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Why Now? The Rise of Licensing 1

Are Brands Dying? 1

Licensing as Content Marketing? 7

The Stanley Brand 10



The Evolution of Brand Licensing 17

The Early Years 18

Palmer Cox and the Brownies 19

Honus Wagner 22

Teddy Roosevelt 22

Licensing Through the Decades 24

The Coca-Cola Company and Licensing 30

History 30

Merchandising and Licensing Through the Decades 34



The Benefits: The Advantages of Harnessing Brand Equity Through Licensing      45

Enter or Maintain a Presence in Businesses That Have Strategic Value but Fall Outside of the Company’s Core Businesses or Financial Thresholds 47

Baileys 47

Building Brand Awareness and Reinforcing Brand Values 50

Febreze 50

Reaching New Consumers and Educating Them About the Brand 53

Energizer 53

Strengthening the Relationship with Existing Customers and Increasing Consumer Touchpoints 56

Weight Watchers 57

Extending into New Channels of Distribution 62

Briggs & Stratton 63

Generating New Revenue Streams with Minimal Upfront Investment 66

Westinghouse 69

Protect the Brand via Broad Trademark Registrations 70

The Coca-Cola Company 71

Harley-Davidson Motor Company 72



A Strategy, Not a Tactic 75

Cracker Barrel Old Country Store 77


Licensing Goals and Objectives   79

Description of Brand Equities 81

Licensing Position Statement 82

Target Consumers 85

Product Categories and Competitive Landscape 86

Market Dynamics and Trends 89

Distribution Channel Strategy 95

Financial Forecasting 96



Managing and Supporting a Licensing Program 99

Preliminary Information Goes a Long Way 100

Adopt Best Management Practices Post-Signing 103

Introductory Information 103

Business Plans 105

Brand Immersion 108

Product Development    110

Licensor Support 112

Business Reporting 115

Managing Retailers 119


Understanding and Mitigating the Risks 121

Identifying Risk Types 122

Licensed Product Failure 124

Cannibalizing Sales of the Core Product 126

Consumer Complaints 129

Contractual Risks 131

Nonperformance 133

Retailers Have the Power 135

Counterfeits and Infringements 136

Promises by the Brand Owner: Don’t Make Them If You Can’t Keep Them 137

Reputational Damage 140

L.L.Bean 141

The Licensing Opportunity 144



To Be or Not to Be at a Single Exclusive Retailer 147

A Brief History of the Single Retailer Strategy 148

Two Exclusive Options 149

Benefits of a Retail Exclusive 150

The Food Network 152

Better Homes & Gardens 153

The Coca-Cola Company 155

InStyle Magazine 156

HGTV 159

The Risks: Be Aware of the Exclusive Pitfalls 165

The Checklist: Ten Elements of Successful Retail Exclusive Partnerships 169



Celebrity Licensing 171

What Makes a Celebrity a Brand? 173

Kathy Ireland 173

What’s in a Name?  175

Tell a Story 176

Drew Barrymore 178

Assessing Celebrity and Retailer Motivation: Why They Do It? 180

Let’s Start with Celebrity Motivation 180

The marykateandashly Program 187

Right 190

Wrong 194

YouTubers, Bloggers, Vloggers, and Influencers 196



Dead or Alive? Bringing Brands Back to Life 205

The Sharper Image 209

Lessons Learned 213

Polaroid 215

Nuprin 218

What a Brand Needs to Come Back from the Dead 219

Determine If Significant Amount of Awareness Still Exists 220

Consider Whether Emotional Attachment and Authenticity Exist 221

Fill a Gap with a Unique Selling Proposition 222

Tell a Story 223

Consider the Competition 224

Provide Brand Management and Marketing Support 225

Don’t Forget the Law 227

Feel the Power 227

Postscript: Toys“R”Us   229



Brand Licensing Outside the United States: It’s a Big World Out There 233

Introduction: It’s Different 233

Ten Steps to Take Before Moving Forward 237

1.   Understand Your Brand’s Fame, Meaning, and the Local Perception of the Brand 237

2.   Adapt to Local Market Needs, Habits, and Customs 239

3.   Know the Local Competition 244

4.   Understand the Consumer 245

5.   Understand the Available Retail Channels 248

6.   Choose the Right Partner and Build Trust and Personal Relationships Supported by Boots on the Ground 253

7.   Consider Different Partnership Structures 254

8.   Address Unexpected and Unusual Legal and Contractual Issues 255

9.   Find Scale 257

10. Take the Long View 258

In Summary 260



The Future of Licensing, Part I: The Shopping Battlefield 261

Introduction   261

Retail Today  262

The Blurring of Online and Offline Commerce          265

The Evolving Shopping Journey   276

Digitally Native Vertical Brands (DNVBs)  284

Looking Back: A Nod to the Past    288


The Future of Licensing, Part II: Delivering the Brand Message     291

Introduction    291

Targeted Versus Broad Reach Marketing   293

Entangling with Consumers   295

Different Generations, Different Strategies      298

YouTubers, Bloggers, Vloggers, and Influencers: It’s the Message               306

