Building a successful licensing program often means a brand licensor must have a licensing strategy that goes beyond royalty generation. This article for the April 2014 Licensing Industry Merchandisers' Association (LIMA) newsletter offers some strategic ideas to consider.

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2014
WHAT’S INSIDE
A P R I L
LicensingClinic:
Beyond Short-Term Royalty Potential: Vetting
Prospective Licensees for Long-Term Success
ByDavidHarkins,
AssociateDirector,RetailBusinessDevelopment
BoyScoutsofAmerica
Licensors often start their vetting process with a license application to learn about a prospective
licensee’s proposed licensed product, the sales potential for the licensed product, and the basic
financial health of the licensee. This may be sufficient if the primary goal for a licensor is rev-
BallotForLIMALicensingExcellenceAwards
Revealed,With118Nomineesin20Categories
The ballot for the International Licensing Industry Merchandisers’ Association’s (LIMA) hotly-anticipat-
ed 2014 International Licensing Excellence Awards competition is now set – and it features a record 118
nominees in 20 categories from across the licensing, retailing, promotion, and consumer products arenas.
LIMA member companies can cast their online ballots via the LIMA website (www.licensing org) through
May 14. Winners will be announced at the LIMA Opening Night Awards Ceremony on Tuesday, June 17,
during Licensing International Expo 2014 in Las Vegas.
This year’s awards program was the biggest ever, with a total of 360 entries -- a 36% increase from
2013. Nominations came in from 16 countries, including first-time nominees from India and Korea.
The 2014 ballot introduces two new
categories, Digital/New Media and
Location-Based or Experiential Initia-
tives, and makes Celebrity licensing a
classification of its own, separate from
Film and Television.
The other categories in which
awards will be presented are Char-
Please turn to page 3
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AroundandAbout
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LicensingClinicCONTINUED FROM PAGE 1
enue generation; however, if the licensing
strategy goes beyond royalty generation, a
licensor will need to consider other factors
to help ensure all parties have greater op-
portunity for success in the licensing rela-
tionship.
A licensor who seeks to increase aware-
ness of its brand, expand into new catego-
ries or markets, or develop new products to
help serve its business goals, for example,
may not consider short-term royalty poten-
tial as the primary factor in evaluating new
licensees.
Depending on a licensor’s strategy, it
might also incorporate factors into its re-
view and vetting process to gain a broader
view of a prospective licensee, its align-
ment with a licensor’s mission and vision,
and potential for long-term growth. In such
situations, a licensor’s vetting process
might include the following:
• Organizational Fit -- A prospective li-
censee and the new licensed prod-
ucts it proposes must be a good fit
with a licensor’s mission and vision.
The proposed products, the manu-
facturing and sourcing procedures,
and the marketing and merchandis-
ing strategies, must all be in align-
ment with a licensor’s brand, im-
age, and organizational direction.
The prospective licensor’s business
practices, executive leadership,
management, and customer service
staff will likely have impact on a
licensor’s brand and these factors
should be considered in the evalua-
tion of alignment with the licensor’s
organization.
• Operational Stability -- Stability is es-
sential and some licensors assess
stability by the number of years a
prospective licensee has been in
operation, or the appearance of fi-
nancial solvency; however, a deeper
dive is always required. For example,
a licensor will likely want to pull
Dun & Bradstreet reports, ask for
financial statements from non-public
companies, check several references
(other licensors, vendors, and manu-
facturers), and evaluate the leader-
ship biographies for experience. A
licensor might also want to consider
a prospective licensee’s operational
structure and supply chain, paying
special attention to ability to fulfill
its marketing, sales, product delivery
obligations in determining a pro-
spective licensee’s stability. In some
cases, a licensor might also want
to conduct a site visit to confirm its
findings before issuing a license.
• Expertise -- Experience with the pro-
posed licensed product and the spe-
cific market for that product is best,
although not always essential. If a
prospective licensee has strength
in a product category or market, a
licensor will likely benefit from that
expertise. Yet, there are times when
a prospective licensee has expertise
with similar products and markets,
and is looking to expansion opportu-
nities. In these situations, a licensor
will need to consider if the expertise
in existing markets or with similar
product-lines will translate well into
the proposed expansion plans.
