Getting started with brand extension

Well, it’s all about right mix! The right timing, product, partners and an explicit legal understanding of key issues involved, among other crucial points, contribute to the very basic of the licensing business for any potential brand. There are mainly five primary points to be considered – brand awareness, per capita income, confidence in the licensing business model, health of the retail industry, robust intellectual property and trademark protection laws. Kelvyn Gardner, MD, LIMA, UK opines, “The first decision is whether to do the work in-house or to appoint a licensing agent. If the former, keep it simple to start with and look for licensees closely related to the core product, for instance, if you own a motor car brand, start by looking for licensees in the field of motoring accessories.”

On right time to go for licensing   Devendra Chawla, Head-Private Brands, Future Group Ltd, opines,”It depends on the objectives for a particular brand or company. While established brands will go for licensing if they want to differentiate the product and charge a premium for that SKU; brands which are not prominent and want an identity for themselves would go for product licensing to build business and gain share over a period of time (ie, doing regular products and activating around it and also through differentiated product) by leveraging the popularity of the franchise/characters.”

How to begin with

Taking up the above mentioned points, brand awareness is one of the most crucial points that needs to be addressed. The brand preference or the brand insistence level of the target consumers should be such that they are happy to accept the additional product categories from the brand in context and, also, willing to pay extra premium to get a share of the merchandise. The per capita income should be taken into consideration since it is important to learn about the purchasing power of the population in context, drawing a clearer picture as to whether there will be scope for the purchase of the ‘non-necessity’ items being offered by the brand. Confidence and faith in the licensing model is of the utmost importance along with the commitment to make the programme a success. It is also understood that since the success of brand licensing is heavily dependent on the retail roll out, it becomes pertinent that the retail industry be on board with the licensing programme. All of these points must merge with stringent legal procedures, in order to ensure that the brand (which enters a market) will be protected by the law of the land.

Having been decided by a brand that it will enter licensing, the brand should get advice and strategy of implementation from a qualified agent. This would ensure that the brand will receive a high level of professionalism, experience and business know-how when entering a new field or market. “The licensing agent can map out a licensing programme tailored to the goals of the brand owner, perform due diligence to select the best licensees and draft the contract to get started. The entire process is made of product development, ongoing royalty and reporting and licensee management to ensure a long term and successful programme,” avers Michelle Minieri, President, Bradford Licensing, USA.

Finding the right partner

A key area of concern remains to be, undoubtedly, the fact that the licensor-licensee relation must be absolutely transparent and there should not be any room for doubt. Chawla points out a few pertinent points here, which according to him, are the fundamentals for finding the right licensee. These are mainly as follows – a licensee should have a clear long term vision of how he wants to build long term sustainable business using character licensing; the licensee should have the manufacturing facility or third party arrangements which should gel well with the equity of the character, and any product which would compromise on quality, would have a negative impact on the franchise/character associated with the product.

Ansul Agarwal, MD, Dhananjai Apparels Pvt. Ltd shares his viewpoint that it is not important for a licensee to have its own manufacturing unit. While a few of them do, others outsource. The most important bit is that the product has to be sold to consumers, so its presence on the retail shelves is very important.

Branding and product development

Numerous studies have revealed that brands are much more powerful than any other asset of a company. However, they are under-utilised. There comes licensing in the picture which has enabled brands to explore their brand potential further (in new markets) by extending into diverse product categories, beyond their core competencies.

The product development process is extremely important in licensing. It is here that the brand owner’s trademark will be used and therefore they need to be assured that the development will be done tastefully and with as much quality as possible. The licensee needs to make sure they stay true to the brand to ensure a strong relation to the core product. “We achieve this by working closely with the licensee when developing the product range; a process that can take anywhere from one month to a year depending on the product,” says Minieri. She further shares that a style guide is a common tool used during this process, which shows the licensee how to create the licensed goods, what logos, colours, icons, patterns, packaging and even advertising slogans can be used. “All licensees follow the same process so in the end, all the products extensions can effectively mesh together to create a cohesive licensing programme,” she further adds.

Chawla shares his experience with FMCG companies and opines that it could take 3-6 months to introduce the product in the market. The duration varies with the product category. “Licensors generally have the capability to share and develop the product and packaging concepts (through their learning in domestic and international markets),” he further adds.

As per Gardner’s take, product development takes three months to one year depending on the type of product and speed to market; Agarwal opines that the ideal duration for developing new products can be 6-8 months. “Once the product line is decided, retail level branding can follow in the same lines which will talk about the product.  Certain products are seasonal. Product development has to be a continuous affair to offer new products regularly to the customers,” avers Agarwal.