Experiential Marketing  309

New and Reinvented Product Categories and Brands    313

Cannabis    315

eSports   317


A Concluding Perspective    321

Afterword    329

Acknowledgments    331

Index    335

CHAPTER FOUR: A Strategy, Not a Tactic

You would be surprised to learn how many companies fail to think strategically about licensing opportunities. It’s surprising on many levels, not the least of which is that licensing is about allowing a third party to use a company’s most valuable asset—its brand. When licensing is reactive and tactical, it’s implemented in a vacuum—objectives haven’t been determined, product categories haven’t been vetted, and management is not in place to oversee the process, among other shortcomings.

Would an iconic brand launch a new product without well- thought-out goals and a strategy to achieve them? Probably not. Organizations will fail to take advantage of licensing’s marketing power if they treat it as a tactic, as an opportunity to which they can react. Being proactive, strategic, creative, and managerial (i.e., operationally ready) are requirements for any licensing program. To meet these requirements, best practices and processes must be used to develop an executable strategy. Those as well as illustrative examples will be discussed next.

Every company has its variables that need to be addressed in a licensing plan, but certain elements are critical to establishing and then executing any plan, including:


• Licensing Goals and Objectives

• Description of Brand Equities

• Licensing Positioning Statement

• Target Consumers

• Distribution Channel Strategy

• Market Dynamics and Trends

• Product Categories and Competitive Landscape

• Design Guidelines

• Financial Forecasting

• Program Management and Support (addressed in the next chapter)

The majority of these elements involve a comprehensive evaluation of the brand—the identification of the brand’s equities and the brand’s marketing and licensing goals. Without a clear understanding of the brand’s equities and what the brand wants to accomplish through licensing, a company is essentially licensing in the dark. Following a comprehensive analysis of equities, goals, and objectives with which licensing must be aligned, the brand needs to evaluate appropriate product categories through a variety of filters—for example, distribution channel strategy and market dynamics—before finalizing the plan and moving forward. And to ensure that licensed products meet the quality expectations of the brand, the company must be operationally ready to handle oversight of product design, development, and production.

Several brands will be used as examples in this chapter— mostly Cracker Barrel Old Country Store and content provider HGTV, although other examples will be sprinkled throughout.


First, here’s a a brief history on both brands that will provide some context for the discussion of the nine strategic elements (the tenth to be covered in the next chapter) listed above and that follow.

Cracker Barrel Old Country Store

While working in the family gasoline business in the 1960s, Dan Evins began thinking of ways to better meet the needs of people who lived life on the road traveling through the small towns of America. This community of travelers was growing on the heels of the rapid development of the interstate highway system in the United States. He thought about the “country store” he remembered from his childhood, a place to buy all sorts of gifts and candy as well as a place to get simple home-cooked food. Evins also believed that the “real flavor of America” was being pushed out by the rise of fast-food restaurants. So in 1969, Evins opened the first Cracker Barrel Old Country Store in Lebanon, Tennessee, next to the interstate. His vision was to replicate the country store experience and offer quality home-cooked, simple food at reasonable prices. Evins was right about the opportunity. The company went public in 1981, and by the end of 2017, Cracker Barrel owned and operated close to 650 stores in 44 states with annual revenue just under $3 billion. Cracker Barrel serves breakfast (all day), lunch, and dinner and prides itself on its “Southern hospitality,” friendly home-away-from home and good “home-cooked” food, and memorable guest experience. The restaurants are housed alongside a unique retail shop offering apparel, food items, home goods, and seasonal items. Sales in the store exceed industry averages for that type of retail location.

Cracker Barrel claims many loyal customers and has been consistently praised for excelling in meeting customer expectations; for providing an experience, not just a meal; and for remaining committed to a consistent business strategy. But over time, the competition in the “casual, sit-down, family restaurant” segment became fierce with other strong players entering the market, such as Applebee’s, Olive Garden, Chili’s, Red Lobster, Outback Steakhouse,


Denny’s, Ruby Tuesday, International House of Pancakes (IHOP), and TGI Fridays. With suburbs expanding and neighbor- hoods getting closer to highway intersections, travelers had many more options from which to choose. In or about 2009, Cracker Barrel was facing the challenge of how to grow the venture. Licensing was under consideration.


