The Objectives and Elements of Corporate Brand Licensing Michael Stone Co-founder and Chairman, Beanstalk October 6, 2020 Michael Stone Michael Stone is the author of The Power of Licensing: Harnessing Brand Equity. Stone serves as Chairman and Co- founder of Beanstalk, a leading global brand extension licensing agency that is a part of Omnicom Group. For more insights from Michael Stone, follow him on Forbes and LinkedIn. [email protected] www.beanstalk.com When you purchase a… …you are purchasing a licensed product Marketing & Communications : What does it look like today and why does it matter for licensing? What’s Happened? The decline of traditional advertising means brands are seeking other paths to connect with consumers. ENGAGEMENT ENTANGLE Coca-Cola Advertisement 1890’s Licensed Apparel 1990’s KITH X Coca-Cola 2018 Licensing Has Many Purposes: • Builds brand awareness, affection, loyalty and penetration • Creates new consumer touchpoints, engagement and brand experiences • Reaches existing and new consumers • Reinforces or redefines, and communicates a brand message • Motivates and inspires consumers to purchase product, both licensed and core. The Benefits of Licensing Benefit: To enter or maintain a presence in businesses that have strategic value but fall outside of the company’s core businesses or financial thresholds Baileys: Among the world’s best-selling liqueur brands Brand Marketing Objectives: • Reframe the brand message • Engage with the brand on more occasions and different parts of the day • Redefine Baileys as not just an alcoholic drink, but more broadly as an impulse treat Licensing Strategy: Enter new categories that would engage consumers with the Baileys brand all year and at various times of the day Benefit: To build brand awareness and reinforce brand values Febreze: Leading air-refresher and fabric refresher Brand Marketing Objective: Deliver the message that Febreze eliminates unpleasant odors and replaces them with light, fresh scents. Licensing Strategy: Enter into categories where odor elimination is important to consumers Benefit: To reach existing and new consumers and educate them about the brand Energizer: Leading battery brand sold in over 140 countries Brand Marketing Objective: It is not just about batteries! Energizer is a brand that delivers power and light. 20 Licensing Strategy: Target close-to-core categories with room for future expansion that reach more consumers in different aisles of the store Benefit: Strengthen the relationship with existing customers and Increase consumer touchpoints WW: Dominant brand in the weight management services category Brand Marketing Objective: Strengthen the relationship with existing customers and interact with potential new customers, driving them to the WW program 22 Licensing Strategy: Offer products to existing and new customers allowing them to participate with the brand in new and different touchpoints Benefit: To extend into new channels of distribution Briggs & Stratton: Leading manufacturer of small engines primarily supplied to other companies to power their branded products Brand Marketing Objective: Provide consumers with the opportunity to choose and use the brand, driving more brand awareness and loyalty 24 Licensing Strategy: Offer consumers Briggs & Stratton branded stand-alone products, inviting them to engage with the brand Benefit: To generate new revenue streams with minimal upfront investment Westinghouse: Once a leading brand in electric, no longer makes any products Brand Marketing Objective: Maintain Westinghouse brand presence in the marketplace without making and selling any goods on its own Licensing Strategy: Use the trademark in as many categories as possible that will resonate with consumers in terms of the brand’s legacy in order to generate revenue Benefit: To protect the brand via broad trademark registrations Coca-Cola: Brand “Coca-Cola” has been registered for a very long time in Class 32, which covers beverages. Unauthorized use of the brand in other categories of goods can be stopped based upon the fame of the brand. Legal Objective: Obtain the extra benefit and trademark protections of registrations in other classes of goods 28 Licensing Strategy: Use licensing in a trademark capacity, not just decoration, in product categories in which the company wanted to effectuate trademark registrations The Benefits of Licensing: The Seven Pearls 1. To enter or maintain a presence in businesses that have strategic value but fall outside the company’s core businesses or financial thresholds 2. To build brand awareness and reinforce brand values 3. To strengthen the relationship with existing consumers and increase consumer touchpoints 4. To reach existing and new consumers and educate them about the brand 5. To extend into new channels of distribution and new paths in the consumer shopping journey 6. To generate new revenue streams with minimal upfront investment 7. To protect the brand via broad trademark registration Understanding the Risks of Licensing Licensed Product Failures Driven by Market dynamics • Wrong price/value relationship • No shelf space • Stiffer than anticipated competition • Consumer perception of brand alignment • Missed demographic target • Perceived trend turns out to be a fad Or just a bad idea • Often driven by brand arrogance Cannibalizing Sales of the Core Product The closer the licensed product gets to the core product, the greater this risk • Multi-brand companies confront greater risks • Direct and indirect cannibalization • Core and licensed products directly competitive • Not directly competitive but fight each other for shelf space For example: Hotly debated in the restaurant category. Consumer Complaints • Dissatisfied consumers will turn to the brand owner to complain • Product doesn’t perform as intended • Harmful products or recalls Contractual Risks Behind-the-scenes failure Marketplace failures • To make timely payments • Selling unapproved product • Market the products on time • Selling outside the Territory • Follow the agreed business • Using social media without plan approval • Selling in unapproved channels Non-performance Can result for many reasons, such as: • Bad product idea • Financial challenges • Retail resistance • Stiff competition • Lack of consumer acceptance Retailers Have the Power Once in a retailer’s hands, control is lost unless there is a contract with the retailer. The retailer controls: • Marketing • On-floor (or page) merchandising and display • Pricing Counterfeits and Infringements • A licensing program encourages counterfeiters and infringers • Sometimes intentional and sometimes innocent • Absent licensing, fame alone can drive unauthorized use Promises by the Brand Owner: Don’t Make Them if You Can’t Keep Them • Brand owners tend to make representations about support that are not in the contract • “Possibilities” construed as “Promises” • “It’s not what you say, it’s what they hear” Reputational Damage May causes such as: • Product failures, recalls, harmful products, design flaws, discounting • Decisions that may damage the brand’s equities or consumer perceptions The Risks of Licensing: The Nine Pearls 1. Licensed Product Failure 2. Cannibalizing Sales of the Core Product 3. Consumer Complaints 4. Contractual Risks 5. Non-performance 6. Retailers Have the Power 7. Counterfeits and Infringements 8. Promises by the Brand Owner That Can’t Be Kept 9. Reputational Damage Key Takeaways 1. The benefits of licensing generally outweigh the risks 2. Corporate brand licensing is a marketing/communications discipline. 3. Actively manage the relationship and the license agreement to mitigate risks and maximize success And What’s Changed Since March 2020? 4 44 Retail Winners/Losers Winners Losers 45 Product Category Winners/Losers Winners Losers Gaming Platforms At Home Entertainment Live Entertainment Restaurants Home Improvement Cleaning and Healthcare Retail and Apparel Travel and Transit Food and Grocery Outdoor Activities Cosmetics Auto 46 Thank you! and [email protected] Michael Stone Chairman & Co-founder of Beanstalk www.beanstalk.com/beantalk [email protected] 212.303.xxxx.