POINT-COUNTERPOINT - IS ALL THE LICENSING OF CELEBRITIES IN THE HOME FURNISHING’S CATEGORY WORTH IT?

POINT-COUNTERPOINT - IS ALL THE LICENSING OF CELEBRITIES IN THE HOME FURNISHING’S CATEGORY WORTH IT?

I don’t think so but my friend Edward Tashijan differs. We’ll write and you decide.

Me first…. Ed's position after my RANT

Almost daily I read another home furnishing company is licensing a celebrity of some sort, Chef, Singer, Home Makeover celebrity…etc… to promote their products and their brand, especially now before the October 2016 High Point Furniture Market. My first thought is;
Why would they do that?

Sure, these celebrities benefit from the exposure the paying brands/licensees provide, but we can’t help but wonder if the brands receive the same exposure and the consumer connections they hope for as a result

Then I started remembering all my RANTS about the lack of, or complete abandonment, of manufacturers investing in and promoting their company as a “brand”. And more importantly using their resources to help their retailers get velocity on the products they floor of that brand.
I won’t bore you with reposting snippets from my RANTS on this subject, you can read them here: Personally, I think I’ve made the case over and over that our industry considers true marketing to be for the furniture markets only at the expense of investing in the retailer and the consumer….you know, that ubiquitous group of people that actually determine if you stay in business….by buying your product?

Let me explain why I think this is a complete waste of time, resources and yep….money!

Let’s start with your target audience, you know the people that actually have the money to buy your products. The 34-64-year-old age group. (Remember, most Millennials have a credit score of 640. Don’t believe me, read this if you dare)
​
According to Statista, and the chart below, the potential total worldwide internet users,  34-64-year-old age group, who find brands through celebrity endorsements equates to 33% “worldwide”, but that number is validated and even worse, according to a recent Nielsen Research Study. Here is what they stated:

“Recent research from The Nielsen Company (Global Trust in Advertising Report, Sept 2015) identifies “winning strategies for an evolving media landscape” through online survey responses from consumers in 60 countries.  Nielsen’s list and data detailing “Advertising Themes That Resonate Most” provides one of many eye-opening statistics. US consumers are big fans of humor (score one for Alec and Lil’); however, the study says that celebrity and athlete endorsements are two of the three themes that resonate the least”.​

To save you time celebrity endorsements resonate with just 8% of consumers, 3% less than the Statista report, according to the second chart below from Nielsen Research. AND remember, who has the money to buy your stuff....Primarily Baby Boomers and older Millennials.

Doing the math, you’ve just missed the opportunity to potentially resonate with 92% of consumers.

The chart BELOW represents the “due diligence” marketers should have done before they pursue any brand platform. 

​To me, the best options would be to look at the higher engagement numbers like; Value, High Energy, Aspirational and Humor before they sell off their corporate assets to some person whose personality and actions could become detrimental to their investment with a single tweet, comment, political position, moral or ethical faux-pas and more that could and most likely would alienate and potentially destroy any brand good will that may have been established.

Not only that, but what is the cost to do this?

​All license deals are different, some are very expensive, but the ones I’ve worked with usually hover around minimums/guarantees of approximately $1,000,000.00 against the wholesale dollars and this could be for 1-3 years! Once that minimum is met, then the celebrity could be looking at 1% - 10%+ of every sale. WOW I wonder what would happen if these brands invested in their own brand and the retailers who support them with this type of investment. Oh Ya I have, several times in MY RETAIL RANTS BLOG HERE, especially the blogs about The Death Of Brands and The Furniture Wars blog I wrote about the great book Michael Dugan wrote.

BUT that’s not all of the costs. You have to pay their travel, pay them for appearances, social interactions and more…OK some have a few included…., but there will be additional costs I can guarantee that, especially if it’s not specifically included in the agreement.

So why would you sell off your brand to a celebrity at the expense of investing in your brand?

I’ll explain what I think, and it may be a bit brutal, but I’ve been there/done that.

