The Power of Licensing #16: The Importance Of Brand Licensing In These Turbulent Times
November 11, 2020: By: Michael Stone, Chairman and Co-founder of Beanstalk
As everybody knows, the world has become a different place in 2020. We are living, consuming and thinking differently in fundamental ways. The worst health crises in over a century, the most punishing economic collapse in 80 years and the deepest struggle with systemic racism in 60 years are the three foundational, separate, yet interrelated, threats that pose among the most serious challenges for brands and businesses that we have faced in decades (and let’s not forget gender inequality, climate change and political disruption). Consumers have reacted by decidedly changing their purchasing habits and their attitudes towards brands. Businesses must understand what kind of new consumer is emerging, actually has emerged, and how business — how brands — can remain relevant and grow. Some of these changes were already underway, but they have accelerated this year at a pace faster than we could have ever imagined.
What are some of the changed purchasing behaviors that we are witnessing this year? There is, of course, less enthusiasm for in-store visits and more online shopping; there’s an increase in digital-based shopping behaviors such as curbside pick-up, delivery, and shop online/pick-up in store; workplaces have shifted to the home; there are more contactless payment options; consumers are spending less; and there is more interest in categories such as wellness and personal hygiene. Many of these changes in consumer behavior are driven by the pandemic and the stalled economy. When both have passed, some consumers will snap back to their pre-pandemic behaviors, but many will not. Recent research has demonstrated that the choices, attitudes and priorities that consumers are expressing today will last into the future. The specific change that I want to address is the change in consumers’ expectations of brands and how brands have to pivot to show up in new ways.
Smart companies today understand that brands don’t just sell stuff, today brands have to mean something and affect change in ways that consumers respect. Making better products is no longer enough, consumers expect brands to make society better. And given that the licensing business relies on brands, their fame and the trust that they represent to consumers, those of us in the licensing industry must pay attention to these consumer expectations and respond to them.
How brands are treating the pandemic and affirming the Black Lives Matter movement as well as addressing other issues such as climate change will have a lasting impact on consumer loyalty and entanglement. For the past several years, it has become clear that consumers (Millennials and Gen-Z, in particular) want brands to stand for something, have a purpose, take a position about societal, environmental, cultural and political issues of the day and purpose-driven marketing strategies were, as a result, gaining in importance. Consumers already had made it clear that they don’t want just a lot of talk and messaging, consumers expect brands to take action. In response, brands have increasingly taken public positions on and actions related to sustainability, gun violence, gender inequality and sexual harassment, among other important issues. And now, in the midst of a pandemic and protests over racial injustice, with our federal government seemingly not up to the challenges, consumers’ expectations that brands play an active role in meeting those challenges has become more urgent. Working for the public good can have lasting, positive consequences.
But it’s not just about what brand owners do. What about the companies that brand owners allow, through licensing, to use their famous names on their products? For example, over the past many years most brand owners have stepped forward to ensure that overseas manufacturing facilities that they use maintain certain labor and manufacturing standards. And most brand owners require that their licensees and the factories that they use meet certain labor and manufacturing standards as well. What about other positions that brand owners are taking?
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Licensing has a very important role to play in this new world order. Let me explain. Brands have always had messages that they want to deliver to consumers. Messages about their products or services, their equities, targeted at the consumers with whom they want to engage. And licensing has always been an effective tool for brands to use to help them deliver those messages. But today, in these turbulent times, brands have a more important message to deliver to consumers, a message not just about their products, but about what the brand is doing to help society, to address issues, a message about their values. And licensing is now an even more important arrow in a brand owner’s quiver to help deliver that message. How so?
Licensing is a form of partnership that always involves branded products. Thousands and thousands of products, all featuring, via license, famous names and logos, names and logos that consumers trust. That’s why licensees pay money to use those names and logos — for the fame and for the trust. By doing so, by engaging in licensing, either as a licensor, licensee or retailer, those licensed products touch the lives of consumers every day, they communicate a brand message to consumers every day. At its core, licensing is a communications tool.
Historically, excellence in licensing has been measured by the strength of a brand owner’s strategic plan for licensing; an understanding of brand equity by licensor, licensee and retailer; product categories logically associated with the brand; selecting the right licensee partners; developing great product; getting the licensed product to market at the right retailers targeting the right demographic groups at the right price; and, of course, actively managing the program. We focus on who the potential consumers are for our licensed product, as we should. However, we need to focus not only on the who but on the what and the how. We need to focus on what consumers are thinking and how they are acting — on their purchasing behaviors and their expectations of brands, the brands featured on licensed products. If we in the licensing industry recognize that our goal is not only to sell a lot of product but also to communicate with consumers, to engage them, to entangle with them, to deliver the brand message, then we have a significant opportunity right now as well as in a post-pandemic world. Entangle with your consumers with the right message, help satisfy their expectations of the licensed brand, take the right actions, and you will drive sales and, probably, also do some good in the world.
It's certainly been a very confusing and daunting year, but we have learned a lot in 2020.
First, we learned that brands really matter. Think about what happened in marketing over the past decade. The marketing environment changed so radically that a school of thought evolved that brands were in decline. Certainly, the internet and everything associated with it diminished the effectiveness of traditional advertising and complicated how brands engage with consumers and drive loyalty. The purpose of brands has always been about assuring us of the quality of a product and to make our buying decisions easier. Consumers want to feel safe in their buying decisions and they came to trust brands. The Internet and technology, however, turned everything on its head and the monopoly that advertising had in delivering brand messages fell apart. Now, with a click, consumers can obtain all of the information they could possibly want about any product from experts, influencers and from each other, among other sources.
Yet, a cultural paradox emerged. Yes, information that we used to rely on advertising to give us about brands and products is now readily available on the internet (so we need brands less). But also, yes, we still want help making our buying decisions (brands give us that help), and we seem to have even less time to make those decisions than we used to. We still want speed and ease when making buying decisions. We need brands less (maybe) because we can research little known or unknown “brands,” and we need brands more (maybe) because we don’t have time, suffer from information overload, and want to be able to trust our purchase decisions. And today, the need for trust is higher than ever. Ultimately, it depends on how brands choose to deliver their brand message.
I used the word “entangling” earlier to describe brand/consumer interaction. The word comes from a ground-breaking book entitled Release the Power of Entangled Marketing: Moving Beyond Engagement, by Stan Rapp and Sebastian Jespersen (The International Press, 2016). They argue that brand messaging is no longer a one-way street, brand to consumer, but a two-way street, brand to consumer and consumer to brand. It’s about “entangling” brand and consumer, building a mutual, enduring, interrelated connection. Today, the pandemic, the economic slump, the Black Lives Matter movement, climate change and more, are each reinforcing how important brands are to consumers and how entangled brand and consumer have become. And that’s where licensing fits in and can help brands deliver the new messages and actions that consumers are demanding and help brands further entangle with consumers. Licensing is able to use product and its association with famous, trusted brands to proactively communicate with consumers, reinforcing the brand owner’s message, connecting with them, resulting in not only sales but in brand affinity and loyalty.
What kinds of actions are brands taking today? Brands have made recent efforts to affirm the BLM movement, such as donations to non-profits, supporting diversity and equality in the workplace, and supporting boycotts to denounce online hate speech. They have also taken actions to help people in need during the health crisis such as switching manufacturing to PPE and other medical equipment, providing free meals to first responders, donating to food banks, developing new help lines, as well as addressing the needs, financial and emotional, of their employees. Licensees of a brand owner should be following the brand’s lead. After all, their products feature the brand. But actions taken by licensees must be authentic. For example, if a company does not have a diverse workforce, how can that company authentically support BLM? Consumers can be wary, and actions must be aligned with a company’s core values; actions need to be authentic. That being said, the health, economic and racial crises we are facing today allow companies to step into the breech and, in a way, redefine who they are, perhaps speaking for the first time.
Let’s look at the data. According to the Harvard Business Review, 60% of all Americans say that how a brand responds to racial justice protests will influence whether they buy or boycott the brand in the future. Sixty-nine percent of younger consumers (Milennials and Gen-Z) think that brands should be involved in the BLM movement. (HBR, When a Brand Stands Up for Racial Justice, Do People Buy It?, by Geeta Menon and Tina Kiesler, July 31, 2020).
With respect to the health crisis, the recent 2020 Edelman Trust Barometer (“Trust Barometer Special Report: Brand Trust and the Coronavirus Pandemic,” Edelman, March 2020), based on interviews with 12,000 people in several countries, concluded that consumers expect brands to protect the financial security of employees and suppliers, provide reliable information about COVID-19, and be creative and compassionate in the way that they take action with respect to COVID-19. In particular, the Edelman study found that 61% of U.S. respondents noted that how a brand acts during this time will affect whether or not they continue to purchase that brand in the future. And 37% claimed to have switched brands or used a new brand as a result of the way it responded to the pandemic. Another recent study found that 89% of executives believe that companies that lead with Purpose have a competitive advantage in today’s marketplace.
The conclusions stemming from all of this are clear — to engage with consumers, companies need to take positions — against racial injustice or the health crisis or other issues such as climate change. That means that brands have an opportunity to further entangle with consumers during this time, but it also means that consumers can easily move to another brand that they see is doing more.
In a time, such as now, when it is imperative for brand owners to communicate with consumers about their positions on issues of the day, licensing and licensed products can help deliver that message; licensing is a path to the consumer and to brand/consumer engagement. Licensing acts as a kind of loudspeaker, amplifying a brand’s message to target audiences at a time when brand owners are sorting through the many communications paths available to them in today’s marketing ecosystem.
