Measuring Up

When A Brand Stretches Partnership Potential Too Far

Guest post from Michael Dresner, CEO of Peppercom’s Brand² Squared Licensing Division

Lululemon, by so many accounts, is a brand success perhaps rivaled only by the iPod over the past decade. It entered a saturated category (fitness apparel) with an archaic cost-structure (traditional retail) charging super-premium prices (groove pants for $98) targeting consumers with declining discretionary income (North American female heads of household). Eight-years-old and the brand is generating $350 million annually with 113 store locations and a +6% growth rate while other specialty retailers fade into obsolescence. But, fate can turn rapidly. Lululemon has developed an odd brand partnership that may create demise faster than success.

The business model is so unique, and in retrospect, obvious. Instead of being an expensive health club attracting physically fit regulars while also hawking low-cost merchandise, Lululemon establishes “ambassadors,” aka Luluheads in each market - who promote a retailer that hawks high-priced, fashion forward fitness apparel while charging nothing for its classes. Buy the clothes, take a free yoga class, look great, come back for another class, befriend the Luluheads, buy more clothes. An average health club costs about $75.00 in monthly dues. Lululemon may not get $900 in annual sales from every customer – but in a lot of cases I bet it comes close.  Plus, the environment of the store makes consumers feel like they’re part of something bigger.  Part of a lifestyle of the moment, a statement that is at once aspirational and attainable, a brand relationship that for consumers nationwide justifies a substantive premium vis a vis similar goods sold elsewhere. This dynamic is nothing new – Ralph Lauren, Nike, Apple, and Starbucks have spent decades creating brand auras that transformed products they did not invent.

The passion of Lululemon’s founder, Chip Wilson, unquestionably guides success. A staunch advocate of self-improvement, he sees yoga as one of the many tools available to develop more enriching lives. He encourages his staff to espouse the same values. Can’t argue with that – the infusion of his passion into employees is among the most scalable assets he has. Here’s where it goes too far: Lululemon staff are given complimentary workshops to Landmark, and are “encouraged” to attend.

If you don’t know Landmark, it used to be called The Forum. And if you don’t know The Forum, it used to be called EST. Yep – that EST. The EST founded by “Dr.” Werner Erhard (born John Rosenberg, incidentally, with a former career as an encyclopedia salesman). Erhard offered coursework in human potential. Seminars would last 15-20 hours a day with “agreements” not to eat or visit the bathroom during sessions. To truly evolve, students were encouraged to return, spend more on dues, and bring recruits. Yes, hundreds of thousands of people went through the coursework, yet opponents consistently accused EST of brainwashing and fascism. (Erhard left the U.S. in 1991 following charges of tax evasion and sexual abuse. In absentia, he was ordered by a U.S. court to pay $500,000 in damages for mental injuries). If you ask people about Landmark, too many say “it’s a cult.”  Whether or not that’s true is debatable. The point is – why would one brand (Lululemon) with such skyrocketing potential create an alliance with another brand (Landmark) that has such controversial baggage it changes its name repeatedly to escape the past? 

Judging from people who have taken Landmark courses (I have declined repeated offers from “graduates” to join them for “free consults”), I’m sure the organization has evolved for the better.  And yes, this blog describes an internal program at Lululemon, focused on company employees.  But all too frequently as Lululemon is covered in the media, the alliance is raised. Chip Wilson discusses Landmark on YouTube. If you Google the phrase “Lululemon Landmark,” results covering the alliance go on for ten pages. I don’t know if licensing fees are exchanged between the two companies – but this is a brand partnership. The purpose of brand partnerships is to create an economic whole that’s greater than the sum of its parts, through a broader consumer base, additional media platforms, and cross-selling of products and services. I find it hard to believe that the publicly traded Lululemon will benefit economically from this alliance.

If I worked for the Lululemon brand, I would have called Clif Bar, creator of the Luna Bar. The combination seems perfect. Similar consumer, resolving similar need gaps, both convincing people to buy into enriching lifestyles (plus premium-priced goods and services). Like Lululemon, Luna Bar seems to have a cult-like following. But unlike Lululemon, Luna Bar is not cross-marketing with a cult.

