Basics of Licensing: What is the strategic objective of licensing-out my brand?
Congrats for reading this article… you’ve decided to explore licensing! I assume you have a brand that has a fan base and you’ve heard about all the lucrative benefit of licensing… Perhaps your brand is a celebrity, sport team, famous artist, cartoon character, laundry detergent or Youtube star…you have a brand and let’s get started!
A lot of brand owners like you may have entertained the idea of extending your brand to other products through licensing. However, a lot just like you are unaware of how to start their licensing program.
First, compose clear objectives. Before you begin your licensing venture, you need to identify your key goals or objectives for your licensing program. Here, we outline some of the objectives companies and brand owners have in undertaking their licensing program:
- Generate Revenue: The number one reason why companies and organizations enter the licensing business is, of course, to generate revenue. By licensing their brands to other companies, these brand owners generate additional income from royalties paid by those other companies. By diversifying their sources of revenue, licensing provides brand owners a new revenue stream outside of their core business.
- However, in a survey conducted among brand owners* only 45% said their #1 objective is generating revenue. Which means the majority of brand owners have “non-revenue” objectives.
- Enhance Brand Awareness: This is the second most popular reason brand owners license-out their brand. “We want more people talking about our brand” says one brand manager of a famous beverage. “We want more consumer touch points” say another brand manager of a TV media brand. By licensing out their brands to other products, brand owners can increase awareness of their brands – a key metric in brand marketing. There is a real value to having your brand on a T-Shirt on display at 3,000 Wal-Mart stores and, more importantly, on the bodies of thousands kids.
- Support Core Product Sales: Licensing can even boost your core product sales. I’ll share two examples. We licensed the Royal Doulton brand to a company to make silverware. This Royal Doulton silverware helped support sales of the core Royal Doulton fine china since it was the same retail buyer, same department and same bridal registry customer. We licensed out the Breyers brand, the number one packaged ice cream brand in America, to a manufacturer that produces hot fudge and sprinkles, Signature Brands. This successful line of ice cream toppings are on display next to the core ice cream products and help support the ice cream sales. In both cases, licensee/licensor cross-promotional activity helped boost sales of both products.
- Protecting Trademark: Another licensing objective may be from your legal department. Your legal team may need licensed product to help protect its trademark. In 1989, Coca-Cola filed a lawsuit against a company that made an unlicensed Coke t-shirt. The judge ruled that Coca-Cola clearly owned the Coke trademark in the beverage category. However, the judge also stated that there are multiple classifications for trademark usage – one in apparel, one in housewares, another in Christmas ornaments, etc. Although, Coke clearly owned the trademark for beverages, if Coca-Cola doesn’t “use” the brand or trademark in the categories outside of beverage, they will lose the rights for those categories. Coke wanted to protect and own its brand in all categories so Coca-Cola started a robust licensing program. Similarly, brand owners like you may simply want to protect their brands or trademarks in other categories through licensing.
Prioritize your objectives: I typically hear people say “I want revenue AND brand awareness…” This is OK but I encourage you to prioritize them. What is more important money OR brand awareness.
In summary, we know licensing-out your brand can be a lucrative path for your brand. The key is to start with clear strategic objectives. Next time, I’ll write about how to develop the best plan to executive against your strategic objectives.
About the Author:
Stu Seltzer is president and founder of Seltzer Licensing Group, a 17 year-old New York City based strategic licensing consulting firm and full-service global licensing agency. Stu is an expert in analyzing, crafting, and securing partners for clients such as Unilever, Safeway and Starwood Hotels. His extensive first-hand knowledge of the industry and skills as a negotiator were developed while managing the licensing for Yves Saint Laurent of America and at DC Comic’s division of Warner Bros. He has helped many national companies and brands including Scotts Miracle-Gro, FTD Flowers and Del Monte reap the best possible return on their marketing investment.
Stu is currently in his 12th year as an adjunct professor at New York University, where he teaches a 3-credit course he developed on brand Licensing. He has also served on the board of the Licensing Industry Merchandisers Association (LIMA) for 6 years including two years on the executive board. Stu has been quoted in the Wall Street Journal, New York Times and many other publications. He has published articles in Licensing Global magazine, The Licensing Journal, The Licensing Book and was a contributing author in the book Licensing for Dummies.
Early in his career Stu developed his analytical skills while working as a CPA at Arthur Andersen & Co. He is a graduate of Lehigh University and holds an MBA from Columbia Business School.
*research from The Licensing Letter 2008 survey