Monday, August 5, 2013

Licensed Merchandise: Gravy or Growth Strategy?

Photo by  Ostia/Flickr
(under Creative Commons License)
Sales of merchandise bearing brand names and logos are big business, with one estimate of the global licensed merchandise market being $153 billion in 2012. Sports is a key category in the licensed merchandise industry as fans are able to express their identification with a team or player by wearing or using branded gear. Minor League Baseball (MiLB) enjoyed a robust year in 2012, too. The 160 Major League Baseball-affiliated clubs of MiLB sold $54.1 million in licensed merchandise in 2012, second only to 2008 in annual sales. MiLB has tracked sales since 1993. Two clubs, the Durham Bulls and Portland Sea Dogs, have been in the top 25 in team sales every year. Seven other clubs have made the list every year of their existence, ranging from three years for the Richmond Flying Squirrels to 19 years for the Trenton Thunder.

What Drives Sales
Expressing fandom is an obvious and important motivation for sports-related licensed merchandise consumption. But, being a fan is not the sole influence on the decision to don a team t-shirt or cap. Other factors that influence licensed merchandise sales includes:

  • Image - A brand is attractive to consumers when its image is compatible with a person's values and beliefs. 
  • Quality - Officially licensed merchandise is typically sold at a price premium compared to a comparable item without a logo on it. Thus, buyers expect quality- they want products that last.
  • Design - Functionality is important but buyers want good looking products, too. Licensees have stepped up their attention to design; slapping a logo on a product is no longer enough to create appeal.
  • Brand Appeal - Some brands have an added "cool" factor that drives sales. In MiLB, the Lakewood Blue Claws, Richmond Flying Squirrels, and Savannah Sand Gnats that have parlayed the popularity of name or logo into licensed product sales.
  • Novelty - Licensed product sales can be stimulated when a team undertakes a logo redesign or changes brand name, such as the NBA's New Orleans Hornets rebranding as the New Orleans Pelicans. Similarly, brands that are new to the market often enjoy strong initial sales.
Think Strategically
Sports properties are in the enviable position of having an audience interested in licensed merchandise consumption. It extends a sports fan's relationship and is a way to make the sport consumption experience tangible. With that said, licensed product sales should be thought of as more than add-on revenue that is extracted from fans. Decisions pertaining to merchandise mix, licensees, and channel partners play a major role in determining the success of licensing programs. And, licensed merchandise can strengthen bonds with casual fans. For example, the NFL has ambitious licensed product sales goals over the next few years, and a significant percentage of sales is expected to come from products targeting women. So, while using licensed products to tap the affinity of fans, sports marketers should think about how to expand the appeal of their brands through products bearing their names and logos.

Sports Business Journal - "MiLB Sales Near Record Level"