Developing and Enhancing Brand Reputation Through Licensing Jeffrey H. Olian Executive Vice President & General Counsel Equity Management Inc. San Diego, CA BRAND LICENSING OVERVIEW BRAND LICENSING DEFINED – Brand licensing is the association of a trademark, name, symbol, likeness or other brand identity with a product – For a licensee, licensing a well-known brand is intended to facilitate consumer acceptance of the licensed product – For the licensor, licensing should enhance the consumer‟s awareness, understanding and acceptance of the brand while simultaneously enhancing sales of the brand‟s core products CORPORATE LICENSORS American Airlines General Mills Nabisco Brown Forman General Motors Nike Campbell Soup Harley Davidson Pepsi Cola Caterpillar Hershey Foods Pillsbury Chiquita Jaguar Planters-Lifesavers Coca-Cola Jeep Porsche Coors John Deere Seagram's DaimlerChrysler Kahlúa Starbucks DuPont Kellogg's Sunkist Eastman Kodak Lockheed Martin Unilever Ford Maytag Wells Fargo General Electric McDonald‟s White Westinghouse NORTH AMERICAN RETAIL SALES OF LICENSED MERCHANDISE 80 70 BILLIONS OF DOLLARS 60 50 40 30 20 10 0 1981 1983 1985 1987 1989 1991 1993 1995 1996 1997 1998 1999 2000 Source: The Licensing Letter, January 2001. RETAIL SALES OF LICENSED MERCHANDISE BY LICENSOR Entertainment/ Music Characters 3% 21% Publishing Fashion 2% 17% Celebrities/ Estates 3% Non-profit 1% Sports Art 16% 8% Toys/Games 5% Trademarks/ Brands 25% Corporate Trademark licensing grew by 6% in 1999 and another 2% in 2000, producing the largest licensing category in the industry. Source: The Licensing Letter, January 2001. RETAIL SALES OF LICENSED MERCHANDISE BY PRODUCT CATEGORY CATEGORY 1984 2000 Apparel & Accessories 38% 22% Toys & Games 20% 12% Publishing/Stationery 12% 9% Gifts/Novelties 10% 8% Home Furnishings/Housewares 7% 6% Foods/Beverages 5% 10% Health & Beauty Aids 3% 5% Domestics <1% 6% Electronics <1% 6% Computer/Video Products 1% 6% Infant Products <1% 4% Footwear <1% 3% Music /Video <1% 2% Sporting Goods NA 2% Other 2% <1% Source: The Licensing Letter, January, 2001. ADVANTAGES OF A LICENSING PROGRAM – Increased visibility of corporate brands, thereby enhancing consumer awareness – Generate marketing benefits through brand exposure and advertising spending by licensees – Strengthens the legal protection for the brand – Generate incremental revenues that are virtually pure profit – Ability to introduce new products and enter new markets without heavy investment SHORT-COMINGS OF TRADITIONAL LICENSING – Absence of disciplined management and sophisticated research – Key concern is selling the deal, not the impact on the licensor‟s equity – The majority of thought and effort is focused on the contract terms – Brand building opportunities are sacrificed and royalty revenues are not optimized due to insufficient attention to the long-term success of the licensed business DEVELOPING A BRAND LICENSING PROGRAM LICENSING’S REAL LEVERAGE – Keys to successful, “brand building” licensing – Generating high quality deals with the right licensees – A “laser like” focus on maximizing the long- term benefits to the licensor‟s brand and primary business – Marketing driven rather than royalty driven approach TYPES OF LICENSES – BRAND ADVANCEMENT: – “Affinity” driven – Traditional – More routine – Numbers oriented – Less complex – Shorter term – Standardized TYPES OF LICENSES – BRAND EXTENSION: – Custom – Complex – Long term revenue implications – Marketing based – Distribution is often an integral component – Totally driven by the equity – Imagery vs. graphics PLANNING PROCESS – Before initiating a licensing program, the licensor must consider at least four key strategic elements – Product categories to be approved – Type and number of licensees – Distribution channels to be approved – Marketing support PLANNING PROCESS – Approved product categories – How close to the licensor‟s core products? – How far removed from the licensor‟s core products? – Public relations concerns? – Safety concerns? PLANNING PROCESS – Type and number of licensees – Established businesses vs. “hungry” newcomers? – Market leader vs. #2 or #40? – Track record with licensed products? – Marketing savvy? Do they “get it?” – Retail relationships? PLANNING PROCESS – Approved distribution channels – Mirror core product channels? – Expand into new channels? – Club, Mass, Department Store, Upscale? – Targeted consumers? PLANNING PROCESS – Marketing Support – Expected from licensees? – Commitment from licensor? – Integration among licensees? – Retailer programs? PLANNING PROCESS – Execution of the Licensing Program – External “agent” – External consultant – Internal resources PLANNING PROCESS – License Program Management – Licensing Sales – Creative – Market Research – Licensee Management – Contract Admin – International Sales – Royalty Admin – Legal/Compliance – Product Admin PLANNING PROCESS – The License Agreement – Product grant – Royalty rate – Territory grant – Guarantees/Advances – Distribution channel(s) – Reporting obligations – Term of agreement – Insurance/Indemnification – Quality control – Termination rights – Product review – Sublicensing rights – Collateral material review – Marketing commitment EXECUTING A BRAND LICENSING PROGRAM BRAND LICENSING PRIMER – A quality corporate brand licensing program is characterized by the detailed and disciplined management of all of the licensing activities – Critical factor is a focus on the management of the trademark imagery – Always be “protective” of the brand – Never be “exploitative” of the brand BRAND LICENSING PRIMER – Begin with an analysis of the brand‟s “core” values, the breadth and scope of awareness of its associated imagery, and an understanding of the brand‟s equity and the way in which that imagery develops consumers‟ trust and confidence BRAND LICENSING PRIMER – Knowledge is the Key – History – Key equity components – Size, trends – Market position – Support level – Marketing and Advertising Plans – Aided awareness, unaided awareness – All imagery BRAND LICENSING PRIMER – Evolution of a Licensing Program – Licensing is not a stagnant process – Feedback from licensees and consumers must be factored into next step planning – Licenses can move further away from the core equity based upon the “expanded” equity created by initial licenses – Changes in the marketing direction for the brand itself must be considered BRAND EXTENSION LICENSING CASE STUDIES DuPont™ - Teflon® Maytag® Jack Daniel‟s® “Out of the Frying Pan and Into Your Life” TEFLON® OBJECTIVES • Objectives – Reinforce DuPont‟s ownership and legal protection of the Teflon® trademark – Establish the Teflon® brand as separate and distinct from the PTFE “ingredient” – Develop licensed products and distribution channels directed at non-traditional users – Convert current PTFE ingredient customers into new Teflon® licensees – Use a technology-based license, supported by high levels of brand awareness, to communicate performance benefits meaningful to consumers TEFLON® RESULTS Teflon license catapulted Sally Hansen into the #1 share position with Teflon Tuff line of nail care • Licensed Categories – Automotive finishes – Oil filters – Lubricants – Glass protectants – Wheels – Wiper Blades – Socks and hosiery – Personal Care – Hardware/Tools – Sports Equipment MAYTAG ® OBJECTIVES • Maximize full financial potential of the Maytag®, Jenn- Air®, Admiral®, and Magic Chef® brands. • Reinforce Maytag‟s competitive position in the core, home laundry business by extending the equity into products for “the home”. MAYTAG® RESULTS Maytag Room Air Conditioner Jenn-Air Room Air Purification System Premium Quality Magic Chef EMI is currently working to Maytag Small Kitchen finalize a HVAC License for Water Heater Appliances the Maytag brand BRAND ADVANCEMENT LICENSING CASE STUDY Chevrolet® CHEVROLET® OBJECTIVES • Develop a long-term licensing plan for the strategic direction of the program • Broaden program orientation from infringement control to increased generation of royalties and marketing benefits • Identify Brand Extension licenses that generate substantial marketing value and broaden legal protection of the Chevrolet Trademarks ® CHEVROLET RESULTS • The largest automotive licensing program and among the top 5 largest corporate trademark programs in the world. • Multi-faceted program with broad-based results, generating not only significant royalty revenues, but also tremendous marketing benefits • Set a new standard in the category and revolutionized how these products are marketed. • GM die cast market share today is 55%. ® CHEVROLET RESULTS Developed a benefit-oriented program for die cast manufacturers converted to licensees. • Negotiated a “stair-step” royalty approach for long-term business relationship development across the board for all brands. – Improved communication of vehicle design data for faster speed to market. – Initiated access to new vehicle data up to two years in advance. – Systematically improved the quality of the licensed merchandise. ® CHEVROLET RESULTS Corvette Tournament Ski Boat: EMI executed a “Corvette on the Water” Corvette Fragrance Over 50 articles on the “Wet „Vette” appeared in newspapers, automotive, boating, and specialty Corvette magazines Vacuum BRAND LICENSING SUMMARY The ultimate objective for a brand licensing program should be to represent the clients‟ brand for the purpose of enhancing or extending its brand image, generating new revenue and protecting the intellectual property assets. EQUITY MANAGEMENT INC.
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