The idea for HGTV grew from the personal experience of Ken Lowe, HGTV’s founder. A self-styled amateur architect moving up the broadcast management ladder at Scripps Networks Interactive, he and his family moved around a lot and found themselves building or repairing houses. There were many home improvement challenges, and he wondered why there wasn’t more television programming that could help people like him. In 1992, he pitched the idea to Scripps by drawing a house in which every room from attic to basement was its own TV show. Scripps liked the idea and agreed to invest $75 million. Two years later, in May 1994, Scripps announced its plans to launch Home & Garden Television (the original name of HGTV). With cable television experiencing explosive growth, HGTV was one of more than 100 networks introduced to the industry that year. HGTV is only one of three announced that year to reach full distribution in the United States.

In December 1994, Home & Garden Television went on the air as a new cable network devoted to all things related to the home and garden. The goal of the network was to use experts on whom viewers could rely “to inform, inspire and lead them to better buy- ing and how-to decisions.”2 A year after launch, HGTV was avail- able in 10 million households. In 2016, the network was available in close to 100 million households and in all television markets in the United States. was launched in 1996 and by 2016


had 370 million visits and 3.3 billion page views.3 In addition, in a joint venture with Hearst, HGTV Magazine was launched in 2012 and today remains one of the most successful magazines in the home category.

Licensing Goals and Objectives

Every company that engages in marketing its brand has a clear understanding of what its marketing is designed to accomplish. The objectives of any licensing program must align with some or all of these marketing goals, and those licensing objectives must be clearly stated and understood. Whether a licensing strategy is, for example, designed to reach a new group of customers or redefine the meaning of the brand or make inroads in global markets, a company must establish the objectives in advance and use them to inform all licensing activities and decision making. Without such an understanding, the company runs the risk of creating licensing that is not aligned with the brand’s overall marketing goals.

For example, to address the issues of fewer people dining out- side of their homes and increased competition, Cracker Barrel’s marketing goals included raising awareness of the brand to drive people to the restaurants. To that end, its licensing program strategy was focused on identifying opportunities that would build credibility for branded products that could be sold outside of the Cracker Barrel retail stores. Doing this would create brand awareness, drive traffic to Cracker Barrel stores and restaurants, and generate new revenue streams.

As for HGTV, the alignment challenge was somewhat different. This brand is a content network featuring cable television and digital and print content. The brand doesn’t sell products; it offers a service—television and digital programming that is entertaining and offers advice and design and style solutions, with advertising being the source of revenue. Entering the consumer product space would be an entirely different business model for HGTV.


With that in mind, the goals and objectives of HGTV would need to be largely specific to licensing but at the same time aligned with its corporate goals, such as:

1. To extend the HGTV brand beyond broadcast television and the Web to provide new touchpoints for existing and new viewers, further driving loyalty to the brand.

2. To maintain relevancy with HGTV’s core viewers and attract new ones.

3. To increase viewership through the sale and exposure of licensed product.

4. To reinforce HGTV’s positioning as a solutions-based, style-driven brand for the home.

5. To leverage consumer brand permission (supported by research) to enter categories that are prevalent within HGTV’s programming.

6. To leverage existing advertiser relationships with both manufacturers and retailers and build the enterprise value of the brand.

The two examples above illustrate how to articulate very clear objectives for a licensing program. Any brand considering licensing must state exactly what the brand wants to accomplish with the licensing program at the very inception of this process. These words are very important and must be crafted carefully. They must align with overall brand objectives. And, importantly, all stakeholders within the company must support and understand these goals. Internal consensus on the licensing goals should precede any other strategy development. Once that is accomplished, don’t file the document away somewhere. Instead, pin it on your bulletin board so that you look at it every day. Every decision you make must be in furtherance of these goals. A successful licensing program is not about luck or about relying on licensees to be successful. It’s about being loyal to the goals and making the


right decisions based on those criteria. Otherwise, you run the risk of your program going off the rails.

Description of Brand Equities

Every brand has equities that are widely associated with the brand and resonate with consumers. Indeed, in many respects, that’s what the definition of a brand is—a set of descriptive words widely shared by consumers. Think of the words that come to mind quickly and obviously. Coca-Cola, for example, is a soda beverage, it’s brown and fizzy, it comes in cans and bottles, and its brand colors are mostly red and white. It’s also associated with sports and music and fun moments. People who are familiar with Coca-Cola will probably use most of these words to describe the brand. Similarly, Black & Decker is about tools, power, get- ting a job done, ease of use, black and orange. Brands represent commonly shared words, phrases, feelings, and emotions. The previous chapter listed the brand equities of a few of the brands examined—Energizer, Weight Watchers, Febreze, and Baileys.

