By DAVE MATLI
Increasingly, marketers are jumping into brand licensing. However, there are perceptions that it’s a simple, low-cost way of creating new revenues without having to invest in new product lines, R&D or even marketing. That can be partially true, but there is also a hidden risk inherent in poorly executed brand extensions.
Brand licensing is far more than simply slapping a logo on some perhaps-related product. Although looking at many licensing attempts might lead you to believing that’s all there is to it. For brands to truly extend their value and increase awareness, market share and revenue with licensing there’s lots more involved – especially if the brand manager wants to avoid depreciating long-term brand value. Differing licensing strategies are applicable depending on which of the four key stages of life the licensed brand may be in: new, growth, mature or revival. This article focuses on why to license, best practices and examples of how success is achieved and, perhaps most importantly, how to avoid catastrophic devaluation of a brand through poor brand extensions.
Understanding Context
Frequently, people charged with brand extension deals are also those with short-term incentives. This creates a perfect storm of unmanaged opportunities. As any senior executive can tell you, the march toward success is as much about paths that have not been taken as it is about those that have. Ironically, after years of painstakingly managing every customer interaction, every line of copy, every photographic element, brand managers often turn licensing partnership decisions over to people whose only success metric is how many deals they can create in the shortest time possible. Deals signed under these conditions are simply cash withdrawals from the bank account of brand trust that the company has invested years in accumulating. With each mismanaged withdrawal, that account loses monetary value, brand value and customer trust.
What To Do: Step 1 – Create Brand Strategy
It may sound obvious, but you’d be surprised how many brands do not actually have a cohesive strategy. Every decision affecting brand value (and that can include anything from HR communications to employees’ Facebook pages) may have developed organically and still be perceived as an individual decision – even if the rest of the world views it as part of the brand. This problem can be avoided by conducting a brand audit melding the internal brand view with the outside one. From this comes a clear-sighted strategy defining the key elements of a brand that are sacrosanct from both inside and outside perspectives. Importantly, employees can discover what makes their branded product important to customers. When that’s understood, creating a brand identity speaking directly to customers in their own language becomes the foundation for marketing efforts.
What To Do: Step 2 – Create Brand Management Tools
When the intended message the brand communicates is clear, the identity is expanded into a brand guidelines document. This clearly defines for future employees or third-party vendors and partners what the brand may and may not be associated with. It shows how the brand must appear, when it is okay to take liberties with the brand and when it’s not. This tool lets employees make brand management decisions quickly and autonomously without risk of long-term brand damage or dilution. With this foundation in place, internal or external marketing and creative pros can develop templates for advertising, marketing collateral, websites and web portals, Facebook profiles, copy voice and any other necessary marketing communications materials. This is the starting point for marketing communications and brand licensing.
What To Do: Step 3 – Create Deals Enhancing Brand Value, Not Eroding It
Once you’ve done the due diligence above and your organization is on the same page about what’s good and bad for your brand, it’s show time. With carefully defined strategy and tools, it’s time for sales seek new revenue and increase brand and company value through licensing.
Strategic Licensing RegainingRelevancy
A brand may be well-known but so ubiquitous that it becomes background noise and people forget why it's special. Relevance in a fresh context can become the growth engine for older brands.
The mission to revitalize Sesame Street at retail applied brand licensing, which dramatically extended its educational outreach message into new categories and markets. The Healthy Habits for Life anti-obesity program was an opportunity to use licensing and brand extension to directly alter the touchpoints of the Sesame Street brand with its consumers as well as update its message to a very current and relevant cause. Co-branding Sesame Street with Sunkist helped redefine produce with sophisticated and fun marketing packaging and product concepts usually only used by bad-for-you processed foods. This licensing strategy was extended with Del Monte and other food producers.
Next, apparel development for limited-edition co-brands with some of the world’s hottest apparel lines expanded Sesame Street’s appeal beyond its core toddler base to men, women and kids of all ages. It also re-established Sesame Street as an American icon, as worthy of homage on the runways of Fashion Week as any other classic emblem of pop culture.
Strategic Licensing Gaining Start-up Awareness
When Dreamworks’ original production of “Shrek” was launched, it was anything but a sure thing from a licensing standpoint. In the world of product licensing, anything made of plastic (“hardlines” in the trade) has to begin production 18 months prior to release. Starring a grouchy, sarcastic ogre and an un-princess-like heroin, using movie industry jokes that flew over kids’ heads but left their parents chuckling, the movie didn’t fit the typical animated feature model. It was an open parody. Yet at the film’s release, the green ogre was unavoidable in the marketplace. Not limited to just making licensed product agreements, there were several promotional partnerships (with Burger King as well as little chocolate Shreks” from Baskin-Robbins). Additionally, a Shrek musical was in the works on the week of the film’s release. All of this done for an untried brand by a then-upstart studio using a new way of storytelling in a medium that had succeeded with few variations. This would all seem incredibly risky were it not for the brand extension program that leveraged partnerships creating far broader exposure than the small studio could afford. Having Burger King and Baskin-Robbins field prime-time TV spots and a unique character splashed at eye-level throughout large retail chains during a movie release represented the kind of brand exposure and increased awareness that no campaign funded by a single company could match.
Licensing as a marketing vehicle not only paid off in exposure for the movie release but also became a lucrative consumer products business on it’s own. Had the consumer products faded in value following the movie it wouldn’t have mattered, because the program had helped to launch the brand so successfully.
Strategic Licensing Creatings Added Revenue
Capitol Studios, the iconic recording studio housed in the Capitol Records Tower in Hollywood, recently entered the licensing world with a single cautious step that paid off. Sensitive to the perceptions of A-list artists and producers that make up their core business, Capitol could not afford to extend their brand in any way that cheapened it in the minds of their exclusive clientele. After surveying the market using the brand guidelines provided by their branding strategy agency, they identified a small division of Logitech, called Ultimate Ears. Ultimate Ears was already responsible for most of the in-ear speakers (“monitors”) used by A-list artists in live concerts. Capitol launched its branded In-Ear Monitors in 2010 to resounding applause by the music industry’s elite. The studio wisely chose to have their own legendary audio engineers use Ultimate Ears in product development and tuning. This creating an uncontested point of authenticity for the brand with it’s first licensed product. It has also generated new revenues as well as laid a foundation for acceptance among the studio’s core clients and a confirmation that their trust in the brand would not be betrayed. Certainly, Capitol could have sold more units by simply licensing their brand to a headphone maker that sold to the mass market but they knew that would have spelled the beginning of the end of the great studio.
Prepare for capitalizing on brand licensing by knowing your core market’s values and attitudes. Do you have a brand identity that speaks directly to your customers? If so, it can often be translated into relevant, profitable licensing opportunities supporting or enhancing your core marketing strategy and creating added revenue.
Dave Matli is principal of Hollywood, CA-based Matli Group – www.matligroup.com, which brings a strategic brand rationale to every licensed deliverable by efficiently integrating licensing, branding and design. He can be reached at dave@matligroup.com
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