To reap these benefits of licensing, licensees must align their company with the actions that are being taken by the brand owner and brand owners must give their licensees the guidance and support that they need to be effective. Actions can be consumer facing or they can be organizational facing. Employees are ambassadors for their company and, indirectly, for the brand featured on their licensed products. So, licensees need to do right by them when taking a position.
Sustainability. I mentioned earlier how consumer attitudes towards factory standards have driven changes at brand owners as well as in their licensing programs. Sustainability is another area to model. How the licensing industry is already responding to consumer concerns about climate change and demands for sustainability is a good road map for how licensing can support a brand owner’s position on other important issues such as health, anti-racism and the economy. Most licensors and retailers have set themselves targets, often ambitious targets, to cut carbon emissions, reduce water usage and recycle plastics and other materials. Licensees are establishing their own sustainability practices, and in many instances, they are getting guidance from licensors. Sustainability is often part of a licensor’s due diligence when vetting potential licensees. Clearly, if a licensee doesn’t meet the same standards to which a licensor holds itself accountable, that could create a problem for the brand owner with consumers. Consumers generally don’t distinguish between a brand’s core products and licensed products. And therein lies the risk if sustainability issues are not addressed and coordinated between licensor and licensee.
Some brand licensors are taking the lead by creating specific sustainability targets and guidelines for their licensees, such as The Coca-Cola Company, PVH and Disney. The BBC is working to ensure that its licensees are aligned with the environmental content on its TV, radio and online channels. A group named Products of Change, launched in the U.K. in 2018, is aiming to establish best practices on sustainability by product category for the licensing industry. And the Sustainability in Licensing Conference will be held on November 24 – 25, 2020. Licensees must meet the expectations not only of their licensors when it comes to sustainability, but also must meet the expectations of retailers and, most importantly, of consumers. We are not far off from a time when licensors will contractually require their licensees to engage in certain sustainability practices (as some of them already do with respect to labor and manufacturing). And I can also imagine a day when licensors will insist on contractual provisions that align the licensee with the licensor’s positions on other issues.
Actions, Not Words. What are some other ways that licensees can follow the lead of their licensors to support a position? Here are some thought starters:
1. Co-marketing and co-promotions with the brand owner, other licensees or a retailer.
2. Designs tied to the issue.
3. Information on a hang tag, packaging or displays.
4. Evaluation of the supply chain.
5. Portraying diverse consumers in marketing materials.
6. Making donations.
7. Involving employees.
But getting involved in social, political or cultural issues can be challenging and brands are often caught between a rock and a hard place. Even the smartest companies can easily get it wrong and suffer blow back. And with any position a brand takes, some consumers will applaud what the brand is doing while others will be offended. The recent U.S. Presidential election, where voters were almost evenly split, proves how polarized we are on issues of the day. So, how do brand licensees align their companies with the brand owner’s positions and avoid failure when taking a stand?
The first step is for the licensee to understand what the message is that the brand wants to deliver. Is the brand staking out a position and taking action on the health crisis, racial injustice, gender inequality, climate change or some other important issue? Licensors and licensees must be marketing the message together. There really is no alternative.
Second, as I have already noted, licensees (and, of course, brand owners) must be authentic and credible when staking out a position. Understand your lane, what makes sense for your business.
Third, companies must make the investment to engage the company in actions to support the chosen position and company internal values must align with the position that you want to take. Consumers want not just words, but action. This can’t be accomplished overnight. It takes time and resources. For example, if you want to take a position on racial injustice, you better make sure that your company is living those values internally before you take a position with your consumers. This is a good time to hit the re-set button.
And, fourth, don’t be simply reactive. Don’t be caught off guard. You know the issues. Engage early, credibly and often. This work will never end, so if you haven’t started, get started.
Undoubtedly, now is a unique time for brands — licensors and licensees — to communicate their values and leadership, and to take meaningful actions for the public good. And, yet, the question remains — as brands take positions and act on issues that are important to consumers: Will consumers remember how brands act today, or will they forget and simply return to their old` purchasing habits and loyalties?
It’s too soon to know if there will be lasting value for brands that take meaningful action today or rise to the challenge and demonstrate continued relevance post-pandemic, after the economy recovers or after protests abate. Perhaps, that’s a fair debate. While I suspect that some consumers will, indeed, forget, many will remember and will continue to have these expectations of brands.
Making a corporate commitment to a purpose can be difficult and challenging, particularly given the economic obstacles many companies face at this particular time. But today’s consumers are demanding that we take action if we want to retain or recruit them as customers. In a world where health issues, economic issues, racial injustice, climate change and more are driving consumer purchasing behavior and attitudes, you really have no choice. This is as good a time as ever to step forward, take a position and make a difference with Purpose to guide your actions. It’s a time, indeed an opportunity, for brands to use licensing to engage and entangle with consumers on an entirely different playing field.