When developing a licensing strategy, list and vet the equities (or attributes) of the brand and select those equities that are most relevant to the licensing process and translatable to licensed products. If a proposed product category does not connect to a good number of the brand equities, it’s likely a wrong category to consider. Generally, think about identifying anywhere from six to 10 brand equities that can be associated with licensed products. And never mind about words such as trust and quality. They are too general in meaning to be of use here and generally apply to most brands (it’s what makes a brand a brand). Be specific so that you can create a clear link between brand equities and licensed products. Then, when a consumer sees a licensed product, he or she will make an immediate and unconscious connection to the core brand based on identifying key attributes the consumer associates with the brand.


For Cracker Barrel, the brand equities that should apply to licensed products are:

• Country

• Authentic

• Road Travel

• Nostalgic

• Unique

• Family

• Good Country Cooking

• Hospitable

And for HGTV, the relevant brand equities to consider for licensing are:

• Solutions

• Inspiring

• Style and Design

• Home and Garden

• Trusted Expert

• Accessible

• Passionate

Licensed products must represent at least some if not all of the equities identified for each of these brands. If they don’t, there will likely be a disconnect between the licensed product and the brand.

Licensing Position Statement

A Position Statement articulates what the licensing program should deliver to the brand in order to be considered successful, usually in one or two clear sentences. When writing this statement, make sure it is an expression of consensus among all of the stakeholders at the company. Surprisingly often, companies embark upon a licensing program without senior management’s buy-in. In that case, when license agreements are ready to be signed, when licensed products are submitted for approval, or (and this is the worst-case scenario) when licensed products appear on retail shelves, the C-Suite is surprised.


The mos senior-level executives at any organization must be aware of and embrace the strategy to develop a licensing program, before implementation. No surprises. This is mission critical not only for the brand but also for the benefit of the licensees that are developing and bringing products to market.

Similarly, use the licensing position statement to secure consensus from the salespeople. Imagine the following hypothetical example: A Stanley salesperson is meeting with his buyer at The Home Depot, who he has known and with whom he has done business for years, and the buyer remarks how much he likes the Stanley work gloves on display in Aisle 6. That should be good news for the Stanley salesperson, right? But there’s a problem. The work gloves are licensed products sold to the store by a licensee, and the Stanley salesperson didn’t know about it. He didn’t even know Stanley had licensed a manufacturer to make and distribute work gloves. He didn’t even know that Stanley had a licensing program. So instead of thanking the buyer, the salesperson says, “What work gloves? We don’t have work gloves.” Not a good moment (again, a hypothetical moment for illustrative purposes). This statement is an opportunity to inform and engage stake- holders about the licensing program. Make sure that all of the stakeholders within a company are aware that a licensing program is commencing and have visibility to the plan, beginning with the Position Statement. Other stakeholders might include account executives at a brand, the legal department, quality assurance people, and perhaps the board and outside agencies. Communicate intentions and progress. This is all part of “Operational Readiness,” which will be discussed in more detail in the next chapter.

Following is a Cracker Barrel licensing Position Statement:

Cracker Barrel Old Country Store will provide a broad range of food and non-food products from a trusted, authentic source that celebrates the brand’s country heritage and delivers the quality and honest value for which Cracker Barrel is known. The strategic distribution of these reliable, familiar products will both deepen Cracker Barrel’s unique connection with its loyal guests as well as reach new consumers who have not yet experienced this popular American brand.


Let’s take apart this Position Statement and look at its elements. First, the general product category is defined—food and non-food products (admittedly very broad but directionally clear that both food and nonfood products can be considered). Second, key word equities are used throughout the Statement—authentic, country heritage, honest, value, reliable, American. Third, distribution is mentioned. And, finally, the consumer target is stated— loyal guests and new consumers of the brand. That’s a lot to pack into two sentences, but it’s all there for stakeholders at Cracker Barrel to see and understand. Yes, it’s very general and covers a broad swath, but the overriding goals are there. And more details are available in the plan for whoever is interested. It’s the beginning of a stream of regular and ongoing communication within the organization about the licensing program as it unfolds.

The same evaluation can be done for HGTV, where the Position Statement might read as follows:

The HGTV brand will be used as an umbrella to leverage its core solutions and style equities to offer innovative, design- driven, functional products that solve problems and educate consumers to simplify the purchasing decision.

Again, let’s look at the key elements of that single sentence. First, the Position Statement reflects keeping HGTV top-of-mind for consumers (viewers). Second, it leverages the broadcaster’s solutions and style equities to deliver products with a unique selling proposition. Third, it leverages the various design aesthetics and styles presented in HGTV programming.


