| How can licensing benefit your marketing strategy?
It is essential to decide what you want any licensing activity to achieve in both the short and long-term. The right licensing property can give significant benefit to the marketing of a licensee’s existing product or service or help them to create new bespoke product lines or attract new users. Retailers may be putting pressure on your listings or your profit margins, wanting something new. Your consumer base may be dying out and you may need to revitalise your product category and make it relevant to new target markets. Different properties can provide your product or service with added value, differentiation and new user bases. Some properties have inherently short lifespans, able to help you achieve certain objectives. Other brands and properties can offer long-term relationships and the ability to update or extend offerings. Your commercial imperatives should influence and govern your licensing activity and the type of organisations and properties you deal with.
TIP: A license should be treated as if it was one of your own brands and looked after with as much care.
Understand the worth of your products/services and capabilities.
The appeal of your product or service to licensors will lie largely in your current users or target market, the quality and pricing of your goods and your listing and relationship with retailers. It is therefore vital to really understand your key attributes and capabilities, your strengths and weaknesses and how you compare with your competitive set. This should also include how long your product development and production times are, which will affect the type of properties you could deal with.
More information on understanding and expressing your brand is shown in Brand Matters.
TIP: It is just as important to understand what you’re NOT as well as what you ARE about. This will help with understanding what brands or properties wouldn’t be suitable or possible to license.
Selecting your licensing property
The category in which you operate may make you naturally gravitate towards certain licensing properties, such as cartoon characters or tv/movies for toy manufacturers or sports and associated personalities for those who supply sports apparel. However, to select a property within these sectors or for those whose product could be directed at a number of target markets, you need to be continually on the look out for forthcoming trends, events and opportunities to see what’s hot and what’s not, to give yourself enough time to fully assess the idea and obtain the license before your competitors do. In Industry News, ‘Market Research’ and the ‘Events Calendar’ we give you some of the latest trends, forthcoming events, movies and ideas to help this process. Details on what organisations have which properties are listed in The Directory.
Ensuring that Licensors are aware of your capabilities and expertise is obviously also crucial. Don't forget to ensure your listing in The Directory is up to date with your profile and licenses. If you are a Licensingpages member and meet certain world class criteria, you can list in our exclusive WorldClass Licensee section, which promotes best of class by category and by country.
Your brand and your commercial imperatives should influence your selection and the appropriateness of a potential property with your product or service. You should carefully consider the property’s target market versus your own and also establish whether your current retail outlets are appropriate or if it would require additional or alternative listing and how you could do this. You need to also consider if your existing product or service line is suitable or if you’d intend to develop a new range specifically for the property, assessing how long development and manufacturing might take. Ensure you allow for a lengthy approvals process.
Another important element to consider is the potential lifespan of the property and the activity the licensor intends to support it. Will it have a long term potential or a very short shelf-life? Will there be more series/another edition/updated or new characters? How will the licensor support it through marketing? If it’s not new a licensee should talk to other licensees of the property and determine how it has been previously received.
TIP: Talk to your retailers. They know what sells and what they want in-store and can be an excellent source of direction. Members can look at what is in-store in selected retail outlets and could become involved in discussional forums with retailers in Retail Connection.
The Licensing Agreement
The licensing agreement between a licensor and licensee is a legally binding document to protect the interests of both parties. Whilst agreements will vary according to each deal and sometimes in accordance with government or legal rules pertaining to different markets, the fundamental points of a licensing agreement refer to the licensor ascribing the right to the licensee to manufacture items incorporating the licensor’s brand or property and which may be sold in a particular territory, for a set period of time in return for a payment. The licensing agreement is prepared by the licensor and will be approved or amended by the licensee.
The schedule of a licensing agreement or contract may include details of:
- The Licensee and their registered office and company registration details
- The Licensor’s product
- The licensed properties – the copyrighted works such as the logo type, phrases, look; trademarked works such as the actual logo, character designs etc
- Which retail outlets the licensed product maybe sold in
- The licensed products which maybe manufactured e.g. clothes – underwear, socks and t-shirts only
- The publicity material – what promotional advertising and packaging material that will promote the licensed product
- The Licensee’s selling price (wholesale price to retailer)
- The deemed minimum selling price (to consumer)
- The territory in which the products may be sold
- The start and finish dates of the agreement
- The advance required e.g. £10,000
- Advance payment date e.g. 50% on signature, 50% in 6 months
- The royalty rate e.g. 10% of net receipts from sale of licensed products plus VAT
- Distribution date – the date by which the licensed products will be available for shipment to retail outlets
- Marketing date – the date by which the licensed product will appear in retail
An agreement will also include all the details relating to the approval of licensed products or publicity material; payment of royalties and statements of account; indemnities; assignment of sub-licenses; termination and many other vital clauses.
TIP: Members of Licensingpages can download US and UK Contract Frameworks for free in Legal Resource. Whilst most licensing agreements are normally drafted by Licensors, these can act as a good overview for Licensees of the sort of contract you may be presented and will need to consider. Licensingpages always recommends the use of a lawyer for all legal issues.
Working with the licensor
You should seek to obtain as much information about the property as possible. This includes brand and style guidelines and anything that influences the look and feel of your product in order to compliment the core attributes of the property and which helps with what motivates or interest its target audience. The licensor will want close contact through the process to ensure their expectations are met and the quality and inherent qualities of the brand or property are maintained. It is vital to have an open and on-going dialogue and relationship with your licensor during your production and retailing process. Your licensor can be a good source of direction and market data. Remember it is in their interest to help make this a success!
Joint marketing activities or piggy backing on a licensor’s promotion can make your activities work harder. Ensure a co-ordinated approach with both the licensor and the retailer. Once launched it is vital to keep up to date with the popularity and overall activity of the main property, which could affect demand levels. Have regular updates from both the licensor and the retailers, not only to help with levels of the present licensed product but to help assess the potential of further activity or extended product lines.
You will be required to submit royalty statements and agreed royalties to the licensor, usually on a quarterly basis, subject to your contract. Details about Licensees' financial obligations and ways to help your licensing management are included in the Accounting section of Financial Issues.
TIP: Be on the look out for any counterfeiting or infringement that could be eroding your potential revenue. Report all suspicions promptly to the licensor.
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