Marketing strategy

A pre-launch strategy to build anticipation and generate awareness works big time in order to build a brand’s marketing strategy. The excitement should be created during launching occasion. One example is that of Fiama Di Wills “Shine in Style” Hannah Montana pack. This is a licensed product from ITC Personal Care premium brand Fiama Di Willis. The product that carries the appeal of Disney’s popular tween icon, Hannah Montana, was launched amidst much fanfare at Wills Lifestyle Fashion Week.

Brand packaging has proven to be yet another effective weapon in the battle for the hearts and minds of consumers on the actual playing field  – the retail shelf. The consumer might take five seconds or less to select a brand and you can focus on some vital points which can help you emerge as a winner eventually. These are broadly: getting the right resource on the table; understand the brand’s visual vocabulary and design the brand in a way that the mind retains visual information.

Generally, a licensor has the more dominant role to play, however, Minieri comments, “The marketing strategy should be a combined effort between the licensor and licensee. The licensor is the expert of the brand, whereas the licensee is the expert in their specific industry. By combining forces, they will be able to develop a full platform for launch, developing and maintaining the product in the marketplace and make full use of our any cross promotions or synergies available.”

Chawla brings forth an interesting angle when he shares that for bigger companies or brands, a licensor can help the licensee leverage the character or franchise in a better manner (as they would understand the character like no one else); involvement of the licensor in developing marketing strategy would be far higher while working with a smaller licensees (in terms of brand equity and market shares).

Building a relation

It is interesting to note that many license agreements do not include specific terms or requirements that reflect key marketing objectives. The same can imply a serious deficiency in the license agreement that impairs the licensor - licensee relationship and limits the licensed business. Thus, this must be taken care of. “When signing a new licensee, the licensor, or through its agent, gives the licensee a full brand emersion. This gives the licensee a clear view of what the brand stands for and the strength of the brand,” says Minieri. Also, the licensor should explain to the licensee the goal of the licensing programme and define clear expectations for the product launch. 

“The licensor should ensure that the licensee understands the brand’s core attributes, target market, etc. Provision of a style guide is a vital part of this,” Gardner confirms. Agarwal informs, “Most of the licensors give training to new licensees. They start from making the licensee learn about the rules and conditions of the agreement. Then, it goes down to how to use a style guide followed by approval processes from design stage to sending contractual samples. Licensors also share case studies and examples of other licensees.” Agarwal also feels that if learning period of a licensee is reduced, it would eliminate mistakes and wastage. All above improves business relationship between the licensor and licensee.

Providing yet another interesting angle to the relation between a licensor and licensee is a view point that we get from Chawla. He avers, “The training that the licensee gets from the licensor depends on the organisation capability of the licensor. Bigger companies and brands benefit from the innovative products and activation ideas that a licensor offers while smaller licensees are trained on a wider horizon (training could include approach to product development, packaging development, promotions, training on putting up distribution infrastructure, dealing with various channels, for example, Modern Trade).”             

Preliminary survey

• Brand awareness in the market
• Purchasing power of the target customers
• Maturity of the retail market to accept licensed merchandise
• Appointing a licensing agent
• Legal checklist to protect the brand

Brand development

• Maintaining strong bonding with core product, the brand’s philosophy
• Style guide to assist manufacturers
• Maintain quality stringently
• Active R&D to offer new products continuously

Marketing opportunities

• Exploring & leveraging the hype around licensed product
• Attractive packaging to grab eyeballs of customers
• Making use of combined effort of the licensor – the brand expert, and licensee – the industry expert

Initiative by Future Group

Tasty Treat, a popular private brand of Future Group into discretionary pleasure foods, moved three of its top selling corn flakes variants into a partnership with Disney. The overall move had two considerations to it – on the functional level, there was a product made available for fence-sitters looking for healthy breakfast; and on the emotional level, Disney characters gave that much desired engagement value by creating pester power with the kids.

The backdrop

Consumers were positively predisposed towards Tasty Treat because trust already being established due to its presence in many other categories and using Disney characters further heightened the interactivity of the brand with the relevant TG.

The launch was backed with a strong incentivising offer, a bowl to enable the category consumption was given free with every pack alluring mothers for trials coupled with persuasive in-store visual merchandising and activation involving Disney character for kids’ pester power - where Mickey character interacted with the kids in the stores. And all this, backed with dry sampling exercise. 

Prior to the product launch

• 4-5 months for product development
• 2 months packaging
• 15 days for manufacturing
• Rest for shipping and distribution

Key elements

The key is to keep the excitement alive by engaging with the kids through the means of differentiated promotions from time to time which renews their interest in the product. 

The keys elements, the 5Ps of marketing – pricing, packaging, promotion, place and people have to be topped with timely and opportunistic riders like licensing in this case, to give the much required differentiation and zing to the launches.