Target Consumers

No licensing strategy is complete without a full understanding of what consumers the brand owner wants to reach with its licensed products. And don’t assume it’s the same consumer the company reaches with its core products. Perhaps the core products are sold primarily to men and the licensing program is designed to focus more on women. Black & Decker sells its power tools primarily to a male consumer, but the licensed small domestic appliances are sold primarily to women, a target of the brand. Or the brand may want to reach a consumer in a specific region of the country or age group or a specific ethnicity. Or, and this is most likely, the brand wants to further engage its already loyal consumer base and, at the same time, reach new consumers who don’t generally use or engage with the brand. By identifying the target consumers, you are better able to guide the licensing program’s channel and retail distribution strategy as well as the product categories selected.

In the case of Cracker Barrel, a brand that is available at its fewer than 650 restaurant/store locations at highway intersections, the brand considered licensing as a tool to reach a fairly wide- ranging group of consumers—some familiar with the brand, some users of the brand, and some unfamiliar with the brand.

Making licensed products available at potentially thousands of other store locations where the target consumer shops could have broad ramifications for the brand in terms of reaching consumers at new touchpoints.

Similarly, HGTV’s viewers are more female than male and most of the licensed products are targeted at that female consumer. However, in the case of HGTV, the only way the brand reaches its target audience is through its television, digital, and print vehicles. There were no products, as noted earlier.


So by choosing the right licensed products targeted at the right consumer, HGTV will reach its loyal viewers, occasional viewers, and others in entirely new ways and consumer touchpoints—the aisles of brick-and-mortar stores, and online and digital retail.

Product Categories and Competitive Landscape

To create an effective licensing strategy, you must, by definition, look “outside” the brand’s core products to appropriate product categories that will align with the strategic elements described above and resonate with consumers. Selecting product categories will likely lead to success (if they are the right ones) or failure (if they are wrong). Don’t waste time pursuing categories that might sound great but really don’t make sense for your brand because they are not consistent with the strategic elements described above. Introducing the wrong product category to the market can actually damage the brand instead of achieving the desired objectives. And with social media, online peer reviews, and expert opinions readily available, these “wrong” choices can hurt a brand quickly. Invest the attention and research necessary to create a strong list of target product categories and prioritize the most compelling opportunities.

It’s okay to start with a broad list. Brainstorm ideas and get them all down on paper. No idea is a bad idea—yet. Look for products that are logically associated with the brand, satisfy the stated goals and objectives, and touch some or all of the identified equities. Then vet the categories identified through a number of filters that will result in a final, smaller list that has the highest likelihood of success. And, by the way, “success” means finding the right partner, developing the right product at the right price, ensuring that quality and performance expectations are met, having the right retail strategy, and then selling through at retail.

Many companies considering licensing are leaders in their core product category (or close to the leader). If you’re in a leader- ship position, be wary of arrogance (or ambition) that prevents you from evaluating the category objectively. Leadership in your core category doesn’t mean that you can enter any other category successfully.


Other companies in those categories are already category leaders with whom you must compete. At the time Coca- Cola Clothes made such a big splash (see Chapter 2), I was called by one of the most famous pizza chains in the United States. It was convinced that it was second only to Coca-Cola in terms of fame and that it could successfully license its brand for a line of fashion apparel, the same way Coca-Cola had done. The effort never panned out. The company let its unrealistic perception of its brand cloud its judgment.

A company can winnow its list based on consumer perceptions of its brand and which categories might diminish perceptions. For example, Cracker Barrel might not want to consider frozen meals (a category that could easily be on the initial list) because it runs counter to Cracker Barrel’s “fresh” and “made from scratch” associations. Or it may not want to offer “center- of-plate” (i.e., entree) meals due to a concern that matching the quality and taste of the same restaurant offering would be challenging. Perhaps HGTV doesn’t want to compete with its advertisers. Although every company should establish filters specific to its brand, some general filters (with brand-specific subfilters) work for just about any brand. Here are four general filters you can use, each in the form of a question:

1. Does a compelling strategic fit exist between the brand and the potential product category?

2. Is there a relevant consumer proposition for the product category being considered?

3. Are the market dynamics favorable for the brand to enter this particular category?

4. Are the financials attractive enough to justify devoting the resources necessary to enter the category and maintain a presence in the category?


For example, in narrowing the initial list of product categories, Cracker Barrel should focus on products that resonate with current and future Cracker Barrel guests, such as:

1. Categories that embody the Cracker Barrel core equities and drive consumers to the restaurants.

2. Products already found in Cracker Barrel stores and restaurants.

3. Food ingredients, as opposed to complete meals, to allow Cracker Barrel to enhance, instead of replace, home- cooked meals.

