67C H A P T E R 5Conveying the Basics of Your Busines.docx
Licensing Journal - Working With Licensing Agents and Consultants
1. Licensing
NOVEMBER/DECEMBER 2010
DEVOTED TO
LEADERS IN THE
INTELLECTUAL
PROPERTY AND
ENTERTAINMENT
COMMUNITY
V O L U M E 3 0 N U M B E R 1 0
Edited by the Law Firm of Grimes & Battersby
THE
Journal
Law & Business
2. NOVEMBER/DECEMBER 2010 T h e L i c e n s i n g J o u r n a l 1
Working with Licensing Agents
and Consultants
Mark Hess
Mark Hess is the Vice President of Client
Relationship Management at IMC Licensing,
the nation’s leading full-service licensing agency
specializing in consumer product brands.
Mr. Hess has over 20 years of agency experience
for a diverse portfolio of brands across various
categories and channels of distribution with
clients including Thomasville Furniture’s The
Hemingway Collection, Hanes and Hanes Her
Way, Skoal, and Long John Silver’s. Before joining
IMC Licensing, he was Vice President, Group
Director of Client Services for Creative Alliance.
Prior to Creative Alliance, he worked for other top
advertising agencies including Paul Schultz, Doe
Anderson, Long Haymes Carr Lintas, and D’Arcy
Masius Benton & Bowles.
Licensing agencies and consultants can play a
central role in the development of an effective licens-
ing program. Whether your company enjoys a long
lasting and mutually beneficial business relationship
with a licensing agency, or if your firm is interested
in entertaining the thought of engaging a licensing
professional, be prepared to hear two words over and
over again: It depends.
This phrase, in many ways, is the currency of the
licensing industry. But lest you think I am being flip-
pant, “it depends” also may be the two most impor-
tant words an agency or consultant can speak. That
is due to the need and desire of the agency or profes-
sional to evaluate potential clients and for that matter,
existing clients, to find the key reasons why they want
to incorporate licensing into their marketing reper-
toire. A client’s motivations for licensing their brand
will dictate the structure of their licensing philosophy.
As Bruce Bridges, Vice President of Licensing at IMC
Licensing preaches, “structure determines behavior”
and the structure of the client will in large measure
determine the behavior of the agency.
Deciding to Work with
a Consultant
There is no right or wrong answer on whether you
should work with a licensing agency or a licensing
consultant. For some marketers, outside resources
make their licensing efforts more expansive, efficient,
and effective. The right agency or professional for your
company can be more objective in their analysis of your
needs and generally has expertise across a wide num-
ber of product categories. In our business development
meetings with prospective clients, we often communi-
cate that by hiring a licensing agency, they gain access
to an entire team of professionals, something that may
not be practical for them to build internally. According
to management guru Peter Drucker, outsourcing is not
the way to cut costs, but “to improve the quality of the
people who work for you.” Hiring a licensing agency
may actually increase costs, but also greatly increases
speed, performance, and returns.
For some marketers however, an outside resource
may be unnecessary. If you have a very clear view
of your needs and the flexibility to add additional
headcount with specialized skills across a number
of areas then, perhaps, it makes sense to develop an
entire internal department. Or, if you’re concentrat-
ing on a limited scope of licensing opportunities and
currently have staff members with enough licens-
ing and related business experience that they could
negotiate a strategic deal or two, the full-service
agency option could be excessive. Again, “it depends”
on your situation.
However, I cannot emphasize enough that licens-
ing is a business, a “craft” if you will. It is not simply
a peripheral undertaking that is either added on to an
existing job position, or even a dedicated job position
in and of itself. Licensing calls for a team-oriented
approach and, as with any team, vastly different skill
sets are required to achieve success on the field. Our
president, Cara Bernosky, has spoken and written
about this extensively. Since she co-founded IMC
Licensing 13 years ago, her belief remains that there
is no “one size fits all” licensing professional. The core
competencies of the licensing sales person differ from
that of the licensing account manager which in turn
differs from that of the product development direc-
tor. In addition, the roles executed by the legal and
accounting personnel are unique and demanding in
their own ways.
