The Slow Death of Commission-Only Deals
November 26, 2012
Truly successful brand extensions are the result of pairing leading consumer brands with products that enhance the brand’s reputation and credibility. In today’s challenging marketplace, however, our clients’ goals extend far beyond increased brand impressions to broader financial goals. They are increasingly focused on securing significant and recurring licensing revenues from top tier national and strong regional partners, and developing multi-year opportunities.
This requires different thinking about how to find and structure licensing deals. Some of our ideas on this topic were covered by Chris Adams in the April issue of Royaltie$ Magazine, April 2012.
According to Adams, “Licensing deals are being drawn up differently, brands are branching into new channels of distribution (and worldwide regions), and licensing agencies today have to offer more than just licensing-related services in order to compete. Stiff retail competition and uncertain economy have made innovation crucial for a brand’s success every step of the way…The reason that brand owners and licensing agencies have had to adjust their strategies is because the old way of doing business just isn’t suited to today’s competitive marketplace. With limited available shelf space, retailers are looking for something innovative to fill the gaps in their offerings.”
We note in the article that “…there are still plenty of RFP’s floating out there for the standard license deal…More and more, we are not participating in them. They are based on the historical business model of low- to no-fee deals where you throw the spaghetti against the wall and see what sticks.”
In response to this changing marketplace, we have a strong point of view about what adds value to the kind of large, iconic brands we serve. We believe that innovation through strategic partnerships speeds innovations to market, lowers risks, and increases revenue (see our process below).
Our process is built to not waste our clients’ time or money. You pay only for an intensive, highly effective effort, which you can control. our approach to the business, which is characterized by these key elements that will drive success for the program:
1. A short, highly targeted strategy process that finds the top opportunities for pursuit. We limit ourselves to a small number of top tier clients (like SC Johnson and AT&T) and pursue only “fewer, bigger, better” partnerships on their behalf.
2, A “marketplace check” during the strategy process with potential partners to verify opportunities. Of the many, many new and good ideas that your team and our team can come up with, which ones will actually sell in the marketplace? We pre-test our strategies to help lower your risks as you innovate.
3. A go/no go feature at the end of the strategy process to ensure that all parties are convinced that we have identified meaningful, impactful opportunities for the Hasbro program, before committing to a solicitation effort.
4. A short, highly targeted solicitation process that focuses on partners, not deals. We mine our relationships and our “IMC Connect™” database of thousands of contacts to find only top tier partners offering sizable opportunities for the Hasbro program. These opportunities might be licensing driven but we’ll be having a much broader discussion with potential partners to try to construct the most valuable opportunity possible. For instance, deals with minimum guarantees in the mid-six figure range is what we target for our larger clients.