Don’t Blame Brand Licensing

Contributed by Pete Canalichio on January 14, 2015 in Strategy, Marketing, & Sales

Jack Trout in his blog published on

BrandingStrategyInsider.com “ Licensing :

Trouble for Brands” dated February 25, 2008

makes a compelling argument for why not to

consider licensing as a method of brand

extension . Furthermore, he backs it up with

multiple examples of established brands with

flawed licensing programs that serve to prove

his hypothesis. After reading about Pratt & Whitney and Pierre Cardin, what CEO in their

right mind would choose to risk the company’s crown jewels to a group of third party

manufacturers, which don’t have a clue about how to build a brand , let alone manage

one? With so much at stake, only those CEOs that are either reckless or desperate would

consider licensing. Right?

Maybe the problem isn’t licensing, but its poor or improper execution? After all, why would

a company choose to forgo its consumer driven innovation process or marketing principles

only when it comes to extending their brands through licensing? Some of the best and

biggest brands around the globe have been actively and successfully licensing. Disney, P&G,

Coke, and Harley Davidson each have outstanding licensing programs. These programs not

only enjoy strong royalty income, they enhance their brands’ attributes in the process.

The problem definitely isn’t licensing. Rather, it’s either the lack of sound brand guardrails

in the brand licensing process or a failure to heed to those guardrails. Jack Trout builds

multiple assumptions into his argument that are flawed. I agree that the promise of royalty

revenue can be intoxicating, especially to a public company struggling to meet its forecasted

quarterly operating income. However, this is an indictment of management and not

licensing. Licensing is simply a tactical execution of a brand extension strategy (even if the

strategy is no strategy).

In considering brand licensing, the first question that needs to be addressed is where the

brand should play. In other words, what categories should the brand be in? If a company

begins with a sound understanding of their brand’s architecture and positioning, they can

then develop a robust brand extension strategy. Knowing where the brand has permission

to play enables a company to identify extensions that offer the best overall business

opportunity. Once the company knows where the brand can play, they must determine

“how to win.” Should the company extend the brand organically? Or, should they source the

category? If the company chooses not to extend the brand with internal resources, they do

so through acquisition or licensing. Like any brand extension, each licensed category must

support the brand’s architecture and positioning. At Newell Rubbermaid, we would draft a

category positioning statement aligned with the brand positioning statement for each

licensed category. This ensured each category licensed reinforced the brand’s positioning.

If a company chooses to extend their brand without a fundamental understanding of the

brand’s architecture and positioning, the licensed products will at best have a neutral

impact on the brand. More likely, they will permanently erode the brand’s equity . This

consequence would occur irrespective of how the company chooses to extend their

brand. Licensing gets a bad rap for damaging brands when either internal licensing teams

or their agencies decide to extend a brand into “adjacent” categories in the pursuit of a quick

royalty infusion. Whether or not a company chooses to use other peoples’ resources and

money when executing their brand extension strategy, they must always ensure every

product brought to market continues to support the brand’s commitment and promise.

About Pete Canalichio

Pete Canalichio is an expert with over 20 years of global experience in the areas of Brand Strategy and

Brand Licensing, working with brands such as The Coca-Cola Company and Newell Rubbermaid.

Recognized as a leading expert, he is frequently asked to speak at branding and licensing conferences

and leading business schools globally. He is a series of brand licensing and strategy frameworks and

webinars available on Flevy here .

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