3. 2 T h e L i c e n s i n g J o u r n a l NOVEMBER/DECEMBER 2010
Selling the intangible benefits of a client’s trade-
mark to a potential licensee is an art form. The team
at a licensing agency must be able to analyze and
synthesize not only the brand owner’s business, but
also become proficient in most (if not all) aspects of
their client’s business. For good measure, they should
understand the categories in which the client com-
petes and be aware of how competitors are positioned
and where they may strike next.
Yes, a licensing agency must have an almost
uncanny ability to grasp the abstract and then take
that vision and deliver a truly cohesive expression of
brand and product. But that is just the beginning. The
German-born architect Ludwig Mies van der Rohe
(1886–1969) is credited with the saying “God is in the
details,” expressing the idea that whatever one does
should be done thoroughly. I’m not certain, but with
that mindset, Mr. van der Rohe may have spent some
time in product development at a licensing agency.
The product development professional is attuned to
and motivated by the seamless execution required
to bring a licensed product to market. This not only
requires oversight of the individual standards of each
of a client’s brands, but also a deep knowledge and
understanding of the rules and regulations in particu-
lar categories, be they legislated by the FDA, the EPA,
the FTC, or another rule-setting council.
Accounting is another function within a licens-
ing agency for which a special nuanced approach
is required. While it is a given that this person pos-
sesses the same exacting level of detail orientation as
required by the profession, they also must be able to
interpret the intricacies and variances often contained
in licensing agreements. For example, definitions
of terms such as “net sales,” “tiered royalties,” and
“contract period” may change from agreement-to-
agreement and those changes often are accompanied
by different royalty payments and schedules.
Often times the glue that holds the licensing team
together is the account manager. First and foremost,
the account manager sets the tone for the business by
working with the client and the agency team to set the
strategic licensing direction for the brand. From that
point forward, the account manager is responsible for
the day-to-day execution of the business. For most
clients, the thought of giving up a measure of control
over their brand and the way it is brought to market
can be a very stressful thing. The account manager is
responsible for rallying the client (and agency alike)
around the Big Idea. By bringing the client to the Big
Idea, and letting them take ownership of it the power
of that idea is magnified. That is the hallmark of a
great account manager. It is not just acting as a go-
between for the client and the individual departments
in the agency. It is taking control of the entire process,
from start to finish, and bringing both the client and
agency together around the Big Idea.
Choosing a Consultant
With all that said, if you are working, or plan to
work, with a licensing agency, I believe there are
three key issues on which there is no room for an “it
depends” answer from either the client or the agency.
I define those areas as:
1. Time
2. Talent
3. Treasure
Time
Today, clients find themselves increasingly busy
and few (if any) companies are expanding their
headcount to take on the added responsibilities that
licensing brings. With scarce resources from which
to draw, clients are therefore more and more pressed
for time and possibly less likely to champion licensing
efforts, even when those efforts support their overall
marketing goals and provide a positive return on
investment.
Good agencies can be relentless with their demands
for their clients’ time, because licensing is that unique
instrument in the marketing toolbox that resists
adherence to timelines and timetables. Make no
mistake, “relentless” is exactly what you want from
your licensing agency as it demonstrates passion and
a dedication to your brands and a belief in building
brands the right way.
Unlike advertising campaigns and promotional
schedules, which are locked and loaded onto market-
ing calendars months in advance to fit consumer buy-
ing patterns around holidays or other seasonal trends,
licensing is all about making the most of opportunities
when they present themselves and often times they do
not present themselves for very long before they end
up in the lap of your competitor. In order to maximize
the “time” aspect of the relationship with your agency
ask yourself the following:
• What is the role that licensing will play in the
company’s marketing strategy? What are the goals
and objectives to be met? Is licensing merely an
exploratory exercise—a dipping of the toe into the
water—or will it be an aggressive initiative equally
as important as all other elements of the market-
ing mix?
