Charting New Waters

Standing out from the crowd is the premise of The Blue Ocean Strategy, a book written a few years back by W. Chan Kim and Renee Maubourgne. It challenges companies to go where the profits and growth are - and the competition isn't - by identifying unique opportunities to hatch non-traditional products and services to sidestep the crowded waters already reddened with the "blood" of failed also-ran concepts. And in an industry where properties are fighting for shelf space, often with competing products manufactured by the same shared group of core-category licensees, it's a concept worth exploring. Read on to find out how a number of IP owners and manufacturers are getting to that end of the ocean.

Certainly, inking deals for key categories such as toys, apparel, publishing and video games remains the backbone of any licensing program with mass-market aspirations. But there's a lot of room in that blue ocean to enhance a retail offering with non-traditional goods and category partners. Just ask Robert Miller, president of Toronto, Canada-based Studio Licensing, which has served as Nickelodeon's exclusive Canadian licensing agent for the past 10 years.

"The red ocean is full of competitors creating all the same products and fighting for the same pieces of the product sales pie. Our blue ocean strategy makes the competition irrelevant by finding existing items with new twists or brand-new items to associate with a licensed character," says Miller.

Opening up uncontested market space via unique merchandising, such as placing motion detectors on a sign so it speaks to shoppers as they pass by or lights up to catch their attention, is just one of the ways Studio helps Nickelodeon's products stand out at Canadian retailers. But the core of Miller's strategy has been to partner with small to medium-sized Canadian manufacturers on unique products, taking a nominal guarantee and often seeing returns 10 to 100 times larger than the initial outlay.

For example, Studio signed on Insignia Trading, also based in Toronto, last June to put a blue ocean twist on an everyday product for most families. The company's line of Nickelodeon-themed lunch bags featuring SpongeBob, Dora or Diego that kids can personalize launched last March at Canadian retailers such as Zellers, Toys 'R' Us, Wal-Mart and Sam's Club. Sell-through to date has been steady, and Insignia is getting secondary orders for the product even without having sold its entire first run. "When Insignia approached us, I was immediately intrigued because it was a blue ocean idea of taking an old product and adding a twist to make it new to the consumer," confides Miller.

Similarly, Toronto's Clean Freak Patrol sees putting Dora, SpongeBob and Diego on an existing non-alcohol hand sanitizer as a way to grow its business. After being contacted by Toronto-based Tag Agency, which searches out new licensees, Studio Licensing met with Clean Freak executives and worked out the details of a deal. The resulting backpack clip (US$1.99), filled with the aloe-based sanitizer, will be available in all Canadian retail channels by year's end. "The program started because of a social issue in the marketplace, which is that kids are not educated in washing their hands," says Michael Morris, president and CEO of Clean Freak Patrol. "Our new deal brings kids' favorite characters to our product line and offers us an opportunity to spread our message."

Uncovering hidden potential

Miller and Studio are definitely not alone in recognizing the potential of combining an uncharted product with a license to further open up a retail program. For her part, Jamie Cygielman, SVP of consumer products at HIT Entertainment, is a firm believer in the strategy. "Non-traditional licensees help enhance existing programs," she says. "They introduce our brands to new consumers or help secure placement for them in new aisles or forms of distribution. All of these niche products create incremental distribution and revenue, as consumers find the brands in fun and surprising places." Perfect examples for HIT include Thomas & Friends and Angelina Ballerina customizable photo books that are available online at Shutterfly.com, and seasonal items such as Thomas & Friends and Bob the Builder bubble kits and sand toys from L.A.-based Imperial Toys.

In fact, these off-the-beaten-path product offerings are a welcome addition to most planograms, says Lisa Streff, VP of domestic consumer products at DIC Entertainment in L.A. "Retailers are anxious to identify and partner with companies that have a compelling product story to tell," she says. "It's always our hope to find that golden ticket and identify a new company that is knowledgeable and experienced and has the wherewithal to expand into mass distribution."

And there's the rub. Identifying these partners is a challenging task. While every company has its own criteria when evaluating a potential partnership, most align with companies that share the same strategic vision, work ethic and, more importantly, believe in the property enough to sometimes go out on a limb. More often than not, they also want to follow standard operating procedure and ask to see the potential partner's detailed marketing and promotional plan and review planned or anticipated retail placement.

According to Michael Peikoff, SVP of licensing and merchandising at Twentieth Century Fox, some of the questions licensors ask a potential manufacturer looking for incremental dollars and exploring licensing for the first time include, 'How risk averse are you? And do you have the retail chops?' Licensing, particularly for nascent licensees, he adds, is not for the faint-hearted or those who just have an eBay storefront and PayPal account. "We vet these companies, and our objective is to partner in success. Otherwise, it isn't worth the time, effort or resources for either of us," says Peikoff.