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# Strategic Brand Licensing for the CEO
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I am an entrepreneur on a mission to inspire people to do new things. In 2000, I started our strategy consulting firm to help top executives grow their business. I, like many senior executives I have talked to, really never paid much attention to brand licensing as a serious growth strategy. However, over a decade ago we added brand licensing to our services, because it goes well with our growth strategy and innovation services for the reasons I will outline here. I prompt you, as CEO, to take another look at how brand licensing may fit your growth goals.
As strategists focused on business growth for our clients, we were always looking at how companies could use their capabilities to do new things, looking at new business models, acquisitions, partnerships, really anything that had significant growth. We were doing a lot of work in strategic partnerships and many times the essential deal payout was where one company would take the majority of work (and risk) developing and executing the product and the other a share of revenue; in other words a licensing deal! Also, when we stepped back and took a critical look at category growth for companies who needed brands, or others who had a brand but shouldn’t take the risk or build/buy the capability to get into a strategic growth area, we realized the value of brand licensing. It is at its essence a type of transaction for strategic partnerships to fulfill certain strategies.
I am not here to say that brand licensing is for every company or brand – it is a strategic choice for the CEO. But it is undeniable that growth beyond the core business and brand ubiquity through partnerships is critical to gain or maintain a leadership position for the most valuable brands in your portfolio. There are many examples from our experience working with major brands of outcomes in how brand licensing creates value in unique ways to further the company growth strategy that might surprise you. We call it Strategic Brand Licensing and it is a partnership growth strategy model.
To reiterate, brand licensing in and of itself is not a strategy. It is a specific type of partnership transaction utilized to fulfill a growth strategy, that’s it. The best way to assess brand licensing opportunity is in context of your strategic options and growth needs. Furthermore, partnerships, including brand licensing, are not for every culture and require a high degree of skill in managing relationships – such as being open, inclusive and a good communicator – as well as having a willingness to see both sides and find win-wins. However, once harnessed, brand licensing opens up options for what “new” things the company can do because of instant and relatively low cost access to new capabilities.
As for how to get started, we do not recommend that companies “do” a deal just because they can. We conduct strategy work to determine the strategic options and, along with senior management, ensure licensing fits a well-designed growth strategy. Sometimes we collectively determine that licensing isn’t for your organization.
In summary, some CEOs have a misconception of Brand Licensing and summarily dismiss it. But you, as a CEO, now armed with this new perspective can explore the concept as a way to provide new growth capabilities and possibly find brand licensing to be a significant value driver in your growth strategy.
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# End Gaming The Future of Food & Beverage – Channel Blur
Disruption of markets is something that creeps up on company leaders. Look at the food and beverage industry – Amazon is gaining ground on grocery retailers, DoorDash is changing the have and have-nots of restaurant brands incremental sales, and Uber is replacing overnight delivery and Courier services. There is one thing in common with this market disruption – Channel Blur. Channel Blurring is here now and will shake out winners and losers across food & beverage channels including grocery chains, manufacturers, emerging food delivery companies, internet retailers and restaurant chains. While the significance of these changes being defined as truly “disruption” is uncertain, it is certain that the market will reward those who have evolved their business model. At stake are things such as who wins at the consumer decision point an hour before dinner time?
Channel blur means that it is not sufficient to consider your competition in one industry. We are a strategy consulting firm so thinking about the simple difference between rivalry among competitors and substitutes as competitors – like Michael Porter put into play in the five forces – is critical. As a CEO and top executive, it is critical to push the boundaries of companies and channels to ensure the future business model attracts your core customers, or that you pivot to where the needs and demand will be.
Fortunately for the proactive, that time is now. Even if you are in Private Equity and have your portfolio companies focused on EBITDA for the next few quarters, answers to these questions will effect valuation positively or negatively.
We focus on answering questions via end-gaming strategy to define growth strategy and business model changes for top executives.
The question to answer is what is the future of food? and how will it impact our growth roadmap?
Having a clear growth roadmap across your businesses, for guidance that is aligned to future scenarios in food & beverage, is where we can help. We will deliver recommendations on prioritization, emphasis in effort and “by-when” dates for existing growth roadmap items as well as changes to the growth roadmap.
We look into areas such as:
Consumer desire for delivery (distribution) driven by trends of convenience and desire for better/fresh food
Impact of channel blur and how to partner, build/buy/test in this new permanent dynamic
Shopping experience models – brick & mortar and online
Impact on digital strategy end-to-end (order taking, distribution and marketing)
Product Innovation impact – because each channel or situation requires assessing the need and having the right product, package/delivery system, form, etc.
Since 2000, the Valen Group is a strategy consulting firm has helped top executives with major food & beverage brands grow their business. We have former top executives leading our consulting teams who have significant experience in major chains and consumer brands, so that we provide actionable, experience-based and fact-based strategic recommendations.
We work with you and your leadership team on marketing strategy, customer strategy, and experience strategy to make your marketing, product innovation, and customer experience work better.
# Grey Area Consumers: Are You Listening to the Right Consumers?
When thinking about growth and innovation strategy for your brand, ask yourself, “Are we listening to the right consumers?”
