Licensing: The secret weapon in an Indian marketer’s arsenal
Jiggy George
Source: WARC Exclusive, May 2021
Licensing offers Indian brands many opportunities but Dream Theatre’s Jiggy George says it is ignored by leadership teams and their strategy.
- Indian marketers can use licensing as a way to test the market and launch in non-core categories.
- Through licensing, Indian consumers can tap into the brand promise and reputation of the mother brand.
- Successful licensed brands reflect years of investment and the core brand’s performance.
Why it matters
The global licensing industry is estimated at nearly US$300 billion with an annual growth rate of 12% but most Indian marketers have not explored this option because companies in India prefer to produce and market themselves versus partner via licensing.
Takeaways
- Licensing is an excellent tool for Indian brand owners to protect their IP and reinforce branding while reaching new consumers.
- At the same time, licensees save as no resources are needed for brand building with a market-ready brand.
- The sophisticated online medium in India offers the best solution for licensing with better control of piracy.
Are you an Indian marketer with a strong brand that has brand extension possibilities in categories outside of your core business? Licensing could be your answer to bridge this challenge.
Why create a new team and distribution when you could license the brand to someone who has these capabilities and intent?
For years, I thought it would be great to see the Indian mega-brand Amul license its distinct flavor of butter to a cookie manufacturer and launch Amul cookies. Then, Amul decided to do it in-house, perhaps due to it being an extension of the brand’s food business and because of its distribution network.
It’s not to fault Amul’s management decision but it could have considered partnering in this category with an established player like ITC foods or Parle and keeping their focus on dairy products.
Why license?
Licensing is one of the potent tools in the arsenal of a marketer that checks many boxes, beyond the obvious one of revenue generation. I also believe it’s a closely guarded secret that has not unlocked its potential in India as it’s not in the MBA curriculum or on the menu cards of marketers.
I call it a closely guarded secret as there is more than meets the eye. Consumer durables like a hairdryer, toaster, headphones or perfumes are usually licensed products. Consumers unaware of this are tapping into the brand promise and reputation of the mother brand. It’s also the outcome of years of investments made by brand owners in their core business. So the brand owner invests in building its core business and licenses the possibilities outside the core.
This is also true for entertainment brands. Lines get blurred as properties may start with one medium and move to others. They could have started from comics (like DC and Marvel), movies (Lucas and Star Wars), books (Harry Potter), toys (He-man), games (Pokémon) or design (Hello Kitty). Regardless, the fact is that owners have made investments worth millions of dollars in the content to then make extensions for their brand and leverage consumer products via licensing.
The more successful licensed brands reflect years of investment and performance of their core brand. It’s akin to sport – we are less likely to be bothered by a million endorsements/extensions from a sportsmanlike Virat Kohli as long as he keeps winning on the field. This is also the reason why Air Jordans are timeless and so too Kanye West and his brand Yeezy with Adidas. The design aesthetic is great but it’s unlikely to have worked if their body of work was not inspiring. We are tapping into the trust and performance of the “mother ship”.
Understanding the concept better
Simplistically, licensing is like a simple lease agreement. The owner of a brand (licensor) leases the intellectual property to a third party (licensee) for a designated time and geography and for a fee. This fee is usually like royalty on sales and a minimum guarantee model.
The global licensing industry was estimated at US$292.8 billion in 2019 at retail and is growing at 12% annually. There are many kinds of licensing. From corporate licensing (likes of Coca-Cola, Harley Davidson, Ford) to collegiate licensing (Harvard, Yale, etc).
Entertainment and character are 44% of the market at US$128,392 million. US/Canada accounts for 58% of the market, followed by Western Europe at 19% and North Asia at 10%.
India ranks 18th in the world with US$1,864 million at retail with a 0.6% share. Character entertainment, corporate, and fashion are its top three categories.
(Source: Licensing International)
Besides the obvious benefits of revenue, licensing allows marketers to test market their brand in geographies before they actually spend resources for a full-fledged launch. It allows marketers to protect their IP and reinforce their brand positioning. It also allows a brand owner to extend its offering to new target consumers, for example, many cannot afford an Amani suit or Fendi bag but they can buy the perfume.
Similarly, one may not be able to purchase an MF Hussain or Raza artwork but a mug embellished with the splendour of their designs would be our cup of tea.
Licensing also reinforces brand equity and authenticity. Bourbon brand Jack Daniels extending into chocolates or barbecue sauces is an example.
Beyond all of this, licensing is the transference of emotions of trust, pride, and humour of the mother brand to the licensed offering. This explains why sporting teams license their brand into merchandise and why fans sport them with pride.
For a licensee, it saves them the resources of brand building by leaning on a market-ready brand.
Why has India not fully realised the value of licensing?
I believe most marketers have not explored licensing as a possibility in their marketing plan. With corporate brands, there are many opportunities and it’s largely a function of the leadership teams and their strategy. Indian companies prefer to produce and market themselves versus partner via licensing. It’s rarely in their consideration set.