I Want (Hard) Candy!

Guest Post from Laura Mills

I bought my first bottle of Hard Candy nail polish nearly a decade ago at Saks 5th Avenue.  It was a metallic turquoise shade (I think it was called Mermaid) and I begged my mom for it.  At about $15 a bottle, she thought it was excessive, but the color was perfect for my Prom shoes and we rationalized the splurge on the special occasion. 

Hard Candy is a luxury cosmetics brand that peaked in the late 1990s.  During its heyday, it was extremely popular among teens and young adults, with Alicia Silverstone hocking their signature nail color while promoting the movie “Clueless” on David Letterman.  Since then, the brand has steadily declined from displays at Saks to disappearing into Sephora’s cosmetic abyss.  I don’t remember the last time I found, or looked for, their product line.  Like most consumers, I gravitated to brands readily available.

Imagine my pleasure when Wal-Mart announced last week that it was resuscitating the brand at a reasonable price point.  Engaging Hard Candy loyalists and new users while potentially stealing market share from their design conscious competitor, Target – it’s destined to be a hit!  Or is it?  I can debate either way.

First of all, the typical mass merchant shopper is ultra budget-conscious, especially in this economy, and in price-sensitive categories like cosmetics.  Consumers who want trendy, high design products tend to shop elsewhere.  Further, Hard Candy as a brand appeals to tweens and teens, right down to the plastic ring hugging the top.  The brand’s biggest fans are people like me - who remember the heyday but are now adult professionals in their late 20s and early 30s.  We don’t shop the teen aisle anymore.  And, as for today’s tweens and teens, open an issue of Teen Vogue and you’ll be quickly overwhelmed by the hundreds of brands, celebrities and entertainment properties that the age group already embraces.  Hard Candy faces a new world of brand clutter.

It’s an uphill road for Hard Candy to break through the brand clutter in today’s market, but not impossible.  Many fashion brands have re-emerged as licensed product, occasionally generating higher sales than their original run.  Mossimo.  Jordache.  Op.  The list goes on.

With any re-launch there are potential benefits and risks, but it’s nice to see a powerful retailer involved in the revival of a brand that generated such passion.  At the end of the day, it’s the consumers (and their purchases) that will prove whether the risk pays off for all parties involved.  For the sake of my future pedicures, I hope it’s a great success. 

The Business of Michael Jackson Benefits from a Long-Term Outlook

Today's guest blog is by Michael Dresner, CEO Brand2 Squared Licensing, A Division of Peppercom.

Since his death on June 25th, the business press have not only speculated on the economics of Michael  Jackson merchandise, but also reported on attorneys worldwide chasing down purveyors of t-shirts, posters, baseball caps and calendars commemorating the King of Pop without a license. Such legal pursuits are legitimate. Celebrities can generate millions of dollars annually in royalties from recordings, wearables and novelties, posthumously, supporting generations to come. Indeed, the Michael Jackson Estate claims $80 million in new film and license agreements have been created since his death.  If these partners follow the law and pay royalties to the Estate, why should street vendors and websites be held to a different standard? 

Having spent a career in licensing, I am about to forswear the cardinal industry rule of piracy protection. My message to the Michael Jackson Estate: give the street-side vendors some breathing room. Keep the smackdowns to a minimum. Over the long haul, the Estate will get what it deserves. 

If you search on-line or walk down 7th Avenue in Manhattan, you’ll see every type of Michael Jackson paraphernalia imaginable. And there is a consistent attribute among the offerings: they celebrate, honor and mourn, with images of admiration and respect. Every piece of merchandise I’ve seen sold from boxes on the street fortuitously follows this guideline. No mockery or reminders of the bizarre behavior adorning covers of the NY Post– just the positive impact his music has had on millions of lives across decades. My first concert experience was The Jackson Five in 1971.  For many others, their first musical experiences were watching the “Beat It” and “Thriller” videos on MTV again and again. In recent years he was frequently inexplicable and frightening. But those concerts and music videos were fantastic, and can forever stand the test of time. Perhaps the ‘illegal’ merchandise, as designed, is helping to reposition Michael Jackson for the long-term into the amazing performer that he was, rather than the oddities for which he became known. The Estate must keep the importance of this in mind. 

