How to tap into the power of brand licensing and extensions

It’s no surprise that traditional media companies can’t rely on advertising for growth the way they used to unless they can wrestle back dollars from the likes of Google, Facebook, and, increasingly, Amazon. At the same time, subscriber losses are motivating traditional media brands to develop new models. What are media companies to do?

Direct-to-consumer OTT video services are one option, and there are ample opportunities for each service to play a unique role with the consumer. However, there are limits to the number of services that a consumer will subscribe to, discovery is a challenge, and the field is getting crowded. How can traditional media companies develop new revenue streams and de-risk their business?

Many brands (i.e. networks, programs, personalities, titles) have been able to build profitable, multi-million-dollar businesses out of low-hanging fruit: brand extensions. However, for many media companies brand extensions are a relatively underdeveloped businesses. How are others succeeding? That’s exactly what we’d like to share.

What are brand extensions?

Brand extensions are opportunities to grow the customer experience in new directions – examples include licensed products, merchandise, experiences, membership clubs, and niche subscription products. Though revenues are proportionately smaller than advertising, brand extensions can have very high margins, particularly brand licensing. Here are some examples:

• Better Homes and Gardens home décor: direct-to-retail relationship with Walmart for more than 3,000 products across multiple categories in the home décor, outdoor living, and garden space
• Tasty kitchenware: BuzzFeed, maker of the Tasty cooking video series, teamed up with Walmart to launch an exclusive line of Tasty cookware encompassing more than 90 products
• Impractical Jokers events: show talent developed a stand-up comedy tour including story-telling and exclusive hidden camera videos
• New York Times Cooking digital app for food enthusiasts: unlimited digital access to the entire New York Times Cooking recipe archive, exclusive how-to cooking guides, the ability to build and organize personal recipe box

How can your business capitalize on brand extensions?

The most successful brand extensions are those that follow a customer-first logic. Here are some questions to help you evaluate your opportunities:

1. Who are your most passionate customers?
   Before all else, you must understand your customer. By digging deep into their attitudes, behavioral patterns, emotional drivers, and current engagement with your brand, you’ll be able to carve out opportunities that inherently appeal to your user base. You will also be able to prioritize by identifying your portfolio brands that garner the highest affinity, trust, and engagement. Just as casinos cater to “whales,” media companies have opportunities to super-serve super users.
2. Where will your customers follow you?
   Your customers might love your brand, but that doesn’t mean they’ll automatically engage with new business lines or purchase new products with your logo. The transition must make sense for your consumers. Where can your brand play a bigger role in customer experiences?
3. What is your customer willing to pay?
   Willingness to pay is another important factor in predicting the success of a brand extension. Are your consumers likely to pay for exclusive content, archives, curation, early releases, unique access events, new features and functionality?Market corollaries are a reasonable place to start to develop ideas. It is valuable to benchmark and learn from what’s winning in the market, but what about the next great idea that hasn’t been developed yet? Often overlooked, creative consumers are a rich source of ideas and consumer ideation and co-creation is an important step to reveal future product/service/experience possibilities before validating and quantifying the opportunity more broadly.
4. What types of extensions will enhance your brand, rather than degrade it?
   A brand is an asset. Ask yourself what your consumers want to accomplish when they engage with your brand, and what kind of product line will help them do so.

Applying an analyst’s lens

If we look at brand extensions through the lens of shareholder value, we also see something important: the development of annuity-like licensing and subscription revenues are more highly valued by the market.

Successful brand extenders investigate new markets as thoroughly as a start-up would, assessing the scale of the opportunity, competitive dynamics, internal capabilities and gaps, ease of execution, and determining the priorities and the right approach. It’s important to assess what is within your organization’s reach, and what isn’t.  Aside from considering the distance from your core, it’s also important to consider other factors such as the investment required (including ongoing development), the profit potential, the time to execute, and scalability. In general, licensing agreements are low-cost and yield high revenues when done right. In an evolving industry like media, that option is certainly an appealing one.