So an iconic brand like Royal Enfield in India produces all their non-biking gear, apparel and helmets with an in- house team while Harley Davidson uses licensing to globally extend its brand.
Unless it’s a tactical promotional tool – why not stick to your core business and license non-core to strong licensees who will create great products and distribute to the target audience? Then use marketing effectively to build on marketing events and legitimise the merchandise?
My belief is that very few brands have the luxury of self-activating in all their relevant categories.
I would further clarify by saying that one should build brand extensions via self-activation if it’s in the same business of food, personal products or fashion.
Again, this is a decision based on how big the categories are and how much resourcing should be thrown into this extension. Some fashion brands have acknowledged licensing in categories like fashion accessories, recognising the value of focusing their in-house teams, COGs, marketing and operations on their core apparel. Brands like Levis and Pepe license innerwear and accessories to licensees who produce and distribute under license.
Dream Theatre’s consulting project for Bennett & Coleman looked at extending their publishing assets into other categories. With valuable inputs from their editorial teams and business head, we built the architecture for the brands, licensed Femina to Shoppers Stop that now carries apparel and fashion accessories in over 60 stores. The team has now ventured into salons.
On FMCG, we have seen some food licensing of Cadbury’s Oreo with ice cream.
Opportunities for effective licensing in corporate and fashion
If one looks at the opportunity for India’s entertainment-licensed brands, the good news is that India ticks two of the three boxes for a successful licensing business. First, Indian consumers know about entertainment, corporate, fashion and even collegiate brands.
We have a vibrant entertainment economy and it’s fairly inexpensive to consume entertainment brands. It’s fairly affordable for consumers to access a gamut of channels, with smartphones now providing even more access to brands.
Another factor influencing our knowledge of brands is travel, with more Indians travelling for leisure than ever before pre-COVID-19.
Second, our consuming class in India is significant.
However, the third component of this three-legged stool is still half-baked – retail.
There is a direct correlation between the growth of organised retail and the growth of licensing as a business. Most retail in India is disorganised, with scattered mom-and-pop stores that make licensing challenging and limit it.
- Firstly, most of this scattered trade has restrictions of size and don’t present the best environment for licensed products, ie display and range.
- It’s challenging due to a lack of addressability and lots of royalties are underreported; the business is much larger than is reported by licensees.
- The third challenge is piracy, which is linked to the lack of addressability.
In India, it’s also unlikely that you will find pirated products in any organised retail outlets but only because the footprint is still very limited.
Online in India is very sophisticated and better than many countries in the world. It offers a “last mile” reach to fans and is the best solution for licensing.
However, online majors are more incentivised to increasing resellers versus protecting IPs. Most brands face huge piracy online and the takedown of pirated products by the platforms leaves much to be desired. In fact, it’s more challenging to prove that you are a legitimate brand on a platform like Amazon and Flipkart than listing a pirated product as a reseller/distributor.
The genesis of online retail and the growth of this business in India has been fuelled by private equity money. The goal was to build a habit with Indian consumers through discounting versus convenience. Being value seekers, Indians have been enjoying these discounts and services and this has placed a big burden on the producers of merchandise (prospective licensees). The pricing makes it challenging to load royalties. If price is most important and if piracy is rampant even on the online platforms, then pirates win.
The market has also not grown due to a lack of investment of brand owners. Most of the licensors believe that just because their brands resonate in major markets like the US and Europe, they should work in India without effort. This is true for some brands with global investments in India but for the rest, it’s a lazy strategy.
Most of these owners make no effort to protect their IP or marketing. For them, it’s the classic chicken-or-egg dilemma: if the market is still not giving huge returns, why focus resources?
There is little effort to bring down piracy (especially online which seems more in their control) or legitimise strong licensees via any support.
Conclusion
In all of this, there is always hope. The brand owners who invest early and deep will capitalize, akin to the Japanese and Korean companies that have stayed invested in many Indian businesses. It’s too big a market to ignore and organised retail will continue to grow and so will addressability. The prominent licensors will invest and push platforms to legitimise their offering. More important, they will be forced to have a flexible and differentiated strategy in this market.
More corporate marketers will see licensing as a better tool to test the market and launch in non-core categories. Focus will be a key consideration where brands stick to categories in which they have the expertise and optimal resources. Less will be more, where they capitalise on their brand value by using licensing as an effective tool to reach their target audience.
It’s only a matter of time.
About the author
Jiggy George
Founder & CEO, Dream Theatre
Jiggy – who is also the head of the India chapter of Licensing International, the global trade organisation for the licensing business – previously held senior management positions in Turner Broadcasting and Viacom, where he set up the licensing business for both companies.
He started his career as a fashion designer and entertainment journalist. He has a master’s degree in management studies and significant experience in sales (Times of India), marketing (MTV and Pogo), licensing (MTV, Cartoon Network and Warner Bros), and project management (Turner and Sesame Street).