Whether your brand licensing practice is decades old or just starting out, optimizing it is critical to the long-term health and vibrancy of your brand. A fully optimized program ensures that all licensed products reinforce the brand’s positioning, that consumers have access to the licensed products through designated retail channels authorized in each licensees’ contract and that the net sales and royalty revenue growth are balanced across retailers and Stock Keeping Units (SKUs). Unless a brand licensing program has a systematic approach to measuring its level of optimization, the quality and success of the program can be both unpredictable and harmful to the brand. The only thing worse than a program conditional on the decision making whims of one retailer is a program that is selling millions of branded products annually in the wrong categories, reinforcing the incorrect brand attributes or eroding brand equity. So, let me ask you brand managers, marketing directors and CEOs out there, “How optimized is your brand licensing portfolio? “
Determining the level of optimization of a brand licensing program is relatively straight forward if you know what questions to ask. Outlined below are eight categories to help you determine your program’s degree of optimization so that you can begin to identify gaps. Before we get to them, let’s dig a little deeper into why brand owners should pay particular attention to this topic. After all, a program may be growing steadily in net sales and royalty revenue. It may even be adding terrific licensees and exceeding plan year after year. With positive indicators like these, brand owners have good reason to believe their licensing program is on the right track. However, without a detailed understanding of how the program is achieving its sales and royalty growth, companies may be at risk of losing a substantial portion of sales and royalties if their top licensee’s largest program does not get renewed, or if there is a safety recall on the program’s highest selling SKU. Some savy brand owners realize that diversification is important and have chosen to sign a large number of licensees to avoid dependence on a limited number of licensees or SKUs. However, programs with a large number of licensees may become administratively overburdened. If your program has many licensees, when was the last time you had the chance to meet with each of them face to face? And when you did meet, did you take the time to inquire about the state and health of their overall business?
If you don’t know your brand licensing program’s level of optimization or if you are concerned that it may be out of balance, it may be time for a brand licensing audit. A brand licensing audit allows you to dig into your program to assess its current level of optimization and begin to identify gaps so you can close them. Here are eight categories to consider when assessing your brand licensing program’s level of optimization:
1. Portfolio Balance
- Is the overall brand licensing portfolio balanced?
- How many licenses does the program have?
- What percentage of the licenses comprises 80% of the net sales?
2. Category Alignment
- Is your program licensed in the right categories?
- Does the brand have permission to extend into the existing licensed categories? (internal/brand research – consumer focused)
- If so, are there category positioning statements written for each category?
3. Licensee Search and Suitability
- How are you prospecting licensees to ensure you are finding the best suited to support your program?
- Where do you look for information when prospecting licensees?
- What parameters are used to shortlist licensees from the universe?
4. Licensee Health
- What is the overall health of your licensees? Times are tight, are your licensees as stable as they were when you signed the license?
- When was the last time you checked their audited financial statements?
- Do they have any current or pending law suits that could seriously impact their business?
5. Category Management
- How often are reviews conducted with each licensee to ensure they are meeting their objectives? Annually? Quarterly? Monthly?
- What questions are being asked in the review?
- Who from the licensees’ side is attending the reviews?
6. Licensee Orientation and Alignment
- Is there a robust orientation program in place?
- If so, who attends the orientation and when does it take place?
- How often do you meet with the licensees individually and collectively?
7. Business Planning
- Is there an existing business planning process in place?
- Is there a licensee summit to review the planning process?
- How often do you discuss the plan with the licensees?
8. Contract Quality and Accuracy
- How robust are the contracts you currently have in place?
- Do they accurately reflect the deal terms and procedures being practiced?
- When do your contracts expire? Is there proper succession planning?