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Licensing 101: Marketing Side of Licensing Business Part 2

09 January 2015

To carry on, nevertheless, the licensees will always be pushing for more marketing support, specifically, spent locally (at retail or against stunts and other marketing activities) an the facts on the ground (as established by some of the big licensors) is they ARE willing to spend at least limited resources in market to provide additional advantage/exposure to their brands and licensed product.

Indeed, with all the changes to consumer behavior coming as a result of social media and the digital age, consumers more and more expect their favorite brands or characters to interact with them at their convenience and to be relevant to them locally – all of this requires more time and resources be directed at local marketing programs to support a licensed property.

As mentioned, most license agreements will also already include some provision requiring the licensee to spend certain marketing amounts against the sale of its licensed products.  This is usually measured as a percentage of sales and is called a Marketing Commitment.  The license agreement will require, at Licensor’s request, for licensee to demonstrate (by receipts, etc.) at some interval that such funds are being spent against marketing activities approved by the licensor.  The problem with this approach is that since it is based on a percentage of sales, from a pro-active enforcement perspective, it is somewhat toothless since you want to get in there and verify a good marketing plan and that adequate funds are being spent before sales happen, not as a post-mortem after the fact, when it may be too late.

As such, in practice, the so-called Marketing Commitment is not generally enforced too diligently and whilst it helps to establish the precedent that licensees are responsible for their own marketing, that’s about the extent of its usefulness.

We’ll talk about a new-ish tool, the Common Marketing Fund, next time, which is coming more into vogue.