• How much time will I expect my agency to com-
mit to my licensing program? Or, said another
4. NOVEMBER/DECEMBER 2010 T h e L i c e n s i n g J o u r n a l 3
way, what is the scope of work you will assign
to your agency? There is no substitute for hard
work and good agencies demonstrate this day
in and day out. If you are asking your agency
to be relentless in the pursuit of ideal licensing
partnerships and devoted to their flawless execu-
tion, then your actions and devotion must mirror
theirs.
• How will “success” be defined and measured?
Royalty revenues? Additional impressions against
the brand? Inroads to new channels of distri-
bution? Some of the above? All of the above?
The clear articulation of “success” can focus
agency resources to consider only those ele-
ments of relevance and overall importance to the
brand. Metrics that are superfluous, or worse yet,
contradictory only serve to sabotage licensing
programs and engender frustration and resent-
ment across all parties.
• What will the internal approval process look like?
How long will it take? Who needs to know what?
When do they need to know it? And how long will
it take from start to finish?
Cara Bernosky is renowned among her employ-
ees and clients alike for espousing the essential
truth that “time kills deals.” The longer it takes to
consummate a licensing partnership, the less likely
that partnership will come to fruition. Deal fatigue
wears on clients, agencies, and potential licensees
equally. What may have once started out in a heart-
pounding rush of excitement to get a new licensed
product on the shelf, a deal can end up dying on
the vine if either too little attention or too much of
the wrong attention is devoted to the process. The
end result is most likely lost opportunities when
retailers reset the shelves in the desired category
and you and your partner are not ready to compete.
If you do not have an approval process already in
place, work with an agency to develop one so that
it is tailored to meet your goals and the goals of
potential partners.
Talent
The issue of “talent” is one that cuts both ways for
the agency and the client. The level of knowledge,
sophistication, and, most importantly, commitment
must match on both sides of the relationship. It is
imperative that each party respects one another’s
views and trusts that each is working towards a mutu-
ally beneficial end. A certain degree and mixture of
maturity, experience, and flexibility are vital to main-
taining an enjoyable and profitable working relation-
ship. Consider the following:
With respect to the agency:
• Does your agency team have the marketing
expertise to understand your target consumer;
who those consumers are; where they live and
how they see your brand? Certainly to some
degree you will need to teach the agency the
fundamentals of your business, but is the agency
a quick study and able to demonstrate through
their questions and observations the insightful-
ness and perspective necessary to grasp the big-
ger picture?
• Does your agency team know how to turn infor-
mation into intelligence? Can they interpret your
research data and from it derive strategic applica-
tions for licensing?
• Can your agency team take charge of and incor-
porate the execution of licensing strategies and
programs seamlessly across your company’s
brand and product portfolios?
• Does your agency have the contacts to go deep
into any category: knowing how manufacturers
are positioning themselves, and where they may
need the help of a trademark to take their busi-
ness to the next level?
• Does your agency have relationships with depart-
ment buyers at retailers and the ability to extract
data on consumer trends and the anticipated
responses to those changes?
• Does your agency offer the direct and on-going
involvement of their senior management people
with your business? Are your day-to-day contacts
highly trained and highly motivated individuals
who are real contributors to your licensing efforts
and not simply messengers?
• Is your agency built for speed? Does its human
resources and structure permit it to move at the
lightening pace required to jump on and leverage
the opportunities that present themselves?
With respect to the client:
• Is your company’s commitment to licensing
built from the top down? Are all appropriate
C-Level parties within your organization fully
engaged, fully supportive, and fully accessible?
At IMC Licensing, all C-level clients (CEOs,
CMOs, CFOs, and Chief Legal Officers) welcome
and encourage all of our senior level manage-
ment personnel to reach out and discuss the
critical licensing issues of the day with them
whenever and wherever they may be. We have
their cell phone numbers and are not afraid to
use them and likewise, they have ours.
