Brand first

Branding is a very powerful component in business. Millions of dollars are spent worldwide by many brand owners to consistently build the brand value that finally adds up as an asset to the company. Coca-Cola, the most powerful brand today, has less than 40 per cent in assets without the brand value; owing 60 per cent of its assets to its brand alone. That is the power of a brand! We all know that the consumers decide if they will buy a product or use a service based on how they view the brand. The brand itself tells us or let us imagine how good or bad the product is even if we never tried or tasted it before! Once a customer likes your brand, he/she will definitely come back for repeated services or products and spread a word around too. It is only a brand that can stand out from the countless generic product offerings, giving consumers the reason to buy it.

 

Companies use various tools to reinforce its brand positioning and build high recall through advertising such as viral campaigns, online ads, print ads and commercials. Another way to build brand equity is through providing consumers with products or services that will reinforce the brand. Many marketers choose licensing as the way forward for brand extensions in the categories which is not core to the company’s original line of business.

 

Safeguard for meaningful extension

Does your brand associate with anything? Brand association is a powerful aspect that should not be neglected while building the brand extension/licensing strategy. A brand is a promise. With a brand, you set customer expectations. When someone buys your product or service, they count on those expectations to be fulfilled. It’s important to remember this while extending your brand.

 

Another point to note is that the side effect of extending beyond the company’s core competence, which can result in a change of brand perception. So how does one safeguard the brand while extending it meaningfully?

 

A few broad guidelines to follow are:

• Ensure that the licensed brand is well developed in terms of its higher emotional profile (personality, values, relevance)
• Always maintain brand essence and harmonisation while developing brand extensions
• Research the categories for brand extensions and map the consumer
• Not to base your decision on mere sales at retail. Some products might sell well at retail but in the long run might damage the brand equity of the mother brand. So, always stop and review your business....who is buying, what is the brand perception, where it is selling, etc
• Look for ways to make meaningful contribution to the lifestyle of the brand’s core users, and at the same time identify a way to resonate the core brand values alongside
• Remember to establish the brand fit and leverage the new brand extension
• Not to work with clients who are in it just for money. That means that they will sacrifice the brand just for a potentially large deal rather than building the brand
• While royalty earnings remain an alluring part of this proposition but it should be noted that licensing royalty can represent only a fraction of the value that is created by a thoughtful, carefully executed licensing programme
• Maintain the brand identity and consistency. Try and tell the same brand story to all customer touch points across categories
• Do not alienate your licensing programme from the core business of the brand. Customers must know that all the product offerings of the brand come from the same stable. Cross-promote, integrate and collaborate whenever possible.

 

The legal angle

Ensure your brand is protected. Trademark your brand and copyright all relevant slogans, characters, etc. In India, especially counterfeit is a sizable problem. It is important to police the market and press damages to the culprits. In more grave situations, illegal manufacturers can be raided and be taken to the court of law.

 

Determining the right value of the license

Although a brand extension license can offer significant benefits to both a licensor and licensee, determining the value of the license and gaining agreement on the terms of the license agreement can be quite challenging.

 

Most of the businesses evaluate the license on income based valuation where one establishes a sales target, then applies the royalty rate to determine the licensing fee or minimum royalty to be paid by the licensee. However, it is important to note other factors that have implications on the value of the license as given in the above table.

 

In order to ensure a good license deal, it is always prudent to secure all relevant information, as listed above, from both the licensor and licensee, analyse the same and then decide.

 

Brand assurance

Every brand has a framework of DOs and DON’Ts that they usually call as ‘Brand Guidelines’ and ‘Style Guides’ used specifically for licensing. It is important to work with the licensees to develop innovative and high quality products that reflect the intrinsic qualities, look and feel of licensed brands as per the style guide or the brand guidelines.

 

Provide support to licensees and manage their product development process. It is important to watch every line drawing, every prototype and sample or packaging material with a keen eye on the brand guidelines of the licensed brand.

 

Summarising

To summarise, extend your brand in categories that fit the brand’s positioning and customer needs. It’s important to research the opportunity available for brand extension before the launch. Map the category, map your customers and then draw up your brand extension/licensing programme. Ensure the right quality and distribution set up for the licensed merchandise as you monitor and review. Note that even one licensed product failure can cause great damage to the mother brand. Once the Harley Davidson CEO Richard F. Teerlink gave some advice; “Don’t prostitute your brand. Licensing is not free money.”

 

It’s tempting for any marketing team to think of ways to convert the cost centre function of marketing to a profit centre by leveraging the very brand that they have created and built over the years and extending it via licensing. While that is true, it is essential to know that the game of brand extensions and licensing is a tricky one to play. If not done right, the licensing programme may actually hurt the mother brand and bring its equity down. It is important to guard the brand first even before looking at the monetary gains of royalty earnings through licensing.

Authors are the Co-Founders and Directors, Extend Brands, India.

 

Business Functions	Components	Applicable to
Property / Brand	Popularity, loyalty and relevance of the brand name, logo, slogans, characters, style guides, etc	Licensor’s property or brand
Marketing	Communications , media and support level	Both licensor and licensee
Operations	Product development, manufacturing and distribution	Licensee’s business operation
Stakeholder relationships	Consumers, retailers, other licensees, employees	Both licensor and licensee