• True Opportunity -- Opportunity for
expansion into new categories and
markets always should be consid-
ered, although carefully weighed
against the risk to the brand. Pro-
spective licensees rarely hit a home
run with their first proposal to a li-
censor because they do not have a
thorough understanding of the brand
or a licensor’s strategy. It is up to a
licensor to look for the “true” op-
portunity within the proposal, rather
than details of the specific proposal.
If a prospective licensee is open to
exploring how to create a better fit
with a licensor’s needs, values, and
expectations, a true licensing part-
nership might evolve to maximize
the opportunity for both parties.
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“Ifthelicensingstrategygoes
beyondroyaltygeneration,a
licensorwillneedtoconsider
otherfactors[invetting
potentiallicensees]tohelp
ensureallpartieshavegreater
opportunityforsuccess.”

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• Innovation and Creativity -- Innovation
and creativity may be the most criti-
cal factor when considering a pro-
spective licensee’s proposal. Most
licensors need progressive licens-
ees—those who desire to go beyond
placing a logo on an existing prod-
uct in prospective license’s current
line. While there is a need in some
categories for product with a “logo
slap,” a prospective licensee who
demonstrates commitment to de-
veloping new products or merchan-
dising approaches that align with a
licensor’s strategy, mission, or vision
demonstrates a level of innovation
and creativity that can create a great
licensing partnership.
• Commitment to Brand -- Commitment
to a licensor’s brand should be dem-
onstrated through a prospective li-
censee’s product development plan,
marketing plan, and merchandising
approach. A financial commitment
should be readily evident, but a li-
censor should also look for messag-
ing alignment, documented product
growth strategies, and of course, a
passion for the brand.
The Boy Scouts of America Licensing
team uses this approach regularly to iden-
tify and develop new opportunities. When
revamping the licensing program in 2005,
one of the key strategies became to recon-
nect with alumni by raising brand visibility
in unexpected places.
Evaluating cultural change and potential
market opportunities, it seemed licensed t-
shirts might provide a good opportunity for
the brand. Moreover, research had identi-
fied a cultural shift from message-centered
t-shirts to design-centered t-shirts, and
given the growth in nostalgia at the time,
the organization believed a new t-shirt line
might help it achieve one of its goals: in-
creasing visibility in unexpected places.
When a prospective license’s proposal for
branded t-shirts was received a few months
later, this strategy was already top-of-mind.
The prospective licensee’s proposal did
not include the potential for significant
revenue growth and offered initial design
concepts somewhat misaligned with the
organization’s brand. Yet, the company
was stable, had a solid marketing program,
strong sourcing capabilities, and broad dis-
tribution opportunities.
Unexpected places
In fact, many of the distribution oppor-
tunities were in those desired unexpected
places—specialty retailers like Hot Topic,
Fred Segal, Kitson, and others—and war-
ranted a much closer look at the proposal
and opened a detailed exploration of the
organization’s thoughts on the true oppor-
tunity.
After several months of working together,
the prospective licensee’s commitment to
the brand and their creativity and innovation
in design resulted in several solid concepts,
which later became successful licensed
products in those unexpected markets. The
success of these licensed products proved
the value of the Boy Scouts of America’s
brand in the consumer marketplace and
was instrumental in helping the organiza-
tion re-launch its licensing program.
Those six factors will not ensure a long-
term success for a licensee. However, con-
sidering those factors will help a licensor
identify prospective licensees who are a
better fit with the overall licensing strategy
and may be in greater alignment with a li-
censor’s mission and vision.
Better partners
Stable, innovative, and committed li-
censees who have a passion for a licen-
sor’s brand are likely to be better licensing
partners and generate substantial revenue
growth over time.
While some licensors may choose to fo-
cus primarily on new licensees who might
generate higher royalty revenue for a short
period, others would prefer the steady,
long-term growth in royalty revenue that
comes with a vetting process designed to
create stronger alignment with a licensor’s
mission and vision.
UPCOMING TRADE EVENTS
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NationalHardwareShow
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5/22
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6/17-19
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www.licensingexpo.com
LicensingClinic CONTINUED FROM PAGE 6