Step 4 of Successful Brand Extensions:
Perform Due Diligence
Here we will rigorously qualify the prospective licensees to determine whether they will progress to the next phase. I’ll show you how to create an application form that encompasses every component that you would need to know about your prospective licensees. Evaluation areas you’ll see in-depth include financial, risk assessment, organizational competency and more.
See A Mock Decision Using Four Prospective Licensees
This fantastic section shows you all facets of prospecting licensees in a decision-chain scenario with me portraying the brand owner. I evaluated them based on the criteria listed below:
- Market Share Rankings
- What channels are they in?
- Financial strength?
- What other licenses are held in the category?
- What is the product innovation capability?
Based on the information provided I eliminated Prospect A first. Why? And how did I get to the two finalists and then the final selections? What criteria did I use? Find out here and see how you can use the same decision tree for your licensee search.
Step 5 of a Brand Expansion Strategy:
Define The Licensing Opportunity
Once the Due Diligence stage is completed, and a qualified licensee has been selected the brand owner must define the Licensing Opportunity.
First, scope or size the Licensing Opportunity. You want to know how much revenue the opportunity will generate and how it will be derived, i.e. the metrics including regions, retailers and SKUs, so that when you define the Anchor Deal Terms you will be able to formalize the agreement. The desired outcome focuses on the Product Concepts, Initial Sales Forecast, the Licensees’ Strengths and Capabilities, and the Deal Parameters.
How Will The Prospective Licensee Plan To Use Your Brand?
You have taken intense measures and used a large number of resources to ensure that your brand is perceived the way you want. So, having a clear understanding of how the prospective licensee plans to use your brand is critical.
Put Numbers To The Licensing Opportunity With My Conservative Business Estimator Forecast Tool
After the “Due Diligence” phase has been completed, you are going to ask the prospective licensees to complete my Conservative Business Estimator form that consists of the prospects providing a three-year detailed forecast by region, channel, retailer, SKUs, and annual product innovation. This vitality is critical to the long-term success of their program and your brand in that particular category. The sales projections and viability are then compared across all the licensee candidates to see which is going to get chosen to become the licensee in that category.
Getting The Licensee To Come Up With A Business Proposal
Once the Licensing Application and The Conservative Business Estimator are complete, you want the licensees to take all the information that they have compiled up to this point and propose a business plan that assumes that they have received the license. You want them to present the concepts in the channels and in the regions that they requested be stipulated in the license. You want them to tell you why they should earn your business and convince you that this is something that is important to you. Treat this concept review like you are the general manager for this particular category with this particular licensee.
Rubbermaid Case Study
There is nothing like a case study to make concepts come alive. In Breakthrough Licensing, I’ll show you a step-by-step “dramatization” of how to choose the right licensee with an example from my days at Rubbermaid.
In the case study, I’ll explain the elements the licensees must get right about Rubbermaid’s Brand Architecture, including the brand’s core value, product attributes, functional benefits, emotional benefits, and the brand essence or promise.
Then I’ll explain each licensee’s prototypes, the strengths, and weaknesses of each licensee and how you should approach awarding the business using the concepts I’ve listed below, like the Conservative Business Estimator.
I’ll give you the opportunity to make your own decision and then you compare it to mine.