How To Select The Best Licensees For Your Brand
One of the most common questions we get is ‘How do I know which Licensee to choose? There are so many companies in each Category, it can become confusing, and sometimes people seem really keen then nothing happens, or they seem to just fade away during the pitch process!”
Some of the more battle hardened and cynical souls out there might say the answer to how to choose Licensees is easy – who will commit to the biggest Minimum Guarantee! Alas it’s not always as easy as that, and getting Licensees willing to commit and pay high M.G.s does not happen by accident.
So here’s 7 Top Tips on how to select the best Licensee:
1. Create a professional, commercial Brand presentation & deliver it with relevant focus & impact - if you make a half arsed approach at presenting your property out to Licensees, failing to include commercially relevant data you could appear to be in Brand owner la-la cuckoo land. Those gritty commercial souls whose life is spent travelling the motorways of this land to face the cold, hard reception often awaiting new products in Retail Buying offices need impressive commecial reality from your Brand presentations. Don’t lie, but you need to impress people with the scope & size of the opportunity your Brand presents. This is very rarely achieved by glorying in how ‘amazing’ the production values or script are…
…so what, it could look crap, but if there is a serious commecial proposition behind it, then Licensees will want it!
And if you present based on a realistic commercial understanding of where your Brand fits, you will begin to attract more Licensees, even where the proposition is weaker, because you project an understanding of scale/scope and where your Brand fits.
2. Run a pitch process with clear structure – clearly there are great benefits from running a competitive pitch process. If the Brand you are presenting is even half way likely to sell product through retail, a competitive pitch will give you a structured framework to assess Licensees. There are effective ways to communicate the fact that a process is competitive, barging in their and saying “but if you won’t step up and pay the big bucks, these other 5 companies will” is not a wise approach, because youw ill turn off Licensees who could be good partners, cause bad will which will be remembered, and frankly fail to stimulate competition in the way that a more indirect and gentle approach might.
3. Minimum Guarantees are important, but not everything – yes, a high M.G. committment is a good start point, and a statement of serious committment, as are the other commercial terms inc. royalty rate, M.G. payment schedule, size of advance, definition of net sales etc. However, to select Licensees who will do the best job all round for your Brand, you also need to look beyond the commercial terms.
What is the product development capacity & quality of output like? What is the distribution set up like, and are there any gaping holes in it i.e. a company who for whatever reason doesn’t supply Argos in the UK is going to miss a huge chunk of the market.
4. It’s not about the size or strength of the Licensee, it’s about the size and strength of their committment to your Brand which counts most – frankly, we could have included this in the last point, but it’s so important, it get’s it’s own Top Tip! You can grant a License to the biggest company in the world, but if their commercial departments & teams are barely interested, you will not get good results. And the reality is that for all the importance of the M.G., the reality is longevity and over recouped royalties are what delivers massive income for some Licensors.
So make sure they really want to work on your Brand. Make sure it will get focus, and make sure they haven’t signed for reasons which don’t serve your needs i.e. cutting out competition to other Brands, land grabbing rights regardless of intention to use, or interest based on flawed thinking/misunderstanding.
5. Credit check/reputation check all potential Licensees BEFORE signing – for those in Corporate companies, you will probably not need any extra process/due dilligence advice (!), but for those in smaller or less corporate companies, it is 100% essential to credit check and reputation check every single Licensee. Credit checks should reveal whether a company is in dire straits, which should increase your chance of getting paid. Reputation checking should help you work out whether a Licensee has a reputation for not paying M.G.’s, or other such shenanigans. Don’t know who to ask? You must know someone! Look at Licenses a particular Licensee has signed, and call the Brand owner/Licensor for at least informal feedback!
6. Beware allowing Licensees to venture into uncharted waters with your Brand – be wary of a Licensee who doesn’t have proven credibility, experience and commercial success in a particular Category. Let them foray with someone else’s Brand, and when they have proved they can do it, ok!
7. Construct a Licensee matrix strategically – it’s really easy to suggest you shouldn’t just chase opportunities that present themselves, but obviously hard to walk away from someone offering to give you a big check! The reality is though, that if you review the biggest Licensed Brands, they run a (mostly) strategically planned matrix of Licensees. What does this mean in practise – well it might mean picking a smaller number of strategic partners who can take multiple product/category rights and deliver the biggest chunks of opportunity, it might mean building a matrix across markets/regions/continents, but what it probably doesn’t mean is signing a deal with everyone that comes along, and then saying ‘Doh!’ when a bigger deal comes along but you can’t do it as you’ve thrown away the bigger opportunities on the first person to pick up the phone and send you a proposal!
Frankly, there are other Tips on this topic, in fact this could probably be expanded to a full published book, but this should act as a quick intro and a few tips to help those struggling to understand where to start.
Surprisingly, we refrained from adding a tip suggesting you engage focused, specialist, professional help i.e. our company (!), to help construct a plan and Licensee matrix, but if you are reading this & do want help, please feel free to get in touch via www.VirtualWorldLicensing.com