Brandar Consulting, LLC

  • Selling a Licensing Agency In for Your Corporate Brand Licensing Program

    My last blog post dealt with the lack of adequate resources being one of the major impediments to building a successful Brand Licensing Program. At the end of that post, I talked about one of the best ways to supplement the resources of your Corporate Licensing Function is to research and hire a good brand licensing agency. The process of finding the right agency and compensating them at a fair rate can be the topic of my next blog post. This post will deal with how you sell hiring an agency to your Senior Management once you think you have found an agent that meets your needs at the right price.

    My experience running AT&T’s licensing program for a number of years taught me that you must sell your Agency to Senior Management for that model to be a success over the long term. Each time a new Chief Marketing Officer came in, I had to bid out and resell the merits of using a licensing agency as part of my licensing program. The cold reality is that many Senior Managers in Corporations view the use of an Agent as a cop-out by the Licensing Director. In their minds, farming out the License Prospecting Function to an outside group is handing over a responsibility that the Licensing Director should be doing on their own. This gets compounded when Senior Management sees the size of the agent commission. They view the commission as giving the company’s money away. Opposition can be strong and once you sell your agent in, the process never ends. You must constantly continue demonstrating their worth to Senior Management.

    So what are the best ways to sell having an agent for your Corporate Licensing program. First it is important that you work together with your chosen agent on their Sales presentation making sure it is customized to your industry and has examples in it that you know your Senior Management can relate well too. If you have chosen your Agent wisely, they should have a lot of examples of prior success that fall in or close to your industry. At the same time, it is very important that you document just how much time and equivalent headcount it would take internally to perform the role that your agent would fill. As I explained in my last post, it is very likely that your company will give you no where near the headcount you need to build a successful Licensee Sales function. Licensee Sales is the most time consuming function in your licensing program. What results from your under-resourced function is a Licensing Program that flounders; growing very slowly and certainly not at a level Senior Management expects. Use the Agent’s presentation to Senior Management to demonstrate the size and power of the Agent’s network and the value to be exacted by putting that network to work for your company!

    Make sure that you bring your prospective Agent in for a meeting when all the key Senior Management stakeholders are available. If an important stakeholder cancels, re-schedule the meeting. Also I always found it best to allow time for Senior Management to get to know the key players from the Licensing Agency on a personal level. So if at all possible, see if you can schedule a lunch or a dinner around the meeting, even if the lunch is sandwiches brought into a meeting room. Hitting it off on a personal level with Senior Management is one of the best selling tools there is. I always wanted my Senior Management and my Agent to feel like they had built a relationship in that very first meeting. And I wanted that relationship to lead to talking to each other directly down the road without my presence or facilitation. I never felt threatened by my Agent and my CMO having direct conversations; to the contrary, I actually felt better about my position in our organization because my management would dial up my agent at any time to ask them a question. It gave my Senior Management more of a stake in my success and I felt like I created a new resource for them to tap.

    The final critical area you will need to tackle will be paying the agent’s commission. This is not a topic that your Agent should deal with in their presentation. You should address this with your Senior Management yourself after the meeting. Make sure you have done your homework and gathered benchmarking data on standard agent commissions. Try to demonstrate how the commission structure you negotiated with this agent is unique and slightly below the average. The going rate for most corporate licensing programs is 35% of the net royalty stream. This commission rate is for a full service agency; by this I mean an agent that does license program planning, licensee prospecting, due diligence, deal negotiations, contract drafting, contract administration, royalty administration and assists with marketing & product approvals as well as ongoing quality control. You can get lower commission rates for less services from your agent. I don’t recommend this approach and a good agent won’t like it either. You see a good agent will recognize that your success is their success. They only get paid if a license turns out to be successful. A good agent will want an involved role in insuring success. Lower commission rates can also be had for more established or promising brands where the agent sees a large upside. I digress though. The main thing you need to sell your Management on in terms of paying a commission is that they are paying a commission on NEW revenues. Yes a good agent should be able to find and close deals that you could not get or negotiate on your own. So getting 65% of new revenues is better than getting 100% of no revenue at all. The other point to make to your Management is that a 65% margin is likely to be a much higher margin than the standard margin for the core business of your company. Even with these points their may still be reticence in your Management to bring the agent on board to represent your WHOLE licensing business. When this hurdle came up with my own AT&T program, I was able to convince my agent that we would assign them certain product categories to work each year. Once AT&T assigned them a category it was theirs to work for the year. If we then received inquiries directly at AT&T about that category, we passed them to our agent to work. In this fashion, we were able to keep certain categories which were extremely close to our core equity for ourselves as they were easier to do licensing deals on and receive 100% compensation; my Management felt this was a more equitable approach.

    Hope this helps. Next time we will look at how to find the right agent for your corporate licensing program. And after that I will turn to how to staff a licensing function for success.

    Mike Slusar

    Managing Director & Owner

    Brandar Consulting, LLC

    email: mike@brandar.com

    908-735-4115

    “Helping Brands Reach for The Stars”

    copyright © 2013 Brandar Consulting, LLC All Rights Reserved

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Our Blog is intended to provide Licensors with unique insights about successfully managing a Corporate Brand Licensing Program. It is written from the perspective of someone who managed AT&T's Brand Licensing program for many years and has consulted in the Licensing Industry for the past 5 years.

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