Brand licensing is a regular practice at giants like Ford, Unilever, Nestle, among others. But in India it’s yet to gain momentum.
We are not even 1 per cent of the global market for brand licensing that stands at $180 billion, but still he is excited and optimistic. You may attribute this to his management education at Kellogg School of Management, USA, or the rigorous approach that he imbibed in his previous organisations like Brand Sense Partners, Deloitte Consulting, Riodran Fellow and PriceWaterhouseCoopers (PWC). His company, The Wild East Group, is among India’s first in media services licensing in the field of fashion, corporate brands, media and celebrity management. It already has two top clients in its kitty including a licensing programme for Yash Raj Films and brand extension initiatives for Hrithik Roshan.
In an interaction with Neha Saraiya of BestMediaInfo.com, Shah points out the nuances of brand architecture and the thin line between brand extension, brand licensing and brand merchandising from a strategist’s perspective. Excerpts:
Q) What is the role of brand equity for brand extensions in areas like merchandising and licensing?
Brand extensions do not work unless the brand has developed that equity with the consumer. Brand equity develops because of the goodwill and name recognition earned over time through the consumer’s trust in the core business. This equity can be leveraged in other logical non-core categories to develop new business lines and opportunities. But brand equity is only one part of it, it is equally important to develop the right objectives for your brand extension plan. Is revenue your objective? Is it to strengthen your core business? Or is it to establish the brand with a new consumer segment or is it another form of advertising? All these and more must be considered at the outset in developing the programme.
Q) In order to develop sound strategic brand architecture, what needs to be done?
This answer to this question can be a paper on its own! But simply put, the brand architecture is the structure that a business chooses for its portfolio. It is imperative to address issues like a) investment/ROI expected from the brand; b) features/benefits; c) brand positioning; d) ability to scale the brand; and e) alignment with the internal structure of the company.
Q) It is commonly held that while mature brands can be progressive and visionary, newer brands tend to be traditional and boring. Do you agree?
When it comes to brand extensions, a mature business has the ability to try a lot of different and unique ways of extending the brand to reach the consumer. As long as it is in line with their overall strategic objectives, a mature business can leverage the brand equity into new categories. Look at companies like Harley Davidson and Kingfisher; both are classic examples of innovative, successful brand extensions. Both companies wanted to extend their lifestyle experience into different segments of the market — and they did. However, a newer brand typically won’t have the opportunity, and in fact, should not even consider brand extensions. A new brand should only be focused on developing the core business.
Q) Today, social media plays an important role in any brand building exercise. A lot has been said about how a company can leverage this platform. But is there anything that needs to be completely omitted or not done by a brand?
There are a lot of options for consumers out there right now, and it is very easy for them to change brands. A brand derives its power from consumer’s trust. It’s not a one-way conversation any more, and brands have to realise that consumers have the power now. Therefore, brands should be willing to adapt, listen and react to the consumer if they want their loyalty and business. They have to be willing to be transparent and have an honest conversation with the consumer.
Q) What is the estimated size of the brand licensing market in India? And are there major differences compared to international markets?
Globally the market is valued at about $180 billion, with India accounting for about 1 per cent of that! This includes categories such as sports, celebrity, art, character, corporate, media and fashion. The main difference between the global market and the Indian market is that almost every major brand globally engages in some sort of brand licensing as a strategic tool in their marketing toolbox, while most Indian companies are extremely wary of brand licensing.
There are a few reasons for this. Companies are growing so fast, they have their best and brightest working on their core business, they don’t have the resources to properly manage a brand extension programme or figure out how it fits in their overall marketing strategy. Indian companies are run very top down, so even decisions usually come from the CEO, as the senior management is not empowered. Also, Indian companies don’t feel comfortable with the idea that the brand is out of their control.
But then, it is changing slowly, because the brand licensing ecosystem is being created by newer companies with new strategies. Additionally, brands are realising that they are missing huge opportunities by not having their brand present in other logical categories which they hadn’t considered earlier. Furthermore, they are finally understanding that the brand is never out of their control, and that they do have a final say in approvals for all new business endeavours.
Q) Recently you bagged the licensing duties for social expression and other popular consumer products categories for Yashraj Films. What kind of initiatives have you taken for this?
YRF is an extremely forward thinking organisation, and I am honoured that they are our client. I can’t speak of the details of what I am doing for them, but I can assure you will see some very exciting programmes in the near future.
Q) Besides YRF, what are your other clients in India?
We work with Hrithik Roshan, HP, Dr Seuss and a few other large clients that we will be announcing soon.
Q) Generally, brand merchandising includes items like sound cards, calendars, stationary, mugs, T-shirts and so on. Are there any new kinds of merchandising products being introduced in the market?
I would like to draw a distinction here between brand extension and merchandise. Merchandise is slapping a logo or picture on anything and selling it, it’s like putting a cricketer on a keychain and selling it for Rs 10. Anybody can do that, doesn’t really require much imagination. Brand extension, on the other hand, constitutes large, self-sustaining businesses that require a lot of strategic thinking and analysis before being undertaken. Merchandise are typically products you mentioned before, and are usually available only for a short period of time because they add no real business or consumer value. Brand extensions become businesses of their own. Look at Kingfisher Airlines, Harley Davidson’s Black label clothing collection, and Britney Spear’a perfume — all of them are multi-million dollar businesses.
Q) You also handle the account of actor Hrithik Roshan. In such cases, what is the criterion for creating revenue generating endorsement strategies both for the brand as well as the celebrity?
I work with Hrithik in partnership with his talent management company, Carving Dreams, on certain brand extension programmes. I don’t, however, develop any endorsements for him as that is not my expertise area. We just launched an exciting brand extension partnership with Mattel’s Hot Wheels, whose commercials are airing on all the major networks.
Q) Currently, what are the challenges facing the brand licensing industry in India?
There is no doubt that this is a growth sector in India, and it is an exciting time for brands to explore and exploit new ways of reaching the consumer. With any new industry, the key challenge is educating brand owners to trust experts with unlocking the true value of their brand; and educating manufacturers to understand the licensing ecosystem. If it was challenging, it wouldn’t be fun. There is a growth story happening in India right now, and we are excited to be a part of it.
Wonderfully explained Brand extension business
Great insights, thanks for the interview!