A thrust on premium

Licensed merchandise anyway shoots up the expectation of the consumers. Can we attribute this to the dual power of the two brands coming together? It’s a known fact that brand development is the most time consuming part of the product introduction process, and when it comes to licensed merchandise, both the parties, licensor and licensee, tries hard to live up to their reputation with the quality betterment, sliding the pricing up. As Mr Vikas Bagga, VP - Marketing & Corporate Affairs, M&B Footwear, comments, “Value added propositions do carry ‘premium’ to justify the cost and R&D efforts. However, that too tends to get governed by interplay of several environmental variables as no such proposition is operating in isolation.”

 For instance, when ITC’s Fiama Di Wills introduced the Hannah Montana shampoo recently, it came up with a different pack in the market complete with accessories like headbands, mirrors and clips. The price is set at Rs 200, bit higher than the regular price which is Rs 115. Popular characters add premium to the products which is directly proportional to the popularity of the character. Also, the excellent packaging works in tune with slightly higher pricing. 

Premium addition

The pricing of merchandise can vary on account of many variables like maturity of the category in the context of the consumption of that particular category launched. The premium addition by licensing can go over 100 per cent. Mr Devendra Chawla, Head-Private Brands, Future Group says, “It also depends on number of players in the category, their pricing and the overall price elasticity within that category. So, it would be on case to case basis for each category one enters,” he further comments. It’s interesting to note that Future Brand’s Tasty Treat corn flakes has the same pricing that of Kellog’s corn flakes. Tasty Treat, a private label from Future Group, here takes on the international brand Kellog’s with the advantage of licensing. Consumers are not hesitant to pick up a Tasty Treat Choco Gol with a Walt Disney Character instead of Kellog’s - a clever application that is giving hard time to an established international brand.

The pricing of a licensed brand is an outcome of simultaneous factoring in of many aspects integrally attached - perception and positioning of the brand in its own country and other countries where it is present, perceived target audience, the varying expectations of premium by high-end and mid-end retailers and the resultant decides on expenses and margins accordingly. The other factors could be innovativeness of the product proposition, the corresponding growth perspective, input cost towards the material and the after sales service in the offering.

Mr Bagga opines, “Licensing fee and recurring royalty payouts impact the pricing multiplier immensely. Usually, a licensed product fetches a higher price, but then again that would be the function of product cum brand proposition. Interestingly, at times, within the same category the price points could be hugely different between branded and licensed products. While it may not be so different when it comes to a high-end retailer or chain/departmental store which thrives both on licensed and branded merchandise as well as unbranded/private labels, wherein huge margins are secured to even out their high operative expenses and push their retail margins.”

Mr Pankaj Sikka, Manager, Licensing-Bioworld shares, “In comparison with similar products (of the same quality), licensed merchandise is costlier than the regular non-licensed merchandise since it involves the royalties for using the brand of the licensor. The difference in pricing depends on the contract between the two companies. The range can lie anywhere between 15 -25 per cent of the whole sales prices.”

Enhancement of sales

It is now well accepted by retailers as to how licensed goods give them the added margins even in the most recession-hit economies. Globally, as per the Licensing Letter, Sep 2009, 63 per cent of the licensed products studied were priced higher than their non-licensed counterparts. 

Mr Prateek Maheshwari, Director, Brand Concepts says, “A licensed character usage would certainly enhance the value and salability of the product.” To this, Mr Chawla adds, “We have had great success with our corn flakes range as well as party napkins and car tissue boxes in which we are working with Disney. Consumption of corn flakes as a category has grown in our stores post our own brand Tasty Treat’s launch and the overall pie has grown too.”

M&B has been involved in handling many licensed brands all these years, one of them being Lee Cooper Footwear leading the sales contribution. “Not only the sales have grown manifold, the licensing arrangement has brought in a lot of innovation in the product, services and practices at M&B,” avers Mr Bagga.

We also caught up with a few store managers to get the hand-on experience of the sales. Mr Ranjit Basnett, Store Manager, Puma, at Saket opines, “The sale for licensed merchandise is higher when the tournament is on and especially when the team is performing well.” One of Reebok’s store managers shares that the Shiamak Davar or Manish Arora product lines will always be in demand for certain group of customers, no matter what is the price range. Here, licensing capitalise on emotions in full scale.

In toy category Mr Manav Mehra, Manager-Sales and Marketing, “Alyied, The Party Shop” shares that the sales for licensed merchandise is more in the malls due to the kind of spending power held by the customers who walk-in.

Target group and kids’ pestering power

Though kids form the chunk of customers for the licensed merchandise, adults and youngsters are also a potential catch. At Brand Concepts, the primary target audience for licensed bags is the kids for sure who connect with the character and fantasise being one. M&B has mainly pursued the adult audience through licensing. At Bioworld Merchandising, the merchandise is basically youth-centric. Mr Chawla comments, “Our primary target audience is children. The licensed merchandise assortment is displayed at lower eye level on primary shelves next to national brands to catch the attention of the kids.”

 Mr Bagger analyses, “Notably, a licensed character works very well to attract kids in shoes, apparels and toys category simply because of the existent heightened connectivity that the kids enjoy and relate to, vis-a-vis, all such characters owing to a widespread media and print exposure,” says Mr Bagga.

The same is echoed by Anil,  a team member of Toon Kidz at Great India Place Mall: “We stock economical products at the child’s eyesight level because if they persist, the parents consider, provided it matches with the budget they have in their mind.”

The present retail evolution shows that much has to be done by licensing in the Indian market which includes value addition to the brand with premium quality and higher price positioning, ensuring higher premium.                                                                                                         

Inputs generated by Varun Jain