This strategy is more lucrative than chasing a few dollars that the Estate would otherwise compromise in 2009.  The classic case study is Elvis Presley, who died prematurely as well, at the age of 42. Three decades after his death, Elvis Presley Enterprises generates $ 250 million annually in retail revenue (incredibly, that excludes music sales) across 220 licensees – and is defined by merchandise that focuses on his unparalleled cultural contributions, not on the self-created controversies. Elvis Presley had a reputation for philandering, drug and alcohol abuse, rapid obesity, absurd financial mismanagement and self-destruction. He shot television sets in hotel rooms, rented amusement parks to visit at night by himself, was commonly incoherent and once collapsed on stage. Today’s merchandise collection– brought to market by manufacturers willing to pay a 10%-15% royalty– succeeds despite those controversies, with no hint that those controversies ever took place. The product is all about the entertainment. 

The Michael Jackson Estate needs to look decades into the future, in the same way Elvis Presley Enterprise has, when all that remains are the images, content and memories of years past.  It is the memory that dictates long-term economic value.  And today’s street side vendors are helping to direct those memories in a dignified way.  Three decades from now, the enterprise managing the Michael Jackson brand may be liberated from the lawsuits, the operations, the prescription drugs – liberated to generate income purely from the artistic brilliance he brought to the world.  Maybe, just maybe, the t-shirt vendors on 7th Avenue are helping further that effort.

POST-SCRIPT:  One key strategic reason for legal pursuits is protection for the manufacturers and studios that ARE paying royalties.  Do they have an unfair competitive disadvantage?  For those companies following the legal route today: have little fear. The traditional, volume generating distribution systems– from mass merchant retailers to movie theater chains to iTunes– will only solicit 'officially licensed product' for fear of similar cease and desist consequences. 

Bring the Hipsters to the Yard… Harvard Yard

Today's guest blog is by Laura Mills, Account Executive, Brand2 Squared Licensing, A Division of Peppercom.
I giggled when I read this recent post from Perez Hilton: “Harvard University Launches Fashion Line, Confuses Everyone,” thinking of my old college sweatshirt at home.  Licensing is a great source of revenue and marketing for universities, but the idea of a stuffy, Ivy League institution lending its name to a fashion apparel manufacturer seemed ridiculous at first.  However, it might actually be brilliant. 

Generally, collegiate licensing is pretty straight forward.  Most schools stick with their name, colors and mascot, licensing assets under strict visual standards to apparel, paper products, tailgate paraphernalia and other tchotchkes.   Merchandise often targets sports fans with products to wear and use at athletic events, as alumni are life loyal to their schools.  You can’t go anywhere in the world without seeing “Penn State” emblazoned on someone’s chest or cap.  It’s an effective strategy and no college or university has broken this mold.  Until now. 

WearWolf Group will launch a contemporary men’s fashion line called Harvard Yard, inspired by photos of students on the famous lawn in the 1960s.  In this case, both WearWolf and Harvard carve out a fashion niche that the University can own, strategically steering clear of both the tailgate aesthetic and the preppy look of Vineyard Vines.  Instead, it appears to be the menswear extension of Dan Humphrey, the resident hipster on the WB’s Gossip Girl.  As Time magazine eloquently writes in a recent profile of the hipster movement, “instead of creating a culture of their own, hipsters […] borrow from trends long past. Take your grandmother's sweater and Bob Dylan's Wayfarers, add jean shorts, Converse All-Stars and a can of Pabst and bam — hipster.”

Hipster is rapidly turning mainstream, as mass merchants like Urban Outfitters capitalize on what the Time article calls “hipster chic.” Bringing the photos from the ‘60s into the equation, the concept ties the University to the style and, by default, the current trend.  Not only is Harvard taking a new direction from traditional, sports driven collegiate licensing, but it’s doing so with the legitimacy of a really hot trend.   While I question its price positioning ($165 for a pair of pants), Harvard Yard could prove to be wildly successful and provide its “alma mata” with the significant, incremental revenue that goes with that retail success. 

