Brandspeak: 5 Myths About Licensing That Every CMO Should Know

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Cinnabon vodka

The following is a guest post by Jeff Lotman, founder and CEO of Global Icons

Stop me if this sounds familiar. Your CEO is hounding you to stretch your marketing budget. His boss — the board of directors — is getting pressure about cutting costs and boosting revenue. Have you heard this before?

As a chief marketing officer, you know all too well how every dollar you spend is scrutinized. Thankfully, a solution exists. Not only will it add cash value; it’ll also penetrate new markets and… it won’t cost you anything.

Let me introduce you to the world of licensing. Licensing allows a third party to leverage the equity in your brand to sell noncompeting products. Licensed products conjure up powerful associations that can sway consumers into purchasing what they perceive as an extension of a familiar brand.

Does it sound too good to be true? Let’s run down the most common objections.

Myth #1: Licensing Means Losing Control

I get it: it’s tough to share your name. But licensing doesn’t mean you need to become Pierre Cardin, who had at one time over 900 licensees, including toilet paper, and who seemingly never met a license he couldn’t refuse.

As the owner of an intellectual property, you can (and should) exercise complete control — over where your product is sold, how it’s displayed, how it’s priced, and so on. All you need is a skilled agent who can negotiate the right controls and approvals into your agreement.

Need proof? In 1995, Procter & Gamble allowed its name to be put on a Vicks vaporizer. As you can imagine, the company’s teams of lawyers and marketers protect P&G’s brand with great care. If they can sign a licensing agreement, surely you can too.

Myth #2: Licensing Cheapens Your Brand

I too once shared this concern. It’s why Birkin bags are so hard to find, and you don’t see Tiffany Blue (or Tiffany ring settings) at Costco. Elite brands can take years to build, but they can be ruined with one bad association.

Consider the story of Vera Wang; there is no doubt you think of expensive wedding dresses when you hear her name. That’s because the designer is considered the gold standard in high-end bridal wear.

Yet, Wang’s products at Kohl’s — ranging from sleepwear to shoes — make up the biggest part of her business. As Business of Fashion puts it, “Wang turned what began as a single bridal boutique into a fashion and lifestyle empire with an overall retail value of over $1 billion.” Best of all, her bridal business has not suffered from her brand expansion into Kohl’s.

Does licensing dilute the integrity of your name? On the contrary, licensing is the single best way to build your brand — if it’s done right.

Myth #3: Licensing Means Slapping Your Logo on a Koozie

When my mother tells people what I do for a living, she says I “slap a logo” on things. That is understandable — she just recently gave up her rotary phone — but it is misleading.

The reality is that logo slapping is not what experienced brand professionals do. The best brand extension stays true to the essence of the brand; it is well integrated and seamless.

So Ford wine? Probably not — but Ford-branded hand and power tools? Absolutely!

Cinnabon licensing brands

Few brands have mastered this art better than Cinnabon. 15 years ago, this bakery didn’t sell anything outside malls and airports. Today, Cinnabon generates $1 billion-plus in sales and is closing in on 100 licensed products — cereals, snack bars, beverages including coffee and vodka  — with partners such as Pillsbury and Kellogg’s.

How did founder Kat Cole and her team accomplish this feat? The answer: methodically, and with great precision. They did extensive consumer research, then product testing, and, finally, relationship building with partners. At each stage, Cinnabon execs posed one overarching question: does this prospective partner truly align with the premium quality and signature ingredients of our famed cinnamon rolls?

The result: Branding Strategy Insider calls Cinnabon Licensing a “best-in-class model for restaurants.”

Myth #4: Licensing Isn’t That Lucrative

This is perhaps the most pernicious myth of all. As an industry, licensing drives more than $230 billion in annual sales for the world’s top brands. If these are small potatoes, then I’m becoming a farmer.

Consider Caterpillar, best known for its yellow construction vehicles and equipment. Did you know the company’s licensed products generate $2 billion a year in retail sales from the CAT brand? It’s true! Outside of the U.S., Caterpillar is best known for its iconic footwear — everything from sandals to sneakers and steel-toed boots. “Globally, we’re more of a lifestyle brand,” says Mark Jostes, a company program manager.

$2.1 billion in retail sales, 50 million products sold, and 100,000 retail outlets — if you aren’t interested in this kind of lucrativeness, I promise your competitors are.

Myth #5: Licensing Is Too Much Work

The typical way to gain new customers is by creating a new product. But this road is expensive and time-consuming. Not to mention, it often leads to a dead end. Allowing another company to invest time and resources in a new product or category launch through licensing is a much more risk-adverse solution.

To clarify: licensing is not a silver bullet. A licensed product still needs to be cultivated. A licensee will still need a distribution network, a sales force, and a marketing budget.

But these burdens shouldn’t fall on your CMO shoulders. After all, you’ve already carried out the hard work of creating the brand, bringing it to market, and establishing a reputation. Now the trick is finding an experienced partner who will do the heavy lifting — while you collect the royalty checks.


Jeff Lotman - Global IconsJeff Lotman is the founder and CEO of Global Icons, an international brand licensing agency based in Los Angeles whose clients include BMW, Fatburger, Ford, and Ironman. Follow Global Icons on Twitter.

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