And Cracker Barrel should avoid categories that do not fit the brand, such as:

1. Categories with limited connection to the store, restaurant, or core consumer.

2. Food categories that run counter to Cracker Barrel’s “fresh” and “made from scratch” associations, such as frozen meals, as stated above.

3. Center-of-plate meals due to concerns that matching the quality and taste of the same restaurant offering would be challenging.

HGTV could be licensing the brand in categories where there is “white space” and that fit with HGTV’s program goals and, of course, brand equities. In evaluating categories, in addition to the general filters identified above, HGTV should ask the following questions about each product category considered:

1. Will the category help build loyalty with current viewers and attract new ones?

2. Will the HGTV brand bring a meaningful voice to the product, offering solutions in a category that is often confusing to consumers?


3. Is the category crowded with multiple strong product lines?

4. Does the category have one or more dominant branded leaders, or is there an absence of an authoritative voice?

5. Is the category a strategic anchor that will build consumer permission and allow the program to stretch into further categories?

6. Is there a particular product or merchandising consumer need missing from the category’s offerings?

The answers to those questions will drive HGTV to the right product categories and help the brand license and develop products with a selling proposition that is unique to HGTV.

Some of the key categories identified for Cracker Barrel might include baking mix, pancake mix, iced tea, jerky, refrigerated and frozen side dishes, soup, spreads, syrup, cookware, and confections and snacks. For HGTV, categories to consider might include flooring, wall coverings, paint, furniture, storage and organization, window coverings, lighting, tabletop, and bed and bath.

Once categories are identified, a company must develop a marketing rationale that articulates how the brand can create a competitive, viable point of difference within each industry segment. Before any brand seeks partners in the identified categories, understanding the market dynamics in each category is essential. As we’re about to see, these dynamics may cause a seemingly aligned category to drop off the list due to heretofore overlooked market considerations.

Market Dynamics and Trends

The retail “shelves” (both online and offline) aren’t empty just waiting for your licensed products. In fact, the shelves are full and something will probably have to move off the shelf to make way for the new licensed product (although it’s a bit easier online where floor space isn’t a consideration). Retailers probably won’t move a successful product off the shelf to make room for something else,


even if it sounds like a good idea. Everything that has been done thus far in the plan has been done in a relative vacuum; you can address the earlier factors without worrying about the realities of market conditions in the product categories identified. But can the brand win in those product categories? And further, are there trends in particular categories that should not be ignored and perhaps embraced as you develop your strategy. It’s time to look at market dynamics and trends to determine what’s happening in the market.

This is a good time to conduct primary research (e.g., collecting new data through sources such as surveys or focus groups) and secondary research (e.g., online research to collect existing data) if you really want to gain some knowledge about consumer per- mission (primary research), assess the size of the selected product categories, and learn about the category growth rates and other market dynamics (secondary research). Focus groups can help in understanding whether a brand that consumers already use or engage with will be receptive to licensed products and, if so, which ones. This research might also reveal whether consumers believe that licensing could have a negative effect on the brand and if that would alter their current perception of the brand. And finally, the focus groups are likely to disclose where consumers would expect to find licensed products—what distribution channels (online or offline)—and what consumers’ product expectations might be.

Don’t rely just on secondary research to unearth this data (although it’s definitely important). Primary research is relatively inexpensive and can easily be accomplished online, so undertake it to mitigate risks. Further, brand owners conduct consumer research on a regular basis for any number of reasons. It’s fairly easy to add a licensing set of questions to your ongoing or regular consumer research activities.

Visit retailers and observe what’s on the shelves and scroll through relevant e-commerce sites. These retail audits, at multiple retailers in different channels of distribution and different regions of the country, can provide context for strategy development,


including category trends, category fit, competitive intelligence, and price and product positioning. Also, relevant trade shows can be very useful in gaining a better understanding of what’s going on in a category, and give you an opportunity to talk informally with executives who work in those categories every day.

Ask the following questions to facilitate strategy development:

1. Have other brands been successfully licensed in this category?

2. Are there market trends or unmet needs in the category upon which the brand can capitalize?

3. Is there room for another brand in this category?

4. Can the brand achieve a meaningful share in the category?

5. Will the financial rewards support long-term revenue goals?

6. Is the category large and growing?

Answering those questions is often as much art as it is science. Yes, it will require some research. But it will also require you to evaluate what you are discovering. Questions that pertain to achieving an acceptable market share in a category or determining what the financial rewards might be are a function of good research, information, and very educated guesswork. Seeing the trends that might affect a category that the brand has already identified or, the flip side, seeing a trend that drives a brand to a new category will take some marketing intuition as well.

