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Licensing royalties. Cost or marketing investment?

Royalties paid for character licensing is not a direct cost to business - it is a marketing cost to increase sales, help build brands and, more importantly, profit margins.
Image credit: Jonathan Kemper on Unsplash.
Image credit: Jonathan Kemper on Unsplash.

Buyers often see character licensing as a short-term sales tool and a direct “cost to business”. But character brand licensing should be used within a companies’ strategic marketing strategy to increase sales and margins.

Here’s how 

This is the accepted model for measuring the value of a product to its target market:

The value of a product or service to a buyer = PerformancePrice

Increase the “performance” or “lower the price of a product” and the value to the customer/buyer increases.

And makes it more attractive to purchasers, than a competitors’ product.

We are in the age of parity products and as a result, it is very difficult to gain a market advantage and add customer value by increasing “performance” or decreasing “price”.

This is where character licensing plays a vital role. The answer to giving a product or service an advantage in the marketplace is to change the value equation to add the vital element that is key to a brand or product.

The value of a product or service to a buyer = Performance + EmotionPrice

Emotional link

Adding a high-existing emotional link between a much-loved character and the customer to increase the value of a product or service to the customer is the job character licensing does and makes the product of more value to the customer – and more likely to be purchased.

If a character you are considered for a licensing strategy does not have a substantial existing emotive link with your target market (and there are thousands out there) you may end up tempted to purchase a cute character “design” with little emotive links to your customers.

This will not offer the added value you are looking for within a licensing strategy.

So, where did we start? Royalties paid for character licensing is not a direct cost to a business to be directly written off – it is a marketing cost to add value to a product, service or store to increase the emotional link between your product and your customer. To increase sales, margins and profits. And a well-planned, long-term character strategy will certainly make this happen.

Next time let’s look at character licensing and the benefit it adds to impulse purchasing. Many people fall victim to the last-minute impulse purchase. In fact, 90% of shoppers buy items not on their shopping list, indicating that the impulse buy is alive and well – according to a new survey.

About Alan Radmall

Generating revenue from Entertainment Brands. Representing Global Entertainment companies/studios like Warner Bros and Turner Cartoon Network. Batman, Transformers, Superman, Ben 10 and many many more.
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