Sharing the cost of R&D

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Sharing the cost of R&D

Why start a Consumer Products programme, if they [licensors] insist on making the product unsellable?

Just one of the challenges raised by a licensee in response to Toy World Magazine’s recent Licensing Survey. Licensors never intend for product to become unsellable as a result of the approvals process, but they look to licensees to provide reliably sourced and evidenced insight to support their ideas.

Know your shoppers as well as you know your consumers,
For pre-teen kids, entertainment characters are profoundly powerful in generating demand for consumer products. These kids are a unique segment in having high demands, but the lowest purchase power of any consumer group. On the one hand, the pulling power of a licence might be enough to dispel the need for licensees to invest large sums of money in generating demand through advertising and marketing to these kids. On the other hand, licences cannot be relied on to do the heavy lifting in persuading those who do have the purchase power – parent shoppers – to part with their money when they encounter products at retail.
Parents are often overlooked in product design and development.

Undoubtedly, parents continue to indulge and buy on impulse, but they are buying fewer medium-large sized items, which occupy valuable space in the home, than the market caters for. Left to their own devices, once a medium-sized playset is bought, parents tend to commit to adding smaller toys from the same range to create a matching “system” of play, rather than diversifying their purchases across other licenses or brands. This tendency to accumulate one brand rather than diversify, has intensified with the age compression of toys, and as technology has competed for and won share of free time, all whilst taking up less space in the home.

From an adult’s point of view, that might seem logical. From a shopper’s point of view, it’s prudent. From a child’s developmental point of view, they may lose out on valuable diversity in the toy box. From a new brand or license’s point of view, it’s increasingly difficult to build scale and achieve ROI.

Whatever your perspective, parent shoppers will stick with this “systemising” approach until their habitual behaviour is disrupted by truly differentiated product or innovation, which promises to expand their child’s play experiences and learning opportunities exponentially, or which parents predict will be the next “hot must-have” toy within their child’s peer group.

Investing in innovation but not at any price
With innovation comes the need for research and development. R&D costs, when added to together with license royalties, potentially price licensed products out of the market, making them unsellable. One solution is to share the cost of research across non-competing licensees. A shared approach means that, when kids or parents are recruited to review concepts, the cost of recruitment, their incentive to attend research, the cost of venue and equipment, and the research moderator’s skills and time are split between 2 or 3 licensees. Licensors which have a good record of testing their entertainment properties in development, and benchmarking it with competitors, are already signalling that they value evidence and insight-based strategy and are more likely to support such a franchise-wide research programme as this. For the licensor, it leads to a richer, stronger franchise statement, worth contributing funds to.

Consumer Fluent researchers often coordinate and conduct franchise-wide projects on behalf of licensors and licensees. First, we test entertainment shows with audiences, from their inception to the final cut, specific episodes and subsequent series, and in the process explore how the core attributes of the license can be transferred on to consumer product. Then, we work with licensees to test actual product concepts in single and multi-category research, and very often sponsored by the licensor. If you are not sure if a licensor will respond favourably to this approach, just ask us!  Use the contact form.

Champion your category
Licensors are masters of their viewing audience, of the creativity which goes into producing a new entertainment property, with top-line knowledge of your market. They cannot be expected to be experts in or have detailed knowledge of your category, your consumer or shopper. It’s up to you to take the lead and demonstrate that the consumer and shopper are front and centre in your thinking, that you have the evidence to champion their needs in your category, and irrefutably prove or disprove a product’s appeal. Licensors respect that expertise. In the absence of evidence, the anecdote and opinion of one person will fill the vacuum, with the risk that a product line which has great potential is rejected before consumers and shoppers have even had a chance to judge it for themselves.

Build an understanding of the separate components which make up a purchase decision or the mechanism for a consumer request. With every new product line, you might have a vision as to how it will add value to your consumer’s life, from play, fashion, food, care, or reading and education, but can you support that vision with evidence? Do you know what trade-offs shoppers are making between your products and others which have retail visibility within the same line of sight? How are you going to persuade shoppers to add your product to the growing pile of toys at home regardless of the license property it carries? How is the license going to make a difference in the shopper’s mind? And finally, what is the price elasticity of individual products and within the franchise’s architecture as well as your product range?

Use as much evidence as you can get your hands on, to get alignment with your licensor on your product line and its role within their franchise and your category. We can advise you on what’s freely available and how to cost effectively source what’s not. And remember, as much as any licensee may feel that their opinions are not listened to in the approvals process, they are just opinions, not insights, until consumers and shoppers have been listened to first.
Consumer fluency begins with listening.