December 5, 2016

By Michael Stone

Why are corporate marketing leaders and others turning to licensing as never before? With the exponential growth of targeted marketing through the internet, the decline of traditional advertising, and the readily available information about products on the internet, brand owners are now compelled to think and act much more strategically to zero in on and reach their consumers in an authentic and genuine way. Licensing can help deliver the brand message—it’s a tool in the marketing tool box.

However, licensing is not a one-size-fits-all strategy. It can be and is tailored to fit the goals of a wide variety of companies and a diverse array of marketing objectives. Licensing helps companies leverage brand equity in new and innovative ways. Oftentimes, organizations don’t fully realize how licensing can be used to achieve marketing and communications objectives. For example, some companies may want their licensing program to shift a brand’s positioning or extend a brand’s meaning. Diageo’s licensing program for Baileys helped turn a brand known as liquid spirit into a brand known more broadly as an indulgent treat. Skechers extended its brand from footwear to fashion utilizing licensing. These types of brand re-definitions are always ambitious, but fully within the scope of strategic licensing.

Although licensing can be used as a tool to support a wide array of corporate marketing goals, following are what I consider the seven most universal benefits of brand licensing with examples for each (in no particular order):

1. To enter or maintain a presence in businesses that have strategic value but fall outside of the company’s core businesses or financial thresholds. Guinness, the famous beer, has licensed its name for a broad range of fish and meats offered in the food service channel, all featuring the flavor profile of the famous stout. This is a product category that has value to the brand but is one in which the company has zero expertise to pursue on its own. These food products expanded the brand’s presence in the food service channel and provided pairing opportunities for Guinness, driving sales of the core beer when both the beer and the food appear on a menu. The brand is more than just a beer. It’s a taste, a treat, a snack. Licensing was part of the answer.

2. To build brand awareness and reinforce brand values. Procter & Gamble’s Febreze is a household air care product. Its primary assets are the elimination of odor and fresh scent. Unlike many of its competitors, it doesn’t mask unacceptable smells—it actually eliminates odors through its innovative technology. What better way to reinforce those important brand values than through licensed products? So, Febreze licensed its brand to Clorox’s Fresh Step cat litter. It utilizes the Febreze technology in the product as the scent and features the brand on the packaging, increasing brand awareness and reinforcing the primary brand value—scent and odor elimination. Febreze has also been licensed as a co-brand for use in other categories where improving the scent is valuable, such as trash bags, vacuum bags and filters, and carpet deodorizing powder.

3. To strengthen the relationship with existing customers and increase consumer touchpoints. Febreze also illustrates this benefit. The licensed products are sold in aisles of the store that are different from where the primary product is sold. Fresh Step with Febreze is sold in the pet aisle and in pet stores, increasing consumer touchpoints. And existing consumers of the core products will likely be attracted to the licensed products because they are loyal to and trust the Febreze brand promise. Other examples include Meredith’s Better Homes and Gardens licensed home textiles and décor program at Walmart, Weight Watchers licensed frozen meals, and Coca-Cola Co.’s licensed apparel programs.

4. To reach new consumers and educate them about the brand. Energizer is one of the world’s leading battery brands, but the company wants consumers to think of the brand as more than just batteries. They want consumers to think about the brand as all things related to power and light, technologically driven and innovative. And licensing is an arrow in their quiver. Energizer has been licensed for automotive batteries; portable power sources; consumer electronic accessories; solar, household and specialty lighting; and photographic and gaming products, among others. The Sunkist Growers Association is known for Sunkist oranges. How do they reach new consumers for oranges and other fruits and how do they let consumers know that they are the experts on all products related to citrus? Licensing has helped, with Sunkist-licensed orange soda, fruit bites and vitamins, among other products.

5. To extend into new channels of distribution. The Meredith example above is a good one for this benefit as well. Better Homes and Gardens is a magazine, sold in all the usual places in which magazines are sold, including by subscription. The brand’s licensed home textiles and décor program, exclusive to Walmart, gets the brand into an entirely different channel of distribution. Pantone is a color chart service, but now the brand can be found in licensed products such as mugs, tabletop products and books, taking advantage of the brand’s color equity and getting the brand into entirely new channels of distribution. Ditto AT&T, a telephone service, with its licensed landline phones sold at electronics retailers.

6. To generate new revenue streams with minimal upfront investment. Some brands enter licensing for the benefit of revenue generation. And, indeed, licensing can generate significant revenues that are very profit-rich, given the model. Iconic brands, such as Westinghouse and The Sharper Image, have turned to licensing the brand virtually in its entirety to keep the brand alive and to be the major or sole source of revenue for the brand. So licensing is a way to not only deliver the brand message but to actually keep a brand alive and generating revenue.

7. To protect the brand via broad trademark registration. Licensing is a recognized way to enable a brand to register its trademark in classifications of goods outside of its primary category. If this is the goal, licensing must be used as the brand identifier on licensed product and not just as decoration. Both Coca-Cola Co. and Harley-Davidson Motor Co. were pioneers in the late 1970s and early 1980s in using licensing to further strengthen their iconic trademarks by licensing the marks in classifications where the companies wished to register and further protect the marks.

These are simply the seven broad benefits of licensing. There are other, subsets of these, such as redefining a brand, reaching a particular customer or demographic (e.g., millennials, Hispanics, women, children), expanding how consumers interact with a brand by delivering new experiences, or expanding the brand in other parts of the world. Of course, as with any marketing activity, there are risks.

For brand owners to effectively reap the benefits of licensing, they need to think it through strategically. The licensed products must align with the marketing/communications objectives—and support and further those objectives. The program must be effectively and professionally managed on a continuous basis. And the products must be well designed, produced with the quality expectations of the brand, and, always, deliver and be true to the brand promise.