"What’s in a name?” Plenty.

Today, Michael Dresner, CEO, Brand² Squared Licensing, A Division of Peppercom, has written the following special guest post.

This week, MSN had a slide show called “14 Brands in Danger of Disappearing,” with ominous predictions for   Hummer, Gleem, and Saab (among others). MSN’s claim:  “Consumers are cutting back, and corporate America is responding  with cuts of their own.” This is accurate, though not a new trend. Corporations have long acknowledged they could spread resources across only so many trademarks. Brands that cannot justify the attention, R&D, and ad dollars were divested, or placed in corporate archeology. But even in bad times, the liability of one entity can become the asset of another. So rather than assuming Hummer, Gleem and Saab are recession-driven endangered species, MSN might document a more predictive – an interesting – analysis on what these brands may become. Examples abound:

Sharper Image was a specialty gift and electronics retailer with nearly 200 stores focused on early adopters seeking the next innovative gadget. Big box retailers like Staples, Bed Bath & Beyond, and Macy’s began offering similar merchandise at lower prices, while mall traffic was declining. Sharper Image filed for bankruptcy in 2008. The brand had deeply satisfied millions of consumers over 31 years. Those consumers didn’t feel differently about the brand because of corporate distress. So Hilco Consumer Capital purchased the brand name and now licenses into the kitchen electrics, men’s personal care, bedding and MP3 categories. And, these products are now available at... Staple’s, Bed Bath & Beyond, and Macy’s. 

Starter athletic wear brand, founded in 1971, was among the first to establish alliances with major leagues, colleges, universities and the Olympic Committee. Starter was acquired by Nike in 1999 – and internal competition was rife.  Starter could never command the attention or resources of the Swoosh. Yet, Starter had a generation of consumers that grew up with the brand and still embraced its equity in sports league and team partnerships.  Starter was acquired by Iconix in 2007. A much broader and advanced product line was developed with licensees.  Now Starter is the pre-eminent athletic brand at Wal-Mart. 

The list of operationally distressed– yet consumer beloved and thus relaunched - brands is endless. White Cloud. Calgon. Right Guard. AT&T– once Ma Bell trademark, today (under new ownership) iPhone delivery brand. Whoever finds a way to relaunch Kayo Chocolate will retire early. So why would the Hummer trademark drift into obsolescence?  A new owner, without the baggage of its predecessors, can easily leverage the military-like, powerful equities of this ultimate “off-road” vehicle to create a dirt bike line.  A toy company can turn Hummer into a competitor to Tonka.  Hummer may compete against Swiss Army in the categories of army/navy, or outdoors-inspired, apparel, gear and accessories. 

The revenue opportunities for Gleem under new ownership are limitless. It can easily extend into toothbrushes, floss, mouthwash, or teeth whitening.  An agile acquirer can refresh the packaging, tap into oral care innovation happening in many places far beyond P&G (Gleem’s current owner/hopeful seller), relaunch with a superior proposition, and reign back Gleem brand enthusiasts. 

When it comes to an acquirer’s ability to see these brands for the future economic potential they have, let’s not underestimate the possibilities. Hummer, Saab and Gleem will likely be a part of our lives for a long time to come.  And if you are the proud owner of the Kayo trademark– you have pent up consumer demand and a gold mine in your pocket. There’s no better time to leverage it.

Marketing Contributes to Growth of Brand Trial- But to Excess and Abuse?

Today, Michael Dresner, president of our licensing division, has written the following special guest post.

A March 2009 study in the Archives of Pediatrics and Adolescent Medicine revealed that “among those who don’t drink alcohol, ownership of alcohol-branded merchandise predicts both the initiation of alcohol use and binge drinking.” Key licensed products of focus– and subsequent controversy– are baseball caps and clothing.

The chicken/egg debate– whether marketing influences behavior, or merely reflects it– has raged since advertisers started purchasing media space. Let’s not kid ourselves– if marketers didn’t think their efforts would generate awareness and trial, they wouldn’t waste their time on ads, sweepstakes, websites or licensed merchandise.

