There is More To Licensing Than Slapping On A Logo
September 15, 2010 Kate Rogers
National Public Radio (NPR) faced a unique challenge when it launched its licensing program nearly two years ago. Although the Washington, D.C.-headquartered organization had decades of intriguing content and a loyal following, its brand didn’t render clearly into marketable merchandise.
"People really identify with our brand,"said Barbara Sopato, director of e-commerce and consumer products.
"But, a news organization doesn’t identify directly with a product line. The Humane Society can license anything that has to do with animals, but our brand didn’t translate directly into products."The charity hired Leslie Sanders, licensing product manager, and began to use its content as a brand enhancement tool. NPR now licenses CD collections, radios and even apparel for young teens.
In the midst of selling commercial goods, Sopato said it was imperative for NPR to take hold of its own brand and be conscious and cautious of the things it was putting its name on.
"In the nonprofit world we have to be much more protective of our brand,"she said. "Our whole business isn’t about selling that mug, or T-shirt or radio. It’s about content. It’s not about making money for us. It’s about continuing our mission-driven business."Charity logos can be spotted everywhere, from the aisles of the supermarket to high-end retailers. Organizations are taking brand awareness further and marketing their mission to the masses through licensing agreements. Care needs to be taken, though, because there have also been some spectacular blow-ups when it comes to nonprofits getting involved in licensing deals.
Girl Scouts of America (GSA) has been collecting royalties on its cookie licensing deals since as early as 1929, according to Barry Horowitz, vice president and general manager of Girl Scout Merchandise for the New York City-based national group. GSA expanded nearly four years ago with a national licensing program that includes dolls, scrapbooks, ice cream flavors and clothing. GSA has since hired a licensing agent to represent the GSA brand in the marketplace and bring potential deals to the organization for vetting, Horowitz said.The organization will collect $7 million in royalties for Fiscal Year 2010, and has invested only in the salaries of two full-time managers and half the time of a director, Horowitz said. "We have to find the right partners,"he said. "We don’t want to slap our brand on anything just to make a few quick bucks when it might undermine our brand image. The temptation and lure of the dollar must be resisted."After aligning the charity’s brand with like-minded partners comes communicating the GSA mission across the country to girls who are unfamiliar with the organization.
"We try to reach more than just our audience,"said Sharon Lee, senior brand manager for the organization, because, "90 percent of girls out there, we don’t reach. It’s about aligning our values and missions to reach the right audience."Nonprofits are relying more on consultants to handle licensing, according to John Merrick, president of Lemur Licensing, Inc., in Marietta, Ga. Merrick’s company recently finished a licensing strategy for United Way Worldwide (UWW) and is working to find consumer brand partners for the Alexandria, Va.-headquartered charity. UWW will be selling apparel, accessories, household items and books once licensing deals are made.
"There is a higher level of expertise focused on licensing,"he said. "Outsourcing allows (nonprofits) to focus on what they do best. They aren’t applying as many resources toward licensing."For nonprofits considering outsourcing licensing to a consultant, there is typically an upfront consulting fee for strategy development, as well as a monthly retainer and a percentage of royalties. Fees vary at Lemur depending on the project’s size, he said, and royalty percentages often range anywhere from 5 to 15 percent.
Retailers are also playing a larger role in the nonprofit licensing arena, Merrick said, and determining how they want licensing to be used in their stores.
NPR’s Sanders said the economic downturn and retail mergers in its aftermath have drastically changed both nonprofit and for-profit licensing, because remaining retailers have more power.When there were more stores to choose from, charities and businesses alike could leverage one store against the other to find the best deal for their buck, however with fewer stores the power has shifted.
"When there is basically Macy’s and that’s it, they call the shots,"she said. "Licensing in general has had a big shakeup. But, the Internet has helped sell more niche properties, especially in nonprofit, which often has niche-licensing products. You have to find new categories (for your products), because Macy’s isn’t necessarily going to carry us over Ralph Lauren."Charities need to look at licensing through for-profit eyes, Merrick said, because that is how partners and licensees will see the deal. There are also upfront investments to be made, he said, typically in the range of $50,000 to $100,000 per year. Charities often break even and even see some profit after about two or three years.