It’s important to be aware of trends so that brands remain relevant in the culture; engage with consumers where, how, and when they are shopping; and break through the clutter to meet consumers’ needs and wants. For example, there’s a trend today for socially conscious consumerism. It started with cleaner household products and has moved to “clean” labeling. There’s a trend for instant gratification. So many meal delivery services are popping up. Giving consumers an experience is a growing trend, resulting in more pop-up shops, for example. There is a trend for healthy living and nutritional eating and a counterbalancing trend that supports indulgent treats.


Licensing strategies should also address cultural and product trends that are occurring in the licensing marketplace that might impact choices made when developing the strategic plan for a brand. For example, there has been a trend for some time now of restaurants and chefs licensing their brands and names for grocery products. Let’s examine this trend, and the related market dynamics, in the context of the Cracker Barrel example.

Cracker Barrel should have been thinking about participating in this trend back in 2010 when it started to recognize the challenges it was facing as a restaurant chain. The “restaurant licensing” trend has capitalized and faced some important market dynamics. For example, consider the frozen meal category, a category that any restaurant thinking about licensing will likely evaluate.

First, the frozen meal category is growing, quality is improving dramatically, and consumer behaviors indicated that frozen meals stood as an attractive growth option for all sorts of brands. Second, consumers were eating at home more often, particularly following the recession in 2008. Third, the competition in the fro- zen category in particular was stiff with giants in the category that controlled a good portion of the business, such as Nestlé (with Stouffers, which appealed to consumers seeking hearty portion sizes and Lean Cuisine, which met the needs of those looking to monitor calories) and ConAgra (with Healthy Choice for weight control, Banquet for filling meals at a good price, and Marie Callender’s for filling meals but with more “restaurant” quality). Fourth, some of these same major food companies were starting to grasp the power of restaurant brands and their ability to generate consumer trial; they became welcoming partners for new restaurant-licensed branded lines of product. Fifth, this trend also disproved the notion that consumers who could purchase restaurant-branded foods at the supermarket would opt to cook those foods at home instead of visiting the restaurant; eating at


home and dining out are entirely different occasions. For exam- ple, partnering with Nestlé, California Pizza Kitchen launched its frozen foods line that allowed consumers to enjoy “all the flavor of the restaurant, now in your grocer’s freezer.” Provided that the frozen pizzas delivered on taste and quality, the licensed product was more likely to drive consumers to the restaurants as opposed to discouraging them from visiting the restaurant. These power- ful market dynamics contribute to a macro trend that has been evolving for almost two decades.

And this trend is illustrated by many other examples. In 2000, TGI Friday established a partnership with Heinz and offered an initial six-item TGI Friday licensed frozen snack line that included Cheddar & Bacon Potato Skins, Mozzarella Sticks, Chicken and Steak Quesadilla Rolls, and Buffalo and Honey BBQ Chicken Wings. The depth of this program helped TGI Friday pioneer this trend (although it wasn’t the first company in the category to establish this type of licensing partnership). Upon the release of the licensed products, Erica Gilbertson, Associate Brand Manager for Heinz, shared the following:

These new options are a perfect shortcut for creating complete dinners with the same type of robust taste and flavor combinations people have come to know and love from TGI Friday. They are a flavorful and conve- nient alternative, and a great way to keep dinner excit- ing and fun, especially on those busy days when you just don’t have enough time to enjoy the full restaurant experience.

Read that quote again. You can just hear TGI Friday’s goals and objectives between the lines. TGI Friday was taking advantage of both trends in the market as well as dynamics in the frozen food category.

Other restaurant brands, and chefs, have entered the licensed food space (frozen and nonfrozen) as well, including P.F. Chang’s(frozen meals for two),


Romano’s Macaroni Grill (frozen meals), Hooters (frozen meals), Panera Bread (soup), IHOP (pancake mix and syrup), Taco Bell (microwaveable entrees and taco shells), Dunkin’ Donuts (whole bean and ground coffee), Wolfgang Puck (soups), Bobby Flay (sauces), and Jamie Oliver (ready-made meals) among others. So for a newcomer to licensing such as Cracker Barrel, although there was plenty of competition in the food category, the market dynamics and trends were generally favorable. HGTV evaluated market dynamics and trends and identified categories where white space existed and where consumers gener- ally had challenges navigating the category. Consider paint and furniture. Have you ever tried to choose and buy paint colors for your home? All of those color charts and color chips; so many dif- ferent shades of so many colors. Consumers are challenged and unsure of themselves when purchasing paint and color, often with- out the help of a decorator. This is white space for a solutions-based paint program for HGTV. Ditto furniture. Consumers often don’t have faith in their style choices for what may be a major purchase of something that should last many years. This is another white space where HGTV can offer expertise and guidance to help con- sumers make choices, confidently. And by the way, with Millen- nials aging and starting families, more consumers are decorating their first homes, a trend of which HGTV needs to take advantage. After vetting each category through the market dynamics fil- ters, as illustrated above, a brand owner will have a final list with which to move forward and seek licensing partners. The brand will have a lot of intelligence about what is going on in the market, making partner decisions much more informed and the sales pitch to potential partners much more compelling.

