Take a poll around your office: ask your co-workers what they think brand licensing means. You’ll probably get a variety of answers. That’s because there’s a general sense of confusion about the business model. Licensing has been under the radar screen for decades and yet is actively used by world-class brands today including P&G, Diageo, Stanley Black & Decker, Energizer and many more industry-leading companies.
It’s much more than just renting a brand’s name and decorating a product with an iconic logo. Taking a company’s crown jewel – its brand name – and creating products that deliver on its core brand promise and marketing message is a highly strategic and methodical process that has many mission critical elements for success. We spoke with Allison Ames, CEO of Beanstalk, one of the leading global licensing agencies, about the value of licensing as an essential component of a brand’s marketing mix.
brandchannel: Why is licensing such a powerful marketing tool?
Allison Ames (right): Extending a brand into other, aligned product categories through licensing has both high value strategic and financial benefits. It’s a unique way for a brand to strengthen and differentiate its market position, support a brand’s marketing goals and enable consumers (both brand-loyal and new customers) to enjoy the brand in new ways. Activated properly, licensing is one of the most powerful tools a company can use to enhance the value of its brand with close-to-core products that not only build on its awareness but also reinforce brand equity.
BC: But isn’t it risky putting brands in the hands of a third party?
AA: It’s all about ensuring that a brand is placed in experienced and professional hands. If not, companies can risk derailing their growth in the market (at best) or causing irreparable damage to their brand (at worst). However, brand owners can absolutely mitigate those risks through careful and diligent management of the licensing program to ensure success. Mission critical is (i) developing the right strategic plan, (ii) choosing the right partners to design and manufacture the licensed products and to bring those products to the right channel of distribution and (iii) carefully and consistently monitoring those businesses throughout the term of the license agreement to ensure compliance and success.
BC: What role does licensing play at retail?
AA: We are a brand-driven culture. As we all know, brands, especially trusted ones, play a very important role at retail by helping consumers decide what to purchase. Brands give consumers a feeling of security in their purchasing decisions. Consumers want to make quick decisions, whether they’re on the floor of a brick and mortar store or online. Brands give them permission to make that decision. As brands use licensing to extend into other product categories, trusted brands are likely to provide that safety net to consumers. Licensing also provides consumers with more options to experience brands that they trust and like
BC: It seems like everyone is talking about the importance of building brand experiences and major brands are following suit. Just in New York, Chobani has its yogurt café and Kellogg’s has opened a chef-driven café serving updated cereal bowls and sundaes in Times Square. What’s your take on this trend?
AA: This is a cultural shift that is now taking place, primarily driven by Millennials who gravitate toward experiencing a brand in an authentic way. In fact, Millennials have been attributed to creating the “experience economy” and would rather spend their money on experiential moments than on material products. Brands are responding to this by creating more immersive and personalized experiences, whether executed themselves, under a joint venture, or through a license.
In fact, Harley-Davidson was the first brand to license its name for a lifestyle destination with the Harley-Davidson Café. As the future of traditional retail continues to evolve, brand experiences are very important ways to connect brands with consumers. Another great example of this is Samsung’s New York City flagship store. It’s an interactive playground. You can’t actually buy any of their products there, but it not only gives consumers who haven’t touched or played with Samsung products a place to do that, but it also allows them to fully experience the Samsung brand.
BC: What do you see as the fastest-growing segment of licensing?
AA: For the last five years, food and beverage licensing has been the fastest growing segment within the corporate trademark segment. Nearly 33 cents of every dollar in corporate licensing sales is generated from food and beverage products. Although it spans across age demographics, Millennials and Gen Z, the two biggest foodie groups, are driving the current food frenzy.
Their eating trends and Instagram posts of all things food have created new opportunities for food manufacturers, retailers and restaurants to offer everything from indulgent mash-ups, exotic flavors, healthy and organic products, as well as meals that can be assembled rather than cooked.
As a result, to take advantage of the growing and changing tastes of consumers across the food space, many food brands are looking to extend through licensing into other food products that meet their needs. Given this very important trend, the category is clearly on a growth trajectory with no signs of slowing down in the near future.
Find out more about Beanstalk in the video below: