Working With Licensing Agents and Consultants

Licensing agencies and consultants can play a central role in the development of an effective licensing program. Whether your company enjoys a long lasting and mutually beneficial business relationship with a licensing agency, or if your firm is interested in entertaining the thought of engaging a licensing professional, be prepared to hear two words over and over again – “It depends.”

“It depends” in many ways is the currency of the the licensing industry.  Yet “It depends” may also be two most important words an agency or consultant can speak.  That is due to the need and desire of the agency or professional to interrogate potential clients and for that matter, existing clients, to find the key reasons why they want to incorporate licensing into their marketing repertoire.  A client’s motivations for licensing their brand will dictate the structure of their licensing philosophy.  Indeed,  “structure determines behavior” – and the structure of the client will in large measure determine the behavior of the agency.

There is no right or wrong answer on whether you should work with a licensing agency or a licensing consultant.  For some marketers, outside resources make their licensing efforts more expansive, efficient and effective.  The right agency or professional for your company can be more objective in their analysis of your needs and generally is the expert across a wide number of product categories.  In our business development meetings with prospective clients, we often communicate that by hiring a licensing agency, they gain access to an entire team of professionals, something which may not be practical for them to build internally.  According to management guru Peter Drucker, outsourcing is not the way to cut costs, but “to improve the quality of the people who work for you.”  Hiring a licensing agency may actually increase costs, but also greatly increases speed, performance and returns.

For some marketers however, an outside resource may be unnecessary if you have a very clear view of your needs, the ability to add appropriate headcount with specialized skills across a number of opportunities that it makes sense to develop an entire department, or such a limited set of licensing category opportunities and internal staff already experienced in licensing that they could negotiate a strategic deal or two.  Again, “It depends” on your situation.

However, we would argue that licensing is a “craft” in a sense.  It is not simply something that is either added on to an existing job position, or even a dedicated job position in and of itself.  Licensing calls for a team-oriented approach – and as with any team, vastly different skill sets are required to find success on the field.

Selling the intangible benefits of a client’s trademark to a potential licensee is an art form.  The team at a licensing agency must be able to analyze and synthesize not only the brand owner’s business, but also become proficient in most (if not all) aspects of their client’s business. For good measure, they should understand the categories in which the client competes and be aware of how competitors are positioned and where they may strike next.

Yes, a licensing agency must have an almost uncanny ability to grasp the abstract and then take that vision and deliver a sublimely creative expression of brand and product.  But that is just the beginning.  The German-born architect Ludwig Mies van der Rohe (1886–1969) is attributed as saying “God is in the details,” expressing the idea that whatever one does should be done thoroughly.  We’re not certain, but with that mindset, Mr. van der Rohe may have spent some time in product development at a licensing agency.  The product development professional is attuned to and motivated by the flawless execution required to bring a licensed product to market.  This not only requires oversight of the individual standards of each of a client’s brands, but also a deep knowledge and understanding of the rules and regulations in particular categories, be they legislated by the FDA, the EPA, the FTC or other rule-setting council.

Accounting is another function within a licensing agency for which a special nuanced approach is required.  While it is a given that this person possesses the same exacting level of detail orientation as required by the profession, they must also be able to interpret the intricacies and variances often inherent in licensing agreements.  For example, definitions of terms such as “net sales,” tiered royalties,” and “contract period” may change for agreement-to-agreement – and those changes are often accompanied by different royalty payments and schedules.

Often times the glue that holds the licensing team together is the account manager.  First and foremost, the account manager sets the tone for the business by working with the client and the agency team to set the strategic licensing direction for the brand.  From that point forward, the account manager is responsible for the day-to-day execution of the business.

For most clients, the thought of giving up a measure of control over their brand and the way it is brought to market can be a very stressful thing.  The account manager is responsible for rallying the client (and agency alike) around the Big Idea.  By bringing the client to the Big Idea, and letting them take ownership of it the power of that idea is magnified.  That is the hallmark of a great account manager.  It is not just being a go-between the client and the individual departments in the agency.  It is taking control of the entire process, from start to finish, and bringing both the client and agency together around the Big Idea.

Today, clients find themselves increasingly busy and few (if any) companies are expanding their headcount to take on the added responsibilities that licensing brings.  With scant resources from which to draw, clients are therefore more and more stressed for time and possibly less likely to champion licensing efforts – even when those efforts support their overall marketing goals and provide a positive return on investment.

Good agencies can be relentless with their demands for time on your calendar because licensing is that unique instrument in the marketing toolbox that resists adherence to timelines and timetables.  Make no mistake, “relentless” is exactly what you want from your licensing agency as it demonstrates a passion and dedication for your brands and a belief in building brands the right way.

Unlike advertising campaigns and promotional schedules which are locked and loaded onto marketing calendars months in advance to fit consumer buying patterns around holidays or other seasonal occurrences, licensing is all about making the most of opportunities when they present themselves – and often times they do not present themselves for very long before they end up in the lap of your competitor.  In order to maximize the “time” aspect of the relationship with your agency ask yourself the following:

•  What is the role that licensing will play in the company’s marketing strategy? What are the goals and objectives to be met?  Is licensing merely an exploratory exercise – a dipping of the toe into the water – or will it be an aggressive initiative as equally important as all other elements of the marketing mix?
• How much time will I expect my agency to commit to my licensing program?  Or said another way – what is the scope of work you will assign to your agency?  There is no substitute for hard work and good agencies demonstrate this day in and day out.  If you are asking your agency to be relentless in the pursuit of ideal licensing partnerships and devoted to their flawless execution, then your actions and devotion must mirror theirs.
• How will “success” defined and measured?  Royalty revenues?  Additional impressions against the brand?  Inroads into new channels of distribution?  Some of the above?  All of the above?  The clear articulation of “success” can focus agency resources to consider only those elements of relevance and overall importance to the brand.  Metrics that are superfluous, or worse yet, contradictory only serve to sabotage licensing programs and engender frustration and resentment across all parties.
• What will the internal approval process look like?  How long will it take?  Who needs to know what?  When do they need to know it? And how long will it take from start to finish? Indeed,“time kills deals.”  The longer it takes to consummate a licensing partnership, the less likely that partnership will come to fruition.  Deal fatigue wears on clients, agencies and potential licensees equally.  What may have once started out in a heart-pounding rush of excitement to get a new licensed product on the shelf, a deal can end up dying on the vine if either too little attention or too much of the wrong attention is interjected into the process.  The end result is most likely lost opportunities when retailers reset the shelves in the desired category and you and your partner are not ready to compete.  If you do not have an approval process already in place, work with an agency to develop one with you so that it is built to meet your goals and the goals of potential partners.

As published in The Licensing Journal, Nov/Dec 2010