September 18, 2017 | By Oliver Herfeld, Chief Legal Officer, Beanstalk
A well-functioning corporate licensing program can help a brand to expand into new categories and territories, adapting to new trends and a changing marketplace. However, setting up such a program takes hard work and ongoing care.
In the first installment of this three-part series, I commenced a survey and analysis of the key processes and procedures in establishing a corporate brand licensing program by covering how to get started, strategic planning, and teams, processes and tools. In the second installment , I covered licensee selection and negotiation, the license agreement, licensee management and product development. I will conclude with a review of unlicensed products, ongoing program optimization and using an agency.
The brand owner should actively monitor the marketplace (e.g., via professional watch services, retail audits, attendance at trade shows and online searches) to identify counterfeit products and intellectual property infringers. In addition, the brand owner’s licensees, agencies and other counterparties should be encouraged to proactively alert the brand owner of any infringement that comes to their attention. When infringers are identified, the brand owner should engage them, notify them of the infringement and, if they meet the brand owner’s partner qualifications, seek to convert them into official licensees. Should infringers not comply, the brand owner should direct the matter to its internal or external legal team to handle in accordance with its trademark enforcement policies and procedures.
Ongoing Program Optimization
Once licensees have achieved their initial financial and distribution goals, the brand owner’s focus should shift to tenacious program optimization, including working with licensees to: manage the program’s day-to-day activities; ensure that all licensed products appear seamless to consumers; drive program enhancement efforts; encourage cross-promotions among licensees, product innovation, category expansion and usage of each licensee’s complete product grant.
Periodic licensee summits should be organized to share best practices and regularly update licensees on the brand owner’s core brand initiatives. To keep licensees focused and foster continuous product innovation and program development, the brand owner should solicit annual business plans from licensees that outline projected developments, forecasts and expectations for the upcoming year. Licensees should be evaluated annually against their business plans and key benchmarks for success. The purpose of the evaluation is to encourage licensee improvement, redirect resource investment, and review and refine both licensed products and channels of distribution to help licensees perform to their maximum potential. Brand owners should work closely with licensees that fail to meet their forecasted revenues or receive below-average evaluations to implement modifications including those of product and distribution channels. Continued underperformance will result in contract termination or non-renewal.
The brand owner and each licensee should also continuously promote the licensing program, including participation at consumer product industry trade shows and public relations (e.g., social media and press releases) that highlight new license agreements and product launches at retail.
Poor-quality products, inconsistent brand communication and inappropriate channels of distribution can dilute a brand’s treasured equity and long-standing reputation. Consequently, brand owners should implement continuous quality control management, formal licensee evaluations and hands-on management of their program as a means of ensuring brand integrity, minimizing the risks of licensing and facilitating licensing success.
Using An Agency
There are many benefits to engaging a licensing agency as opposed to managing a corporate licensing program in-house. In particular, leading licensing agencies: have broad industry knowledge and experience in building and managing programs of varying size and scope; maintain relationships with best-in-class manufacturers and retailers worldwide, which have been developed over many years on behalf of many clients; can secure better financial and legal terms as a result of experience in negotiating many license agreements across multiple categories; hold greater leverage in managing licensees due to their existing work with other clients, as well as potential future opportunities; possess a greater depth of professional expertise and deliver more efficient program management with large dedicated teams of seasoned licensing professionals in disciplines spanning sales, brand management, creative services, legal, finance, audit, royalty collections, product approval tracking and contract administration; can efficiently and effectively expand a program to new categories and geographies; have legal and financial expertise in global retail markets, as well as territorial market nuances, laws and regulations; help keep the brand owner’s resources focused on its core business; require only a minimal out-of-pocket expense to the brand owner; and are usually compensated on a contingency basis so that both parties’ interests are aligned. The more successful the licensing program, the more reward both parties receive.
The licensing program phases described in this series are not one-time or linear. In reality, they are overlapping, multi-dimensional and cyclical, as the brand owner will continuously prospect, solicit, negotiate, sign, manage, amend, renew or replace different license agreements in different categories and territories at the same or at different times. This requires a disciplined process, whereby the brand owner’s program is created, re-created, managed and refined over time. It is a 360° approach to licensing where each stage builds upon the last one, creating a continuously evolving licensing program, which incrementally expands into new categories and territories, and enables ongoing adaptation to new trends and a changing marketplace.
Oliver Herzfeld is the Chief Legal Officer at Beanstalk, a leading global brand extension agency and part of the Diversified Agency Services division of Omnicom Group.