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Brand licensing: A recession-proof marketing tool hiding in plain sight
August 3, 2022
By Michael Stone, chairman and co-founder of Beanstalk, author of The Power of Licensing: Harnessing Brand Equity
The economy is slowing down. Inflation is at its highest in decades. Many economists and business leaders are predicting a recession - with some saying that it's already arrived. We are in a bear market. Some big companies, such as Meta and Google, have already stopped hiring. Marketers are cutting budgets as they look for revenues to drop to the bottom line. Yet companies still expect growth at a time when consumers are still spending, albeit more carefully. It’s a challenging landscape, to say the least.
How do brand marketers face these obstacles while still driving consumer engagement and revenues? They need to focus on consumer loyalty and brand trust, continue to recruit new consumers and be more skillful about how and where they spend marketing dollars. In short, brands need to laser focus on their connections to consumers and build upon them.
Many big companies that pour hundreds of millions of dollars into marketing, such as P&G, Stanley Black & Decker and The Coca-Cola Company, years ago turned to a highly effective marketing/communications tool – one that connects brands with consumers in an authentic way, drives direct revenue with very little cost and achieves a host of marketing objectives. It’s a tool that requires virtually no marketing budget, is recession-proof and, remarkably, is hiding in plain sight.
It's brand licensing.
What is licensing?
It is the permission to use a name, a slogan, a logo, a likeness, a character (i.e., an intellectual property) in conjunction with a product, service or experience for a prescribed period of time, in exchange for a payment in the form of royalties or fees. For brands, it’s about connecting and engaging with the consumer. It’s about touching and communicating with the consumer in their shopping journey and generating income at the same time. When you purchase a Black & Decker toaster oven, a Westinghouse air conditioner, a quart of Hershey’s chocolate milk, a P.F. Chang’s frozen meal or a Mr. Clean broom, you are purchasing a licensed product and connecting with the brand and its promise. It’s the perfect marketing tool for our turbulent times.
Although licensing can be used as a tool to support a wide array of corporate marketing goals, here are the five most universal benefits of brand licensing:
Guinness, the famous beer brand, has licensed its name for a full range of marinades and barbecue sauces (among other foods), all featuring the taste of the famous stout. This is a product category that provides value to the brand but is one in which the company has zero expertise to pursue on its own. The brand is more than just a beer. It’s a taste, a treat, a snack. How to communicate that message to consumers? By licensing.
2) Build brand awareness and reinforce brand values
P&G’s Febreze is a household air care product. Its primary brand equity is a pleasant, light scent. However, unlike many of its competitors, it doesn’t just mask unacceptable smells – it actually eliminates odors through its innovative technology.
What better way to reinforce those important brand values than through licensed products? So, Febreze licensed Clorox’s Fresh Step (the leading cat litter) to utilize the Febreze technology in the product as the scent and feature the brand on the packaging. This increased brand awareness and reinforced the primary brand value – scent and odor elimination.
The brand has also been licensed as a co-brand for use in other categories where improving the scent is valuable, such as trash bags, vacuum bags and filters, and carpet deodorizing powder.
3) Strengthen the relationship with existing customers and increase consumer touchpoints
Both of the examples above, Guinness and Febreze, illustrate this benefit. In both instances, the licensed products are sold in aisles of the store that are different from where the primary product is sold. And, in both instances, existing consumers of the core products will likely be attracted to the licensed products because they are loyal to and trust the Febreze and Guinness brand promises. Licensing is also an effective tool to strengthen relationships with demographic groups targeted by the brand.
Other examples include Meredith’s Better Homes and Gardens, which licensed home textiles and décor program at Walmart, WW (formerly Weight Watchers), which licensed frozen meals, and The Coca-Cola Company’s fashion apparel programs.
4) Reach new consumers and educate them about the brand
Energizer is the leading battery brand, but the company wants consumers to think of the brand as more than just a battery. They want consumers to consider the brand for all things related to power and light, technologically driven and innovative. To do this, Energizer has been licensed for automotive batteries, portable power sources, audio/video cables, solar lighting, and photographic accessories– all of which strengthen the association between Energizer and power and light, helping to re-define the brand at the same time.
Similarly, The Sunkist Growers Association is known for Sunkist oranges. How do they reach new consumers for oranges while offering orange lovers the flavor and health benefits of oranges? With Sunkist licensed orange soda, fruit bites and vitamins, among other products.
5) Extend into new channels of distribution
The Meredith example above is a good one for this benefit as well. Better Homes and Gardens is a magazine, sold in all the usual places in which magazines are sold, including by subscription. The brand’s licensed home textiles and décor program, exclusive to Walmart, gets the brand into an entirely different channel of distribution. Ditto AT&T, a telephone service, with its licensed landline phones sold at electronics retailers. Licensing can also be used to extend a brand to consumers in countries where the brand is weak or not present at all.
Brands with mature licensing programs have been recognizing the marketing benefits of licensing for years and earning some very profit-rich dollars at the same time. And with economic headwinds, licensing’s importance in a marketer’s toolbox becomes even greater.
For brands that have not yet focused on the benefits of licensing as well as the outsized importance that it represents during economic downturns, now is the time to focus. Unexpected market conditions often come at us very quickly. Who would have predicted that a pandemic would cause ongoing global supply chain issues – or that Russia would invade Ukraine disrupting global fuel and food prices? Disruption happens all the time.
It’s important for brands to be using every arrow in their marketing quiver. Aside from quick novelty merchandise like t-shirts, it’s too late to get meaningful licensed products that extend a brand message to market by the end of this year, but with budget cuts and so many unknowns on the horizon – and at a time when connecting with consumers is more important than ever – it’s a good time to pull a new tool out of the toolbox and develop a strategic licensing plan for 2023 and beyond.