Sales Strategy

How to increase your profit margen with licensed products

25 March 2021 / por Cerdá Group

Profit margins are the best indicator to know the financial health of your business, and increasing those margins is – or should be – the goal of all companies. So far so good, but... how can they be increased?

 

There are many tips that can help you in this regard, such as, for example, using a dynamic pricing strategy that conforms to each moment, having a good customer service (because this will make them more willing to pay more), adequately managing your inventory to avoid running out of stock and having the competition make the sale to your customer, engaging in cross-selling and upselling strategies, etc.

All of these are interesting strategies to implement. But in this post we want to go a little bit further and focus on the product. Having an eye-catching product that builds an emotional bond with the consumer can make the difference between closing the sale or not.

And when speaking of emotions and products, it is unavoidable to talk about licensing and its huge potential in this regard. 

 

What is licensing and how can it help my business?

 

Licensing is, simply put, an agreement by which the license holder leases the rights to a legally-protected intellectual property from a person or organization that owns or is the representative of said property (licensor) to reproduce or exploit it for a specific amount of time. 

Nowadays it can be used – and this is the case for anything from major multinational companies to small businesses – as one of the most dynamic activities in marketing. Now more than ever, manufacturers look for differentiating elements in their business plan so that it attains the expected success. 

Licensed products have great advantages that can make a difference and are perfect to increase your revenues. Some of these benefits are:

  • Product with a recognized brand image. Major licenses and licensees invest vast amounts of money in publicizing the brand and characters, and not only through hours of exposure on the big screen: major companies that own their brands implement many marketing and advertising campaigns around them. This is a great advantage for business owners.
  • Increased profit margins. Consumers are willing to pay more for a licensed product and all it represents, meaning that base prices be 2.2 times higher on average (in some products this can be higher, and in others, lower). It is much more profitable than working with a generic or cheaper brand, since you will need to make many more sales to attain the same figures.
  • They generate an emotional bond. When deciding to buy a product, the consumer takes into account two essential aspects: the emotional aspect and the functional aspect. The nostalgia factor in adults and the emotional attachment that a child has with characters of the entertainment industry will be key when selling a product.
  • Characters have diehard fans. Regardless of the emotional attachment or feeling of nostalgia, there is the fan phenomenon. There are people who become diehard fans of certain characters and will want to collect each and every product they see about them.

 

Licensing challenges and expectations for 2021

 

It will not come as a shock if we say that 2020 has brought a global change in regard to consumption. While digital transformation was a process that was going to take hold as time passed, Covid-19 has accelerated the process, revolutionizing the entire world of business.

 

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This acceleration has led consumer trends to change, who want the opportunity to acquire the products that they need via the Internet even when the physical stores are still available. 

2021 brings some changes that we outline below: 

  • The world of licenses is still booming. In spite of the lack of movie releases, economic figures remain steady, since classics are offering a much-needed stability. While there are no releases in theaters, the opposite is the case for streaming platforms, which have been gaining an enormous importance, such as Disney +.
  • Digital platform contents. Being unable to make the expected theatrical releases in theaters around the world, the movie industry has also reinvented itself and it is now common for releases to be made on various digital platforms, thereby rekindling the love for different characters by users who will then become consumers.
  • Digital sales and communication. A need has been created for every establishment to have its own multi-channel sale system on which to offer the same products and services. This is an acceleration of a process that had already begun that led to online consumption and sales.

Furthermore, the way in which companies communicate with customers via the Internet has also evolved. Having an online store is no longer enough – consumers want more. Companies are adapting to change, creating virtual showrooms, holding videoconference presentations, communicating more over social networks, etc.

  • Increasingly demanding consumers. Consumers are becoming more demanding, maybe because the situation that we are experiencing is affecting them financially. Moreover, they have become more rational, since the ability to buy over the internet allows them to more easily compare prices, products and services (product delivery times, for example). Word of mouth is still important; over internet this is in the form of reviews by other users.
  • Immediacy and fast adaptation. The ability to quickly adapt to the tastes of consumers and a fast response will be essential for the growth of your business. Staying ahead of trends and offering the right product with the right license at every moment has gained importance. 
  • Multigenerational licenses. Children’s licenses still lead the market, but there is an increasing interest in property and brands that many generations can identify with. 

 

 

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As we have seen, the world of licenses has a great number of advantages and could be essential to the growth of your business – a business that will need to evolve along with the sector and the corporate world to adapt to the changes that the market is experiencing. 

At Cerdá we are helping our clients with all of these changes and accompanying them in their transformation process toward new consumption methods. If you need advice in taking that first step toward the world of licenses and digital transformation, get in touch with us. Let’s move forward together!

 

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