How to find and qualify new licensing opportunities

One of the most significant challenges for licen­sors is to keep the opportunity pipeline full. Regardless of the size of the licensing pro­gram, finding and qualifying prospective li­censees can be a challenge. Some licensors need more opportunities to explore, while other licensors have the opportunities but do not have a defined qualification pro­cess. Unfortunately, some licensors have both challenges. A licensor might consider the following sales and business development techniques to overcome those challenges.

Key assumptions

Let’s start with three fundamental assumptions:

• You have a strategy for each of your licensed properties;
• You’ve identified the product cat­egories that align with your core brand message and best support your li­censing growth goals; and
• You have a realistic understanding of the value of your brand and licensed properties.

While having a defined strategy for each licensed property and knowing the catego­ries in which each property fits best is a great starting point, you also need to have a real­istic expectation of your licensed property’s value to a prospective licensee. For example, you may have a top brand in one category, but your brand might not bring significant or even incremental value to the market leader in another category that you’re targeting; therefore, your brand probably has less value for that category leader than it would for the number two or number three player. This will be a crucial factor in targeting and qualifying licensing prospects.

With these assumptions in mind, you can begin developing or refining the process to grow your licensing program.

Finding prospective licensees

Prospective licensees fall into two camps: Those who know and see value in your brand and those who do not. The former will likely be already knocking at the door to pitch new ideas, but the latter creates the biggest challenge for most licen­sors.

The best way to identify possible new op­portunities is through Environmental Scan­ning—carefully monitoring the marketplace—for new licensing deals in your target product categories. You can also identify potential opportunities by not­ing specific changes at companies within those target categories, which might in­clude:

• Changes in licensing, marketing, or other senior leaders;
• A shift in organizational strategy, new product line development or line extensions; or
• Expanding markets—either demo­graphic or geographic.

Excellent sources of such information for environmental scanning include LIMA, licensing trade publications, and other marketing and business publications. It is important to note that Environmental Scanning typically provides advance indica­tors of possible opportunities, not those op­portunities already clearly defined. You must invest time to determine if an opportunity exists and how you might leverage your licensed properties into the mix.

When a prospect is identified, it is impor­tant to create an ongoing marketing and sales program to keep connected. Like any type of marketing program, a prospective licensee needs regular communication to keep your brand top-of-mind when the opportunity presents itself, and the licensor’s sales and business devel­opment team steps forward to qualify and close the opportunity.

Qualifying new opportunities

Regardless of the source, once you have identified what you believe to be an excellent prospective licensee, it is important to have objective criteria in place to help you evalu­ate fit with your brand. Most pro­spective licensees will look good on the surface and will be reputable. Still, a deeper dive will give you a clearer picture of how well the company, its products, and its busi­ness practices align with the values and ex­pectations of your business.

The first step in collecting the informa­tion you need to qualify further as a prospec­tive licensee is via a licensing application. The qualification process should include a review of objective matters such as:

• The applicant’s financial solvency, possible legal issues (including prod­uct recalls, infringements, social- and/or labor-related matters);
• Experience in developing and launching similar products in the marketplace;
• Experience working with other licen­sors and;
• Reputation in their distribution chan­nels for meeting demand.

A licensor may need advice from finance or legal experts for some review areas.

Key Point – Ask: Does the market need this product? 

The market need or opportunity for the proposed licensed products is critical in the licensor’s decision process. A licensor should also evaluate the prospec­tive licensee’s understanding of the market­place, the market needs for the product, the strength of the product development and launch plan, and the company’s commit­ment to market the licensed product. Then consider whether the licensor’s brand truly brings value to the product in the marketplace. If all align, it might be a good opportunity to consider further.

These review steps are somewhat sub­jective, yet an experienced licensor will quickly spot those proposals that are likely to fall short of expected performance if a deal is completed.

A prospective licensee who scores well in all of these review categories is clearly a catch. Those who do not may still be a good match for a licensor; it depends on the tol­erance level for imperfect feedback in one or more of the review categories.

Some licensors develop a rubric or score­card for evaluating prospective licensees, and their tolerance for variances in the review categories is built into the scoring process. This approach also helps to make the review process a little more objective. The most significant challenge in finding and qual­ifying new licensing opportunities is the lack of structured, formalized systems for achieving these goals.

Keep in mind the best opportunities for a licensor are not those that are readily ap­parent.  Licensors will succeed more in growing licens­ing opportunities by looking not at “what is,” but at “what can be.” A defined process for identifying and qualifying opportunities will help you find and leverage “what can be” much more quickly.

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A version of this post was originally published in the Licensing Industry Merchandiser’s Association (LIMA) Bottom Line newsletter.