So, I find merit to the argument that alcohol-branded merchandise leads to product trial. That said, I just don’t believe in the validity of research linking licensed wearables to binge drinking. Our agency has seen enough market research protocols in which clients manipulate the variables and questionnaire to get the answers they want to hear. Hence, my theory:  the Archives wanted to promote the link between t-shirts, hats and binge drinking within academic and business media vehicles.  Otherwise they would not have sent out the press release. 

Efforts to curb binge drinking should be honored. My question is– why is licensed merchandise an area of such vital focus? Full disclosure– my experience with adolescent psychology and substance abuse is low. But doesn’t common sense indicate that binge drinking– a disease– is a byproduct of peer pressure, education, home life, genetics, and mental health?  If that is true, shouldn’t the Archives be spending more time on those issues? 

Licensing plays a role in product trial. No question. But trial and excess are two different subject matters. Licensed product plays an insignificant, and arguably non-existent, role in excess and abuse. Will the absence of such licensed product take away the other factors leading to binge drinking? No way.

If I sound like an advocate of licensing– it’s because I am. People who love the Corona brand should have the opportunity to enjoy its t-shirts, hats, bathing suits, and beach towels. Corona should not have to cease its merchandising strategy because people find an unrelated way to sadly abuse alcohol. I am also an advocate of objective market research, particularly efforts without underlying motive that pinpoint genuine causal factors of damaging health problems. 

I hope the Archives wish to reduce binge drinking.  To solve the problem, I also hope they focus on what really causes the affliction in the first place, rather than wasting resources displacing responsibility on inanimate objects that nobody is under any obligation to buy.

Universities go to school on one unfortunate manufacturer

Russell Corporation, a leading manufacturer of sports apparel, is learning a painful lesson in the world of licensing.  And the properties that have licensed to Russell have a painful lesson of their own.

Yesterday, the University of Michigan announced that it would officially end its long standing licensing agreement with Russell to create branded sweatshirts, t-shirts, fleeces and other clothes with the college logo/brand on them.  Michigan joined Duke, Georgetown, Columbia, Cornell, Purdue and a host of other big time universities that have also ended relationships with Russell over the last few months.

All of these universities belong to an organization called The Worker Rights Consortium, a factory monitoring group (sponsored by 185 universities). On February 18th, this consortium condemned specific human rights violations taking place in one of Russell’s manufacturing plants in Honduras. It seems that the plant was closed on January 31st  because almost half of the employees had joined a union and a large dispute occurred when management stepped in. Another monitoring group, the Fair Labor Association, also found a number of serious labor and human rights violations.

In a report last week, Russell management confirmed that mistakes were made. A direct quote from the company stated, “We acknowledge that management mistakes were made that led to a failure to adhere to standards on freedom of association.” The company vowed to improve its compliance and hence what it called “its overall corporate social responsibilities process.”

Unfortunately, for this licensee, these apologetic admissions are too little and too late. I don’t know how lucrative the company’s license agreements are with its university partners. But, it’s safe to assume that all of these manufacturing agreements add up to quite a sum of revenue. And, now the domino effect is clearly taking place as one university after another is stepping forward, undoubtedly loosening Russell’s long standing industry hold within the higher education market.

It’s equally safe to assume that Russell has generated millions in high-margin royalty revenue for the University of Michigan.  Collecting sizeable royalty checks is a benefit of licensing– no question.  But with that benefit comes significant labor responsibility for the licensor or its representing agency. Where was the oversight?  Where was the contractual clause that allows University officials to inspect licensee business practices to prevent usage of factories culpable for these violations? 

This news is by no means a surprise. Manufacturers and brand owners across the globe have challenges like these. And, sometimes they are hidden in dark corners, without management even having a clue that they exist. That said, this is by no means an excuse. The executives in our licensing division stay awake at night thinking about this very issue. When we connect our clients (licensors) to those manufacturers who we believe will be a good match, one of our first priorities is to ensure that these companies uphold the highest human rights, quality and environmental standards in all their operations. And furthermore, our licensors retain– and leverage– the right to audit, inspect, evaluate, and if necessary, mandate cessation of any factory practice inconsistent with the values of the brand.

