One of the most significant challenges for licensors is to keep the opportunity pipeline full. Regardless of the size of the licensing program, finding and qualifying prospective licensees can be a challenge. Some licensors need more opportunities to explore, while other licensors have the opportunities but do not have a defined qualification process. Unfortunately, some licensors have both challenges. To overcome those challenges a licensor might consider the following sales and business development techniques.
Let’s start with three fundamental assumptions:
- You have a strategy for each of your licensed properties;
- You’ve identified the product categories that align with your core brand message and best support your licensing growth goals; and
- You have a realistic understanding of the value of your brand and licensed properties.
While having a defined strategy for each licensed property and knowing the categories which each property fits best is a great starting point, you also need to have a realistic expectation of your licensed property’s value to a prospective licensee. For example, you may have a top brand in one category, but your brand might not bring significant or even incremental value to the market leader in another category that you’re targeting; therefore, your brand probably has less value for that category leader than it would for the number two or number three player. This will be a crucial factor in targeting and qualifying licensing prospects.
With these assumptions in mind, you can begin developing or refining the process to grow your licensing program.
Finding prospective licensees
Prospective licensees fall into two camps: Those who know and see value in your brand, and those who do not. The former is likely to be already knocking at the door to pitch new ideas, but the latter creates the biggest challenge for most licensors.
The best way to identify possible new opportunities is through Environmental Scanning—careful monitoring of the marketplace—for new licensing deals in your target product categories. You can also identify potential opportunities by noting specific changes at companies within those target categories, which might include:
- Changes in licensing, marketing, or other senior leaders;
- A shift in organizational strategy, new product line development or line extensions; or
- Expanding markets—either demographic or geographic.
Excellent sources of such information for Environmental Scanning purposes include LIMA, licensing trade publications and other marketing and business publications. It is important to note that Environmental Scanning typically provides advance indicators of possible opportunities, not those opportunities already clearly defined. You will have to invest time to determine if an opportunity does indeed exist, and how you might leverage your licensed properties into the mix.
When a prospect is identified, it is important to create an ongoing marketing and sales program to keep connected. Like any type of marketing program, a prospective licensee needs regular communication to keep your brand top-of-mind for the time when the opportunity does present itself, and the licensor’s sales and business development team steps forward to qualify and close the opportunity.
Qualifying new opportunities
Regardless of the source, once you have identified what you believe to be an excellent prospective licensee, it is important to have objective criteria in place to help you evaluate fit with your brand. The majority of prospective licensees will look good on the surface and will be reputable, but a deeper dive will give you a clearer picture of how well the company, its products, and its business practices align with the values and expectations of your business.
The first step in collecting the information you need to qualify further a prospective licensee is via a licensing application. The qualification process should include a review of objective matters such as:
- The applicant’s financial solvency, possible legal issues (including product recalls, infringements, social- and/or labor-related matters);
- Experience in developing and launching similar products in the marketplace;
- Experience working with other licensors, and;
- Reputation in their distribution channels for meeting demand.
A licensor may need advice from finance or legal experts for some areas of review.
Key Point – Ask: Does the market need this product?
The market need or opportunity for the proposed licensed products is critical in the licensor’s decision process. A licensor should also evaluate the prospective licensee’s understanding of the marketplace, the market needs for the product, the strength of the product development and launch plan, and the company’s commitment to market the licensed product. Then consider whether the licensor’s brand truly brings value to the product in the marketplace. If all align, it might be a good opportunity to further consider.
These review steps are somewhat subjective, yet an experienced licensor will quickly spot those proposals that are likely to fall short of expected performance if a deal is completed.
A prospective licensee who scores well in all of these review categories is clearly a catch. Those who do not may still be a good match for a licensor; it depends on the tolerance level for imperfect feedback in one or more of the review categories.
Some licensors develop a rubric or scorecard for evaluating prospective licensees and their tolerance for variances in the review categories is built into the scoring process. This approach also helps to make the review process a little more objective. The most significant challenge in finding and qualifying new licensing opportunities has more to do with the lack of structured, formalized systems for achieving these goals.
Keep in mind the best opportunities for a licensor are not those that are readily apparent. Licensors will have more significant success in growing licensing opportunities by looking not at “what is,” but at “what can be.” A defined process for identifying and qualifying opportunities will help you find and leverage “what can be” much more quickly.
A version of this post was originally published in the Licensing Industry Merchandiser’s Association (LIMA) Bottom Line newsletter.