Don’t Blame the Weather: Federal Natural Disaster Aid and Public Corruption
Don’t Blame Brand Licensing
Transcript of Don’t Blame Brand Licensing
Don’t Blame Brand Licensing
Contributed by Pete Canalichio on January 14, 2015 in Strategy, Marketing, & Sales
Jack Trout in his blog published on
BrandingStrategyInsider.com “ Licensing :
Trouble for Brands” dated February 25, 2008
makes a compelling argument for why not to
consider licensing as a method of brand
extension . Furthermore, he backs it up with
multiple examples of established brands with
flawed licensing programs that serve to prove
his hypothesis. After reading about Pratt & Whitney and Pierre Cardin, what CEO in their
right mind would choose to risk the company’s crown jewels to a group of third party
manufacturers, which don’t have a clue about how to build a brand , let alone manage
one? With so much at stake, only those CEOs that are either reckless or desperate would
consider licensing. Right?
Maybe the problem isn’t licensing, but its poor or improper execution? After all, why would
a company choose to forgo its consumer driven innovation process or marketing principles
only when it comes to extending their brands through licensing? Some of the best and
biggest brands around the globe have been actively and successfully licensing. Disney, P&G,
Coke, and Harley Davidson each have outstanding licensing programs. These programs not
only enjoy strong royalty income, they enhance their brands’ attributes in the process.
The problem definitely isn’t licensing. Rather, it’s either the lack of sound brand guardrails
in the brand licensing process or a failure to heed to those guardrails. Jack Trout builds
multiple assumptions into his argument that are flawed. I agree that the promise of royalty
revenue can be intoxicating, especially to a public company struggling to meet its forecasted
quarterly operating income. However, this is an indictment of management and not
licensing. Licensing is simply a tactical execution of a brand extension strategy (even if the
strategy is no strategy).
In considering brand licensing, the first question that needs to be addressed is where the
brand should play. In other words, what categories should the brand be in? If a company
begins with a sound understanding of their brand’s architecture and positioning, they can
then develop a robust brand extension strategy. Knowing where the brand has permission
to play enables a company to identify extensions that offer the best overall business
opportunity. Once the company knows where the brand can play, they must determine
“how to win.” Should the company extend the brand organically? Or, should they source the
category? If the company chooses not to extend the brand with internal resources, they do
so through acquisition or licensing. Like any brand extension, each licensed category must
support the brand’s architecture and positioning. At Newell Rubbermaid, we would draft a
category positioning statement aligned with the brand positioning statement for each
licensed category. This ensured each category licensed reinforced the brand’s positioning.
If a company chooses to extend their brand without a fundamental understanding of the
brand’s architecture and positioning, the licensed products will at best have a neutral
impact on the brand. More likely, they will permanently erode the brand’s equity . This
consequence would occur irrespective of how the company chooses to extend their
brand. Licensing gets a bad rap for damaging brands when either internal licensing teams
or their agencies decide to extend a brand into “adjacent” categories in the pursuit of a quick
royalty infusion. Whether or not a company chooses to use other peoples’ resources and
money when executing their brand extension strategy, they must always ensure every
product brought to market continues to support the brand’s commitment and promise.
About Pete Canalichio
Pete Canalichio is an expert with over 20 years of global experience in the areas of Brand Strategy and
Brand Licensing, working with brands such as The Coca-Cola Company and Newell Rubbermaid.
Recognized as a leading expert, he is frequently asked to speak at branding and licensing conferences
and leading business schools globally. He is a series of brand licensing and strategy frameworks and
webinars available on Flevy here .
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