Manufacturers demand that our clients’ brands be above reproach (after all they are investing real money to license that sterling image.)  Russell has certainly enjoyed that with properties such as Michigan, Duke and Georgetown. Licensors cannot want to wake up in the morning to read that their partner has unsanitary worker conditions, serious quality issues or (in this case) abused human rights.  Not only will licensors have a miserable PR situation to manage, but they will be forced to change licensees, at potentially less advantageous financial terms.  Aside from making money, the key goal for any licensing program is to extend brand equity into new product lines, distribution channels, and consumers. Through this, both parties can also greatly enhance their image with core constituents who already love the brands for what they stand for.

Whether from a pure public relations standpoint point, or because of valuable licensing deals that are on the table, licensors and manufacturers both need to consistently audit plant operations so that they neither  become parties to the now defunct University of Michigan/Russell Corporation license agreement of tomorrow. This is a valuable lesson for so many companies who depend upon licensing programs as an important additional ongoing revenue line. Maybe, just as importantly, it provides a sobering reality that violations like this (and the publicity that comes with it) will only serve to undue all the brand and revenue building that was created in the first place.

Ms. Obama… be flattered that your daughters are dolls

Today, Michael Dresner, president of our licensing division, has written the following special guest post.

On February 3, Ty’s Toy Box ceased offering ‘Sweet Sasha’ and ‘Marvelous Malia’ dolls following a week of merciless media coverage. "We feel it is inappropriate to use young, private citizens for marketing purposes," First Lady Michelle Obama communicated through her press secretary, Katie McCormick Lelyveld.  When the products were taken off the market, Ms. Lelyveld said “We appreciate the company’s response to this matter.” I take a leap with the next sentence– the words of Ms. Lelyveld drove the media criticism, which drove what is essentially a product recall. Now that the dolls are repackaged as ‘Sweet Sydney’ and ‘Marvelous Mariah,’ I challenge Ms. Lelyveld– and her boss, the First Lady– to explain what they accomplished. 

            OK.  Michelle Obama was clearly frustrated.  As an everyday parent who wants his children to have a normal life, I can accept that. 

            But Ms. Obama is not an everyday parent.  And, her children will not have a normal life.  Ms. Obama made those choices for her family when Barack Obama launched the White House run.  Sasha and Malia now have every opportunity that can bestow an American child. And with those opportunities, they are a part of the public eye forever.  Will a doll line exacerbate that?  Try googling the phrase “Sasha and Malia.” Five MILLION links. Does Ms. Lelyveld plan on pursuing all of those too?

             Ty’s Toy Box did “use young private citizens for marketing purposes.”  But how are the toy company’s actions any different than the books, magazines, television programs, posters, t-shirts, and ice cream pints bearing images of the Obama family?  Purveyors of this merchandise are in it for the marketing purposes too.  To my knowledge, no magazines have been recalled.  No TV show had to be shut off midstream.  But Sweet Sasha and Marvelous Malia had to be taken off the market.

            Ty’s Toy Box clearly tried to leverage the mystique of the Obama daughters.  But, rather than being outraged, is it possible to be touched?  To recognize the impact that these graceful, intelligent, gorgeous children have had on the global psyche?  To take pride in the astounding accomplishments the Obama family has enjoyed over the past year?  The nerve that Ty’s Toy Box clearly touched is not a negative statement about business.  It’s a positive statement about the First Family.

            Perhaps, if Ty’s continued to sell these dolls, they would have generated profit for vendors and themselves, helping the economy and providing jobs.  Perhaps Ms. Obama could have asked Ty’s to allocate some profit toward the educational, infrastructural, and economic deficits that now plague our country.  Perhaps Ms. Obama could have publicly congratulated Ty’s on their ingenuity, while respectfully asking that Sasha’s and Malia’s parents be called the next time someone wants to create dolls that commemorate them.  The First Lady would have gained respect, and Ty’s would have maintained a new business driver.

