program, I was able to convince my agent that we would assign them certain product categories to work each year. Once AT&T assigned them a category it was theirs to work for the year. If we then received inquiries directly at AT&T about that category, we passed them to our agent to work. In this fashion, we were able to keep certain categories which were extremely close to our core equity for ourselves as they were easier to do licensing deals on and receive 100% compensation; my Management felt this was a more equitable approach.

Hope this helps. Next time we will look at how to find the right agent for your corporate licensing program. And after that I will turn to how to staff a licensing function for success.

Mike Slusar

Managing Director & Owner
Brandar Consulting, LLC
email: mike@brandar.com

“Helping Brands Reach for The Stars”

http://www.brandar.com/

copyright © 2009 Brandar Consulting, LLC All Rights Reserved

What's one of the Biggest Hurdles to building a Successful Licensing Program

2009-12-01T11:16:00.000-08:00

What's often the biggest barrier to success in terms of starting up or expanding a Brand Licensing Program? This is a common question that I get asked a lot as a consultant in the industry. I will tell you, more often then not, it is trying to build a brand licensing program without receiving adequate resources from your company to do the job right. Typically a Licensing function in a corporation might be staffed by a Director of Licensing and maybe one support person if you are lucky. What will come along with that title is probably an aggressive royalty revenue target that you will need to achieve in your first year. Unfortunately, most licensing functions are borne out of a desire to generate additional revenues from you brand, but there is very little forethought or research that goes into staffing a successful licensing function to achieve such a goal. Very often the company setting up the function may be under headcount growth restrictions particularly for non-core activities like brand licensing. I would say the norm in the industry is that a company NEVER will give its licensing function the resources it really needs to be successful.

There also can be a chicken or the egg mentality in that management will tell you that you can have more resources once you close a few successful deals and start generating a profitable revenue stream. The problem is getting those first few licensing deals closed can be the hardest part of starting a licensing program. Often programs will languish for a year or two as one or two licensing professionals try to act as their own sales force in scouting out new licensing deals. But serving as your own sales force is more than a full time job for a Director of Licensing whose responsibilities also include legacy licensee management, licensed product quality control, cross marketing between licensees and internal business units, marketing approvals and meeting with retailers to help get licensed product wider distribution. Trying to cover new License Sales on a part-time basis is simply a recipe for very slow program development.

So what's a Corporate Licensing Director to do? My advice is to quickly tee up the analysis and discussion of what resources your licensing function truly needs to achieve its goals. If your company is unwilling or constrained from providing these resources, then it is time to consider hiring a licensing agent. Licensing Agencies can serve as your outsourced sales force, aid in licensee background due diligence, negotiate your licensing deals and assist in contract drafting. Once a deal a signed an agent can also be helpful in on-boarding your new licensee and assisting in executing on the promise of the new licensing relationship. Remember their compensation is commission based so the new licensee’s success is their success. Their interests are perfectly aligned. To me a good licensing agent can be the biggest key to success for a new licensing program.

At times, licensors have to arrive at this conclusion the hard way, they try to go-it-alone without the proper resources, experience or the network to be a successful licensor and their program will languish for a few years with very poor results. Fed up with the lackluster performance Management finally will bite the bullet and decide it can now stomach paying an agent their commission rate in return for getting the licensing program on a much faster track for success. Unfortunately, by that point they have lost time, licensing opportunities and years of royalty revenues. The reticence to bring an agent on-board quickly in the early stages of a licensing program because of the "dreaded' commission payment is the biggest hurdle to building a successful licensing program with limited resources. When I encounter this "commission" reticence, I ask my clients this simple question, which is better getting 70% of millions of dollars in agent generated royalties or getting 100% of the zero dollars or much lower royalties revenues that you may be able to generate on your own. The healthiest way to look at agents is that a good agent will typically generate royalty revenue that you would not be able to attract on your own; truly incremental revenue. I’ll pay a commission on revenue incremental to my own licensing efforts every time.

My next post will deal with successfully selling a licensing agent into senior management.

Mike Slusar

Managing Director & Owner
Brandar Consulting, LLC

“Helping Brands Reach for The Stars”
email: mike@brandar.com
http://www.brandar.com/

copyright © 2009 Brandar Consulting, LLC All Rights Reserved