We analyzed research conducted by other companies and found that most focus on recruiting consumer based upon behaviors; e.g. purchase transactions. Whether they focused on recruiting loyalists, switchers or heavy users, each time the decision to whom to listen was based solely upon what a consumer had bought. The problem isn’t which segment to target, but rather the fact that recruiting is based upon consumer transaction behavior. Looking at loyalty solely based upon behaviors, such as frequency of use or transaction history, doesn’t tell you very much. You must consider the attitudinal beliefs about brands and products to determine loyalty and identify high value targets. These are consumers who are not dedicated to the brand. Their purchase habits relative to loyalty or switching is not indicative of whether or not they will switch in the future. They may continue to use the brand out of convenience, complacency or because they are uninformed/unaware of better alternatives. These consumers are behaviorally loyal, but attitudinally switchers. We classify these targets as Grey Area Consumers.
If you are entering a new market, who better to understand than these consumers? The consumers we target are heavy users of products, want to be loyal, but are not satisfied with the offerings of the brand. The reason this type of consumer recruiting is important is that we do not know from their behaviors alone if they are buying the product out of convenience, complacency or true loyalty.
Similarly, for categories where your brand is already a significant competitor, who better to listen to than those behaviorally loyal consumers of yours who are heavy users, but we identify as having issues that you can solve to keep them loyal? The U.S. cable TV customer or a cell phone customer in just about any country is a good example of this. They can seem loyal because they are purchasing and have purchased for a period of time, but attitudinally would switch in a heartbeat. There are many products and brands that consumers stick with because they either don’t realize there could be something better or haven’t been given a reason to switch.
By differentiating consumers by their attitudes about loyalty and needs, you open up a whole new way to identify lucrative innovation opportunities whether your growth objective is to keep consumers, expand in your existing market or innovate in another. With the Grey Area Consumer recruiting model, you can identify brand improvements or new sub-segments to ensure that you are serving the highest value consumers.
Before you engage your next insight research or innovation project, ensure you get to a higher level conversation as to which consumers you should be recruiting.
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# Brand Extension Must be Execution “Agnostic” at the Start
Brand ExtensionWhat makes an ecosystem work is the common purpose the elements in the system hold. Similarly, a robust brand extension strategy is like an ecosystem.
Extending a brand requires thinking through a holistic growth strategy prior to beginning a growth program execution.
A brand extension growth strategy must have a “what” (e.g. what are the opportunities, what are we going to do) and the “how” (e.g. how we will execute the strategy).
Extending a brand requires thinking through a holistic growth strategy prior to beginning any growth program execution
The plants, animals and other elements in the ecosystem are like the growth programs that must support the brand purpose. One of the biggest mistakes that a leader makes is to jump into a particular growth program execution without first defining the strategy, e.g. how the “ecosystem” will work. Understanding how growth programs such as licensing, partnerships, new ventures or acquisitions fit within the brand extension strategy is critical. These programs are not the brand extension strategy; they are the way to enable a strategy, e.g. an execution of the brand extension strategy.
There are three primary execution methods to extend a brand: “Make,” “Rent,” Buy.” Common examples are to: start a new division or product line (“Make”), license the brand, license in or partner with companies to execute (“Rent”) or acquire a company or product line (“Buy”). Leaders who begin brand extension without regard to how a program might fit with current or future growth programs may put the brand at risk because some programs might be at odds with others. Programs have to spawn from one well thought out brand extension strategy. It is easier to start by making a brand extension strategy process “execution agnostic”, meaning not to bias the development by focusing too heavily on a particular tool or technique to extend the brand early in the process.
Here is how to conceive a brand extension strategy and execute a program built to last:
1. Ensure the brand has a good core
Define the core brand purpose or promise. This is what it stands for; the reason it will be chosen and by whom over competition. A good strategy leader will allocate resources toward that common purpose and avoid funding for every distraction that moves the brand away from the core purpose. We know we have defined the core purpose of a brand when one word or phrase undeniably describes how the brand wins. Continue to invest in the brand promise and prepare a defense against anyone who tries to take the position established by the brand. A successful brand strategy provides above average margins because it makes a brand unique and the brand commands a premium above the average offering in the marketplace.
Conduct consumer research to understand factors important to consumers and how the brand compares to competition. It takes discipline and commitment to ongoing consumer research. Keep up with key purchase and usage factors, compare brand performance to competition, ensure the brand is positioned in a unique, valuable and sustainable way to win in the marketplace and understand the opportunities and threats.
Start a brand extension program with a strong core. Knowing what the brand stands for today helps guide the choices about a brand extension strategy.
2. Envision the future
Think through to the end, pick a point in the future – 5, 10, 20 years – ahead and create stories about what will be important in the future. This is more than just reading trends; this requires making some predictions about future consumer habits and choices and what their needs will be tomorrow. Start with topics like how information will be consumed, what devices and methods of transportation we will have, types of jobs, etc. Make choices about what products and services the brand offering can and cannot include. Develop the brand extension strategy vis-à-vis the future opportunities determined to consider how well it supports the brand promise (e.g. the core purpose or equity) and how competition fits into those scenarios. There are research techniques that provide support for this decision process to aid in deciding brand fit, market reach, comparison to competition, etc.
3. Decide how to execute
Determine what capabilities or products and services to provide in the future and how to organize to execute. By considering a breadth of opportunities for growth from all Make-Rent-Buy methods, you will avoid growth programs or solutions chosen from a limited set of options or what merely has been seen to work in another company when exploring brand extension. The breadth of thinking will also help match the right execution method to the right opportunity.
Doing the thinking work upfront provides a strategic roadmap for brand extension. A well thought out brand extension strategy makes defining the plan for execution much clearer to ensure licensing, partnership, acquisition and new venture brand extension programs have a significant chance to survive and thrive together with purpose in the brand ecosystem to prepare for success over the next decade.