            But that did not happen.  Ty’s Toy Box had to cancel a product line that people clearly wanted to buy.  Ms. Lelyveld and Ms. Obama– you have no more privacy.  You have no fewer marketing interests in the First Family.  You have no dissipating fascination with your genuinely sweet and marvelous children.  So whatever you tried to achieve, I hope you got it.  Because in the process, a good company suffered.

Using Licensing to Generate Profits and New Revenue Streams for Clients

Marketers need to stop being seen as cost centers and start becoming revenue generators now. Below is an article that Michael Dresner and I recently penned for our trade publication, PR News, about how licensing can do just that.

Our economy has hit a rocky road. Unless you’re in a recession-proof niche (which rarely exists), it’s only a matter of time until your firm is negatively affected by the turbulence. Don’t you wish that your agency had the capability to create real sales and more profit for clients and prospects versus just costing them money on promotions, publicity and more of the same?

Public relations is but one tool to facilitate strategic communication for your brand. Agencies need to think more broadly about all tools available—specifically those that have a direct, quantifiable impact on the bottom line—yet cost clients next to nothing. Strategic brand licensing is one such tool, frequently underleveraged or dismissed—and it’s a tool that the marketing and communications personnel should be using.

THE ROAD LESS TRAVELED
Extending your brand to new categories via third-party license agreements can generate new awareness, increase brand impressions and reinforce the core marketing message. Most important, it generates revenue for clients through manufacturer royalties, rather than a high upfront cost. This is the very organic and resource-efficient marketing brands may seek in uncertain times.

Quite simply, licensing is a strategic marketing service that helps companies with appealing brands (licensors) make money by extending that brand into new categories and industries. This is done by developing new products that current, loyal customers will be interested in—that is, if the extension is strategically designed and executed.

Licensing also can greatly help manufacturers with very little brand visibility because these companies (licensees) can license those attractive brands and use their own manufacturing expertise and retail relationships to create their own products.

Think of licensing as a win/win opportunity for all parties involved. Traditional PR clients can create long-term brand impression generators through licensing that will result in greater customer visibility, as well as show their business leaders that they can bring in real income to the company (thereby earning a newfound level of respect.)

Plus, those licensing clients are now able to obtain ongoing marketing support from third-party manufacturers, all reinforcing messages from the core brand.

LICENSE TO PROFIT
Skeptical readers might be asking, “Licensing? That’s a strange one. Why does this make sense, and why consider expanding into this area?”

There’s an easy answer to that.

Forward-thinking communications professionals are always looking for what’s next. Typically, that means developing new offerings and services to help soothe clients’ pain. Although we at Peppercom didn’t have a crystal ball to see where the economy was heading, we conducted some deep analysis more than a year ago in hopes of enhancing our model. The goal was to offer a completely different type of service that could bridge brand-building with truly understanding and impacting the business of our clients’ business. Whatever we pursued would need to be both synergistic with the strategic nature of our services as well as provide clients with an offering that could have direct impact on their bottom-line revenues.

Which led us to licensing. There are some principles to understand and lessons to learn before jumping in:
1. Licensing isn’t for the faint of heart. Like most marketing functions, it is far more complex than it seems at first glance. The business model of outreach, negotiation and ongoing product development between brand owners and manufacturers is a unique skill set; when not managed correctly, mistakes can be made that adversely affect the brand.

2. A successful licensing practice requires senior mangers’ support. Unless strategic licensing is taken as seriously by senior management as other primary marketing functions, licensed manufacturers, as cost-efficient media vehicles, will never be leveraged as they should. Conclusively, each product category has its own unique rhythm of lead times, buyers, trade spending requirements and competition, so initial paths to sell-through will almost certainly be outside the expectations and experience of the internal client team.

3. Licensing should not be an afterthought. Just like public relations, advertising and consumer promotion need to be priorities or the programs won’t pay real dividends. Recruiting knowledgeable experts from the function to lead and integrate it fully into your client’s culture is also absolutely critical.

With that said, strategic licensing and PR can be leveraged interchangeably to create a fresh set of messages, brand impressions and revenue for clients hungry to compensate for drops in their businesses. And, in a time when any communications/marketing services firm needs to demonstrate much more business acumen and results, brand licensing can truly be a secret, revenue-generating weapon for clients.