Rationale #1
They are famous and we are not. This will elevate us in the buyer’s mind at markets to come see us.

My answer #1
REALLY, that’s all you’ve got. Have you invested in your brand for retailers to get sales velocity. You know, the basics; product videos, P.O.S. Social media, Blogs, your website and sooooo much more?

​Rationale #2
The celebrity has a huge social media following and we can gain traction with that.
REALLY, I just went to get a haircut and was “FORCED” to read People Magazine, Us Magazine and other irrelevant tabloids because I guess only women get their haircuts and therefor all the reading materials are geared towards them and guys reading materials? I guess they are irrelevant. I ask you, did you even recognize the people’s name highlighted in these tabloids, you know the shoes or dress they wore, who they’re dating or other stupid stuff…or better yet, do you even care if your’e over 14 years old?

My answer #2
This is a loaded question since most brands in this industry have lousy websites and a social/blogging platform that is virtually non-existent. Why would this matter if it doesn’t matter to you in your everyday existence? To me, it’s a tell-tale sign you have very weak people guiding your marketing.
There are a handful of companies in our industry that have done this well, and the reason they have done well is that they Co-Branded extremely well and though it out to insure they took advantage of the opportunity to support their retailers with a variety of tools for increased velocity. (No need to name them, I think we all know who they are).

Rationale #3
But we get huge traffic and we get placements from the buyers at markets.

My answer #3
OK, I’ll give you that because in the last 16 years of attending market, there really isn’t any “BUZZ” except about a new country singer, celebrity chef, home makeover person or something. Believe it or not, the “person” gets all the advertising, while the Brand and the product play second or third fiddle to their name.
So I ask you, after the initial introduction and placement, what are the numbers over 1 year, 2 years, three years? Have you sustained the placements and more importantly the sales velocity, because you are still “Paying the license fees” whether you do or not. And then I ask, has this licensed product cannibalized your other collections and SKU’s? If so, you have a HUGE problem when the agreement ends, because you are now reliant on YOUR brand, or lack of it, to sustain. OK, I know, buy another license….do I need to even go there?

​My answer overall, and this is where it might become brutal.

You’re lazy and uninformed.

As a marketing person for over 30 years it was my job to do the research, due diligence on the research, formulate a plan, articulate the plan and execute the plan with the input and insights from my stakeholders. My stakeholders being employees, salespeople, outside vendors supporting us and more. I don’t see that anymore; I mean a marketing person that is a marketing person. Sure there a a few really good ones, but believe me, not nearly enough…again, a handful, maybe
Many people who run the marketing in our category are not marketers, they are loyal employees that come up through the ranks and are promoted to that position without the due diligence necessary to execute on that position. I can say that by seeing what they do, how they do it and most importantly by what they are NOT doing.

In Summation

I think it’s a complete cop-out, not well researched, not well articulated as a brand, not well executed, very expensive and most importantly….

CONSUMERS DO NOT BUY INTO IT & DON’T CARE!
​
Just sayin….

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COUNTER-POINT BY EDWARD ​TASHIJAN

​Bill makes some good points, but don’t throw out the baby with the bathwater.  There is no such thing as always or never.  Without question there are plenty of ill-conceived licensing arrangements that are a waste of resources but there are many that make sense. The key is to know the difference before you jump in with both feet. I will provide a checklist, but first let’s examine the 3 primary objectives of marketers at the various markets.

1. To develop and bring to market differentiated products with a real or psychological differences
2. To get those products placed at retail
3. To facilitate the sell-through of those products at retail

​The right partnerships can make a world of difference in each of these areas. With more than 2,000 exhibitors introducing new products at least twice, and some as many as four times a year, it is extremely difficult to stand out. This is especially true in a category that is driven more by fashion than technology. Many of what Bill referred to as celebrities are in fact bona fide designers with extraordinary talent and creativity.  For example, take Richard Frinier for Century Outdoor and Brown Jordan.  ​

​He is the quintessential outdoor designer that redefines the category with style and innovation (which is why he is being inducted in to the Hall of Fame this October.)

