According to the Licensing Industry Merchandisers’ Association (LIMA), the use of licensing as a marketing and brand extension tool has proliferated over the past 30 years.
Steven Ekstract, group publisher of Licence Global magazine – the official publication of Brand Licensing Europe (BLE), held in London, UK, last month – told BakeryandSnacks that Walt Disney is the world’s largest licensor, trading $52bn annually in retail sales and license merchandise.
“Even though you [a licensee] are going to be paying a royalty to the licensor, a licensee is still going to end up ahead of the game,” he said.
Make the connection
Around 1,000 international companies are active in licensing consumer products, nurturing that emotional connection that causes consumers to want to buy a particular brand.
“It’s a very smart marketing strategy because it enables the licensor to extend their universe beyond their current business model and get into product categories they typically wouldn’t be in,” said Ekstract.
“The brand can also actually help you sell more, and get a premium for your product.”
Win : Win
A strong licensing relationship benefits both parties.
Licensor
Firstly, the brand owner generates revenue from royalties from granting a license.
Licensing also provides further marketing support and extends the brand into new categories, areas of a store or even a new market altogether, without having to invest in manufacturing, facilities or further logistics.
For example, Coca Cola brings in around $1bn a year in licensing revenue and royalties over and above its core business, which is soft drinks. The company’s marketing and reach is further extended – for free – by fans wearing, say, a sweatshirt with its logo, said Ekstract.
Licensee
The most obvious benefit to a licensee is the marketing power it brings to their product.
Licensing allows the manufacturer to take advantage of the huge investments made in building the brand without most of the risks.
“The reason licensing works is because consumers have an affinity to a brand, an emotional connection that causes them to want to buy a particular brand,” he said.
Distinguish your products
“From a bakery and snacks perspective, licencing is a wonderful way to distinguish your products because you can basically lease a brand and put it on to your product,” added Ekstract.
“Certainly in FMCG, where the margins are tight, being able to brand a product allows you to charge a little bit more,” he said.
BLE, owned by UBM and sponsored by LIMA, is the largest licensing event in Europe. Now in its 19th year, the 2017 show featured more than 280 exhibitors – ranging from Twentieth Century Fox and BBC to the Emoji Company and the Victoria and Albert Museum, among others – as well as more than 2,500 brands, characters and images.
The show will be held again from October 9-11, 2018 at London Olympia, UK.
* According to LIMA.