Sector watch: Not-for-Profits

Posted by Marty Brochstein on August 28, 2012

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In many respects, licensing in not-for-profit organizations operates along the same lines as the licensing business does in the for-profit world. The goal is to find the right licensee that shares the brand vision and can maximize the opportunity. But in this sector as much as in any other, the definition of “maximizing the opportunity” often goes far beyond the immediate revenue generated.

According to results of LIMA’s Annual Licensing Business Survey, licensing by not-for-profit organizations generated $35 million in revenue in North America in 2011, which translates into retail sales of about $758 million. That’s 2.9% more than it generated the year before.

As such, it accounts for a small sliver of the overall licensing business, where, according the LIMA Survey – conducted on the association’s behalf by a team from the Yale School of Management — licensors generated an estimated $5.316 billion in royalty revenue in North America in 2011. That’s 5% higher than the $5.065 billion they generated in the previous year. Notably, this year’s report shows the first year-on-year increase in royalty revenue since 2006. Those royalty numbers translate into estimated retail sales of licensed goods in the U.S. and Canada of $109.3 billion, five percent higher than the $104.0 billion in retail sales in the territory in 2010.

While the vast majority of not-for-profits are perpetually on the hunt for revenue, the licensing is often as important for the exposure it provides as for the direct royalty income it generates. Says Michelle Alfandari of Moda Licensing, which has worked with several not-for-profits: “A big part of what they need to do is raise awareness and raise revenue.”

For an organization such as Girl Scouts of the USA, the goals are several, says Karina Gee. Aside from revenue and increasing brand awareness, the visibility that can be raised via an effective licensing program can also help in recruitment of new members and donors.

But the relative emphasis placed on those goals can vary widely among organizations. “The primary goal is to raise awareness, then to protect our marks,” says Dave Harkin, Associate Director of Retail Business Development, Boy Scouts of America, of BSA’s licensing program. “Money is far down on the list.”

For the BSA, which has about 125 licensees, licensing revolves around the Boy Scouts as an assurance of quality, rather than as a brand unto itself, says Harkin. The group also uses secondary trademarks and slogans – the motto “Be Prepared,” as well as marks such as Wilderness Outfitters and Pinewood Derby – within its licensing efforts.

In most respects, not-for-profits are faced with the same challenges as any other brand owner: In the hypercompetitive retail market, with so many brands vying for buyers’ and consumers’ attention, everyone’s looking for something to set them apart. For not-for-profits, the “something extra” can be the feel-good aspect that they carry, and the consumers’ knowledge that supporting the brand is a way of supporting the group’s mission.

But as they seek licensees, not-for-profits labor with a very specific burden: Unlike commercial licensors, they’re not allowed to sell or promote licensees’ products on their own websites.