5. 4 T h e L i c e n s i n g J o u r n a l NOVEMBER/DECEMBER 2010
• Have you and your team invested the time and
training to understand and appreciate the intri-
cacies and nuances of brand licensing? Do you
fully realize differences in the challenges and
possibilities that will present themselves on an
on-going basis?
• With whom and at what levels do licensing
decisions rest? Will your agency have to navi-
gate a labyrinth of administrative assistants and
entry-level brand management personnel just to
find time on the appropriate calendars in order to
entertain discussions of critical importance?
• Are you built for speed (i.e., processes and infra-
structure) across all levels of your organization?
Including, but not limited to:
(a) Marketing
(b) Legal
(c) Finance
(d) Quality Control
Treasure
As the mantra goes, every situation is different, but
there generally are three accepted compensation mod-
els to choose from in the licensing industry:
1. Fee Only—A client prepared to pay a qualified
licensing agency a fee only should be prepared to
pay rates similar to those for good consultants, as
in, hundreds of dollars per hour (or thousands of
dollars per day) for all work that anyone employed
by the agency performs.
2. Commission Only—A client unwilling to pay any
guaranteed compensation, and willing to limit the
licensing agency’s work appropriately, should be
prepared to pay the agency a very high commis-
sion, typically in the realm of 50 percent, on the
royalty revenue the agency can earn. Exactly how
high depends on the specifics of the opportunities
to be pursued, the agency’s experience with simi-
lar opportunities, and the scope of work assigned
to the agency.
3. Fee and Commission—Clients who are able to
pay a highly qualified and fully staffed licensing
agency (such as IMC) an early-stage retainer of
$5,000–$20,000 per month should be prepared to
pay the agency an ongoing commission between
30–45 percent. To some extent, the retainer
reduces the agency’s risk, and so as the retainer
goes up, the commission percentage might come
down and vice versa.
As with almost every other business sector, the
landscape of the licensing industry has been greatly
altered over the past few years. The impact of
the economic downturn has only exacerbated those
changes.
To that point, compensation to licensing agents
and agencies, or more accurately reduction in com-
pensation, is now one of the key determinants in
the selection and retention of professional licensing
services. Clients always can find resources for less
money, but often times there is a high price tag associ-
ated with buying on the cheap. For example:
• Once the pitch is over and the agency selected, will
you have the first string team on your business,
or will they have been replaced with junior level
employees?
• Will the licensing strategy align with your overall
marketing strategy, or will it follow the path of least
resistance—looking for easy conversions versus a
rigorous examination of opportunities that rein-
force the core tenants of your base business? We
often refer to this as the “shiny penny” model. The
licensing agency that takes on a client’s business
for zero retainer and a commission only generally
looks to strike fast with some deals against the
low hanging fruit. Should those opportunities not
come to completion, then they will most likely
be off to find the next shiny penny in hopes of
executing an agreement with another new client.
In the meantime, the first client may experience
difficulty in finding any forward momentum on
their business after the initial stage.
• Will the emphasis be placed on doing a deal rather
than finding the right partner with whom you can
align and work together to reach mutually benefi-
cial goals?
• Do the opportunities that are brought to your
table reflect solutions that meet the needs of the
brand or do they represent the licensing agency’s
agenda and/or need to meet operating costs?
You may be asking yourself: If my company
addresses the preceding complexities of the licensing
industry and the unusual nature and charm of licens-
ing agencies, will I be assured of a successful relation-
ship? It depends.
Sometimes things just don’t work out for any num-
ber of reasons:
• A poor response to the trademark in the mar-
ketplace due to lack of awareness, distribution,
equity fit, etc. Here, a good licensing agency will
demonstrate that stone was left unturned on
behalf of the brand;
• Personnel changes within the client or agency
organization;
