Leaving money on the table

Flip on the television any evening and pay attention to the commercials. What do you see during the commercial? You will see four ads each with a different Bollywood celebrity. Do you remember the brand or the celebrity? Yet, companies still spend crores on a strategy which they know has no actual lift in revenue or noticeable brand impressions. The average person is exposed to 3,000 commercial messages every day, how much do you think they actually retain?

Instead of spending the money on developing a brand with a strong brand positioning, appealing to a specific segment and appealing to a specific need, brands rather spend money (that is completely immeasurable) on a celebrity with the hope to tap into that celebrity’s brand equity and the hope that the equity translates to their brand. In a way, it is realised that Indian brands and retailers are leaving money on the table.

Brand licensing touch

The objective of marketing is to send a relevant message about a product or brand to the consumers on how it will affect, change or delight their lives in a meaningful way. There are many tools in the marketing toolbox that brands should feel confident about leveraging besides one-directional advertising that engage consumers. These tools in combination of a well articulated marketing plan could include social media, targeted deals and contests and brand licensing. These tools, particularly brand licensing, can put the target message in front of consumers with greater accuracy. Brand owners invest substantial money to achieve the same benefits via traditional marketing, often just to create a short lived brand impression. The unique advantage of brand licensing as a marketing tool is the fact that these benefits accrue
to the brand (or licensor) more effectively than traditional marketing. The other benefit is that there are virtually no costs associated with the implementation and this, in fact, becomes a revenue source.

Introducing brand licensing – the most underleveraged tool in the marketing toolbox, one that is used by every brand globally, except in India. To summarise, brand licensing allows brand owners, through a legal agreement called a license, grant manufacturers or retailers in diverse or non-core categories the right to use the brand in conjunction with new products. These products are usually a logical extension of the core business and are always approved by the brand owner.  Globally, the licensing industry is upwards of $200 billion. You cannot enter a global retailer without seeing licensed goods, whether it is a Macy’s, Walmart or Tesco in the US, Europe, or South Africa.

Hindrances

Besides the nascent stage of retail in India, which is understandable, there are a few reasons why brand licensing hasn’t been successful in India. Retailers are plagued with high property rentals across the board and, as a result, look at the bottom line with a magnifying glass, so much so that even front line staff can discuss the return on sq ft of a particular brand. This type of thinking is absolutely necessary from a management perspective, but the lack of focus on the top line (strategy, ideas, and people) precludes new ideas, growth and business models because it is difficult to plug intangible benefits into a spreadsheet. As a result, retailers are of two minds about direct to retail licensing deals and other types of brand entry deals – on one hand they believe in the idea and know it will do well and on the other hand, their excel model doesn’t quite return the numbers for them to feel comfortable because they compare it with their current business model. If Apple Retail looked at only spreadsheet models before launching their retail concepts, we would have undoubtedly not been able to experience one. Instead they are all over the world, and always full. 

Manufacturers are wary because the licensing ecosystem is a brand new one in India, again understandable. The current thinking is – why should I give a brand an MG and commit to a multi-year agreement with minimum volumes when I have my own brand and it is doing OK?  With the license of a top brand, you suddenly receive top quality brand guidelines, style guides, mood boards, deep assortments, look books, tech packs – all of which have been executed and tested globally. You also suddenly are a brand that has real brand awareness, which translates to increased shelf space at a retailer. You get to tap into global and domestic advertising, which would have been unaffordable before. If it is the right brand, it is a win-win for everybody involved. To give a small idea of brands that engage in brand licensing, look at Coca-Cola, Harley Davidson, Clorox, P&G, Paris Hilton, Jennifer Lopez, Dodge, Ford… And the list goes on. 

Developing an understanding

The key for brand owners is to understand what brand extensions fit into the overall strategic objectives of the brand. It is not just about slapping a logo on a t-shirt. The programme must ensure that it meets two objectives: 1) Is it brand building? 2) Is there revenue? The brand owners, with their licensing agents, need to undergo an in-depth exercise that consists of an ideation phase, a business case phase, a brand positioning phase, a consumer research phase and a partner identification phase. Once the proper diligence is complete, then only should a brand owner consider engaging in a brand extension programme. This exercise ensures that it will be good for the brand and the consumer will buy it.

When executed correctly, brand licensing is a win-win situation for brands, retailers and manufacturers. Retailers can truly differentiate their offerings and offer brands and assortments that their competitors can’t. Manufacturers can get increased shelf space and increase their turnover exponentially. Brand owners can offer new products to consumers via new channels that weren’t available before via their core business. At the end of the day, brands are able to increase their reach across the consumer lifecycle, something which advertising isn’t capable of doing. Consumers and word-of-mouth become the new commercial.