Sopato said that although hiring a consultant to work with her organization was appealing, the cost was a deterrent. "We found our brand was strong enough, and a consultant would cost us a lot,"she said. "We would learn what we already knew. Plus, the agency cut on it is forever. They will be making money as long as the product exists."Having a clearly-developed product to pitch to licensors and manufacturers is in your organization’s best interest, Sopato said, because it will increase the charity’s cut of royalties. NPR is still in its infancy with licensing and is evaluating its results, she said, and plans to continue its endeavors for the time being.
"We had a much lower return on investment with licensing, but I attribute that to timing,"she said. "We are in the very early stages of seeing this and it’s a timing issue, especially in the retail arena and with the economy the way it’s been the past two years."
Licensing efforts have proved to be less fruitful for some nonprofit organizations. Save the Children, based in Westport, Conn., ended its licensing efforts in late 2009, according to spokeswoman Eileen Burke, after the program failed to become an efficient moneymaker. The organization declined an interview for this article, but did send a statement by email.
"It takes a lot of resources — ranging from project management to legal review — to run an effective licensing program, and Save the Children doesn’t have these resources available right now,"Burke wrote. "When you combine the lack of resources, a tough economic climate and a soft retail environment, we determined that licensing is not the best return on investment at this time."Before reaching out to consultants, or developing licensing from within, Merrick said it is critical for organizations to get real about their brand.
"Do a true evaluation of whether or not your brand has a potential to be licensed and be honest about it. Think ‘How much awareness of brand do we have?’ and ‘Is there something about it that has an emotional connection with consumers to translate into merchandise?’"he said.
Next is deciding whether your organization will go it alone, or call in outside help. Figuring out your marketing strategy, consumers and channels of distribution, as well as determining when the products themselves will actually be manufactured are the following steps. Merrick said above all, patience is key in successfully launching a licensing initiative.
"There is a lot of competition out there, so you need to have a strategy and be flexible,"he said. "You could design something now, and it might not hit the shelves for another two years. There are generally significant lead times when people buy products in a particular season."Aside from having a clear brand message and execution plan for your product marketing, Sopato said language and communication methods for retail must be separated from donor engagement and fundraising tools.
"You don’t talk to a buyer in a store the same way you are talking to someone you are trying to get a donation from, or someone you are getting a grant from,"she said. "You have to really be able to express the values of your brand to the audience you are trying to get involved. There is a whole existence out there who don’t know who we are."Licensing deals can also cost big bucks. The largest blow-up was when the American Medical Association (AMA) had to pay Sunbeam $9.9 million after backing out of a deal. The AMA had agreed to license its name to appear on several Sunbeam products, including ice packs and heating pads, which would be sold with AMA educational literature in its packaging. Sunbeam sued for $20 million after the AMA pulled out of the licensing agreement in response to public criticism. It settled out of court for $9.9 million in 1989.There is more to licensing for charities than a little extra revenue in the bank, according to Phoebe Campbell, founder and president of Campbell Associates, LLC, in Tarrytown, N.Y. Licensing products can both communicate your mission and prompt supporters to take action as a result.
Campbell Associates has worked with both the American Red Cross and the ASPCA on licensing deals, she said. The organizations had brands that linked realistically to product lines. The American Red Cross used emergency crank radios and the ASPCA put out a line of pet care products. Both licensing deals went beyond just the "feel good"for consumers.
"The brands had equity on products that went above and beyond that,"she said. "You know (when buying) that you are purchasing a product that will do what’s best for you and your family, or your pet."In a competitive marketplace, only nonprofits with clear marketing strategies will make the cut for product development.
"Not every nonprofit is necessarily viable for licensing,"Campbell said. "You have to marry mission to marketplace. You are basically asking a retailer to take something else off the shelf and put your product in its place. Why is yours going to sell? You have to be able to viably answer that question."Despite the difficult economic climate, Campbell said now is as good a time as ever for charities to get into the licensing game. Shoppers might be watching their money closely, but they want to purchase products that do more than just serve practical purposes.
"Consumers are not just looking for good value, but also for values,"she said. "If they are going to spend their money, they want something that has more meaning."NPT