The market, occupied by a multitude of competitors, is a richly woven fabric populated by micro and macro trends; rapidly evolving consumer behaviors, tastes, and needs; and innovation. You need to study the landscape of the categories you have identified to determine how and if your brand can make a statement, how and if you can win. Then articulate that in your strategy.


The final piece is to establish the distribution channel and offline/online strategy for the licensed products you have identified as part of your plan.

Distribution Channel Strategy

Having done primary and secondary research and having examined the market dynamics and relevant trends, you know a great deal about each category—how and where the category is sold at retail, consumer behavior in the category, the competition, and consumer expectations.

Based on this knowledge, you can align distribution channels with the core brand and the licensed product category, leveraging the brand’s equities and reaching the target customers where, when, and how they shop. In some categories, leading brands are sold to a wide range of retailers—Energizer and Coca-Cola are examples—and licensed products are likely to follow suit. Other brands such as Baileys are sold in more specialized channels, requiring a more selective assessment of where the licensed products can be sold. High-end luxury brands must be even more careful about licensed product distribution. And some brands have a very particular consumer base, such as Pantone with a mostly professional and business consumer, and need to distribute their licensed products where those consumers are likely to shop.5

Consider distribution channel strategy from Cracker Barrel’s perspective. Most leading food brands are sold in all grocery and mass channels of distribution, although some brands, of course, are sold in high-end and specialty grocery stores. But for Cracker Barrel to secure a best-in-class licensee and generate meaningful revenue, brand impressions, and consumer touchpoints, its licensed food products must be made available to the entire grocery and mass channels. The only other alternative is to develop an exclusive partnership with a single large retailer that will devote heavy resources to promoting its exclusive line of Cracker Barrel licensed products.


For HGTV licensed products, the natural channel for the brand is home improvement stores, specialty stores, catalogs, and online retailers. Again, retail exclusives turned out to be an appropriate strategy for HGTV licensed products. (For more on retail exclusives see Chapter 7.)

The channel will, of course, dictate the pricing of the products, but even within channels, “good, better, and best” pricing strategies are options. Each brand must consider what pricing strategy best suits its brand and its licensing strategy in general. As for Cracker Barrel, it should seek products that are priced consistently with the core brand—a fair price and a great value. In other words, those products should have accessible price points across retail chan- nels (i.e., prices that appeal throughout the Cracker Barrel guest segmentations). Artisinal grocery products at high-end specialty stores would be the wrong channel strategy for Cracker Barrel.

Financial Forecasting

This might be a little more art than science, but it is doable as long as you accept that there are many caveats and variables. Any brand considering licensing wants to understand what the potential revenues might be, whether costs will be covered, whether there will be a profit, whether the time and resources devoted to the enterprise will be worth the financial return. Although revenues should not be the primary objective for embarking upon a licensing program, a forecast should be included in every plan, probably for the first three years. How is this accomplished? The best forecasting method is to follow the steps listed below. Keep in mind that depending on the category, there are rarely any significant sales in the first year of a contract. It takes awhile to design and develop product, with all of the required brand approvals, and then get it to market. A three-year projection is more likely looking at sales for years two, three, and four of a license agreement.


And remember, these projections are designed to help guide your Strategic Plan. Once you start soliciting potential licensees, they will provide you with more informed sales projections.

1. Identify the market size of the potential category.

2. Estimate the share of market that you hope to achieve (resulting in sales projections).

3. Assume an appropriate royalty rate and apply it to the sales projection.

4. Factor in a growth percentage for each subsequent year.

5. Develop low, high, and medium projections for each potential category.

By addressing distribution channels and the seven other factors, you connect all of the dots. Rather than approaching licensing reactively and in a vacuum, you have created a well-thought-out, integrated approach. You are now almost ready to begin the search for the right licensee partners.


But before embarking on that portion of the process, you have one more task. Referring back to the list of ten factors at the beginning of the chapter, you may recall that the last item on the list—Program Management and Support—will be addressed in the following chapter. This is a critical topic: What does it mean to “manage a licensing program”? Does your company have the infrastructure in place to manage the licensing program, and does it have a clear vision for how it will support its licensees once they are on board?