Cutting prices in a recession? No way! Part 2

There are many reasons retailers and manufacturers use an entertainment character on their promotions and on their products:

• To add excitement to their promotions to make them stand out.
  
• To increase sales during the normal sell-off period (to improve the usual apparel sell-off from 60% to 80% in a month).
  
• To create a point of difference from that of the competitors to offer customers a choice advantage.
  
• To improve take-off on the shelf to exploit the increase in impulse purchase.
  
• To transfer a characters emotive properties onto a brand e.g. Superman's strength and reliability (unless the consumer carries Kryptonite).
  
• To add emotion to a commodity product.

These are all tried and tested but there is one strategy and objective that is as important as any other in these challenging economic times and that is “to increase margins”. In my decade of experience in the licensing business (and 25% years in the advertising business), this is an important opportunity that is very often missed. This should be a measurable objective.

We have proved that the price point of a licensed product can be far higher than the added cost of a 10% or 12% licensing royalty (or 3 to 4% on FMCG). Determining where additional margin can be made with licensing needs work but the benefits are worth the work.

The pictures above are the same - but with the licensed design on the T-shirt added by our Revolution designers in Photoshop. What shirt will a child demand and how much more could be charged for the licensed shirt over the plain shirt? 30% or more? From R39 to R59?

The addition of the character on a plain yellow T-shirt will also allow similar increased margins. Another good reason to increase the character licensing budget to drive margins in difficult economic times.

We have seen the addition of a licensed character onto a South African FMCG product increase sales by over 30% and maintain that growth over many years. I guarantee that licensing used properly will change your business. Providing the strategy is sound and well planned.

Thinking of developing your own character? Well don't. It just does not work. Marketers just cannot develop the required emotive link between customer and character in the short term. They simply do not have the advertising and communication budgets. The retail world is littered with the skeletons of failed product characters.

Stop thinking of licensing as a hard cost to be absorbed in the manufacture price and start thinking of licensing as a multi-faceted marketing tool that used strategically will make a huge difference to your sales and just as important in today's difficult environment, your margins. Start thinking about a licensing strategy in a different way.

Very important in difficult times, licensing adds fun. And fun is what everyone needs during hard times. Licensing is not just for kids. We are seeing a massive increase in licensing revenue from adult products. Again properties like Superman, Batman, and Looney Tunes all have relevance in the adult market now spending money on retro-distressed designed apparel. Exploit this new opportunity to the full.

Best wishes for business success. Remember your customer may not be as sensitive to pricing as you think. Remember licensing should not be a manufacturing cost but a sales and margin opportunity.