​Lifestyle brands like Tommy Bahama or TV celebrities like Joanna Gaines (Magnolia Home), bring something to the table that no one else can.  I recently conducted surveys with several top retailers about this topic.  Dealers have mixed feelings about licensed brands. They believe the key drivers are product and value and the license is just the frosting on the cake.  But nearly all feel they need to have them and in fact buy them regularly.

​Different channels need different partners.  Middle-market stores need middle-market licenses. They loathe the high-end designers, but are attracted to well-known names, especially when they're known for their expertise in the home, like Joanna Gaines. Aside from the cachet of the name, what retailers like about them is that they often come with manufacturer commitment and energy as well as marketing which includes both lifestyle photography and personality photography drawing interest and differentiating their store both in advertising and at the point-of-sale.

​Getting products placed in the marketplace is another challenge. There is a limited amount of shelf space.

​There is a limited amount of shelf space. I estimate that the products shown at market is anywhere from 50 to 100 times what can actually be placed at retail. There are 11.5 million square feet of show space in High Point alone. .  Even the most efficient buyer who is there for 7 days can visit only 70 per market. Rachael Ray has wide distribution.  ​Without her endorsement I doubt Legacy Classic would have achieved those placements.

​A primary goal of competent furniture marketers is first to get people to their showroom. Does a celebrity magnet help? You bet it does. Anyone who is ever done this successfully knows that the right license brings in new customers and you can double normal showroom traffic whether it’s the result of vanity or real product differences. 

A license almost always leads to better marketing at retail because there is a contract that requires it. Yes, in a perfect world, manufacturers would add a 10% advertising royalty or marketing fee to their OWN bill of materials. Nearly every other industry does this to support their marketing efforts.

Here’s why furniture manufacturers don’t. The barriers to entry and the real product differences in this category are very low. There are certain merchandising price points that manufacturers need to hit. If they don’t, there are plenty of competitors that do. And, a manufacturer is lucky to make a 5% net operating profit. Their thinking is, if they put this into marketing they won’t make any money at all.  Without something special like a license, they can’t reconcile the premium price.
 
Having the license forces manufacturers to build marketing into the cost. Along with the new products, there is advertising, point-of-sale, in-store events and training the come with the territory–which are often the real differentiators!
 
Not all licensees are created equal. Some are great and some are lousy. Allow me share my top 10 checklist of criteria for knowing the difference.  By the way, you can see the complete checklist on the Tashjian Marketing Website here.

1. Fill a profitable design niche.  A common element of all successful licensing programs is good product, which meets an unfulfilled lifestyle niche.  Licensor should bring something special to the table in terms of design, marketing or brand equity.
2. Increased placement.  License should allow you to open more doors, increase square footage on existing floors, or bring new customers (Example: a younger demographic or a new channel of distribution).
3. Support higher prices and margins.  Margins must increase by a minimum of the licensing fee plus 20% to cover extra costs. 
4. Extend a product life cycle.  Licensed brand should be of an enduring nature which allows you to add products and extend a product life cycle.   
5. Be consistent with your brand  positioning.  For example, if you stand for fashion leadership, licensed brand should be of a design nature, or its ability to enhance displays.
6. Have a strong Social Media following. Social media is continuously evolving, and each medium has its own special audience.  The partner must have a strong following, and a contractual agreement and plan to promote the products on an ongoing basis. 
7. License should appeal to each of your constituencies.   Interior Designers, Buyers, floor design associates and end consumers.  There needs to be a reason why everyone can get excited by it.
8. Be a logical and believable fit.  Be an easily understandable authentic connection.
9. Licensed brand should be better known than yours.  You are licensing the equity in a brand which has already been built, vs. using your marketing dollars to build their brand.
10. High Quality Partners.  A stable staff of counterparts who are intelligent, creative, available and responsive, who help us to grow our business as a partner.

 
In sum, licensing can be a very effective strategy.  Like everything else, if poorly conceived and executed, it is counterproductive.  But when it works, it can be magic.