Brand New Goods

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Successful brand-extension licensing operations look easy, but they require foresight and thought. "It shouldn't be misconstrued by companies as a freebie," says Equity Management's Konkle. Every brand has a "core equity," which is its image--what it stands for in the minds of consumers. Is it a premium brand? Does it signal value? What image does it conjure up? "You can't just put out a doodad with a name slapped on it," insists Michael Stone, co-director of New York's Beanstalk Group, another large licensing agency. Missteps abound among those who have held that simplistic view. Take Virgin Clothes: British entrepreneur Richard Branson has successfully etched his Virgin trademark onto a host of products, from CDs to cola. But his apparel line is struggling, mainly because its initial styles were pricey and somewhat conservative, which went against the trendy and value-conscious image originally established by the airline Virgin Atlantic.

Then there are the challenges involved in homing in on your target audience. Though Europe clearly offers new licensing opportunities for its own firms and foreign ones, it still cannot be viewed as one big market of 370 million undifferentiated consumers. Cultural and language barriers are very much a factor in consumer choice. And some brand images vary from country to country. BMW cars, for instance, aren't considered to be particularly top of the line in Germany, but are considered luxury cars in much of the rest of the world. Rovers are commonplace in Britain, but they are seen as classy foreign imports in Southern Europe. There is not even pan-European agreement on what constitutes quality. A T shirt made from a cotton-polyester blend may suit a British shopper, but French and German consumers want 100% cotton T shirts only, please. Licensing executive Gianfranco Mari, head of the agency DIC 2 in Milan, underlines that "what sells in Italy may not sell in France." Then there is the tangle of various legal requirements and trademark laws in each nation, which the European Union has not exterminated. "Those laws can keep the lawyers happy for years," says Jaguar's Maries.

Perhaps the biggest hurdle to overcome in Europe is retailer reluctance. In the past, licensed goods from fellow European companies were often cheap promotional giveaways, so many retailers view licensed products as a form of advertising that doesn't belong on their shelves. That puts the onus on marketers to convince retailers that most of today's licensed products are well-made goods associated with top brands. It's a slow slog. But, says David Isaacs, Equity Management's international director, "it can be done."

Given the new onslaught of licensed goods heading their way, European retailers may have little choice but to change their view. Consumers, after all, like the stuff. As American-style retailing continues to take hold in Europe, shopkeepers are beginning to chant another U.S. mantra: the customer is always right--especially when wielding branded credit cards.