Natural selection

Posted on by Chief Marketer Staff

Despite the allure of a masked, web-shooting man, a funny, but cantankerous green ogre and a talking yellow sponge, licensing rights fees rose just slightly in 2004. Marketers struggled to maximize the merchandising opportunities generated by such blockbuster films as Spider-Man 2, Shrek 2 and Sponge Bob SquarePants: The Movie, but the category failed to generate a significant bump in revenue. Experts attribute the malaise to shrinking retail space.

“Retailers are being a little more selective in the range of merchandise that they are carrying now,” explains Charles Riotto, president of the New York-based Licensing Industry Merchandisers’ Association (LIMA). “Consolidation of retailers makes competition even stronger.”

Segment revenues in 2004 reached $5.9 billion, up a mere 1% after a flat year in licensing rights fees in 2003. While certain segments reported some growth, experts say licensing revenue was lower than originally predicted.

“It’s not because there aren’t a wide array of licensed properties,” Riotto says. “It’s really more a factor of retail climate.”

In 2003, retail sales for licensed merchandise came in at $104 billion in the U.S. When 2004 is totaled, retail sales for licensed goods may reach $105 billion, Riotto says. In general, “it’s a pretty respectable number,” he adds. Final figures will be released by LIMA in June.

Riotto says some retailers are missing the boat when it comes to maximizing their licensing opportunities, opting to play it safe and “not taking a chance with something that is new on the marketplace.” For example, blockbuster film Shrek was limited in its licensing, but the sequel, Shrek 2, captured far more attention, Riotto says.

Other retailers latched on to those familiar properties, including multi-segment films that were sure to bring in the dollars.

“In 2004, it was really all about Lord of the Rings,” says David Imhoff, Sr. executive VP-worldwide licensing and merchandising for New Line Cinema.

Last year, the multi-chapter film came away with all 11 Academy Awards for which it had been nominated, including Best Picture, and sales supported its popularity. By the middle of last year, The Lord of the Rings properties surpassed $1 billion in worldwide retail sales, Imhoff says.

New this year, New Line Cinema will transform its horror properties with the likes of Freddy Krueger from Nightmare on Elm Street under a new moniker, House of Horror.

Other blockbuster hits contributing to the rise include Shrek 2, SpongeBob SquarePants the Movie and Spider-Man 2, which “really moved the merchandise,” Riotto adds.

Despite last year’s projected weak showing in entertainment licensing, 2005 has the markings of an even bigger year for movie licensing merchandising opportunities.

“2005 will be a good year for entertainment licensing,” Riotto says, citing Star Wars: Episode III — Revenge of the Sith and Batman Begins as potential movie blockbusters this year. “[Those] should keep the category strong.”

Already, Hasbro and Warner Bros. Consumer Products have announced their respective lists of master toy licensees for each film. To tie in with the latest Star Wars film, Hasbro’s Playskool has even transformed its staple Mr. Potato Head into a Star Wars villain — “Darth Tater.” The toy comes with a lightsaber, cape, shoes and helmet and eyes, nose and teeth.


Lean growth for second consecutive year

Retail sales of licensed goods estimated at $105 billion in 2004

Natural Selection

Posted on by Chief Marketer Staff

THERE ARE MANY different ways that companies select the promotional offers they will use for their next promotional period. Companies and agencies use a variety of qualitative and quantitative testing techniques to determine their promotional options for their calendars. All too typically, however, lack of time or budget results in the use of inappropriate evaluation techniques — more commonly known as “gut reaction.”

Budget constraints also lead to the use of techniques that result in the least reliable form of consumer testing, “preference testing.” Preference testing (qualitative, sequential monadic quantitative, conjoint, etc.) asks consumers what they prefer due to the methodology. Yes, it is less expensive to ask one consumer what they think of six, ten or 27 different concepts, but the results have no reliability. And so, over the past 15 years and during the process of testing over 6,000 concepts, we’ve developed a key driving principal: Avoid preference testing whenever testing concepts.

Consider the market reality: During such tests, the consumer is given no choice as to whether or not they want to receive: 55 cents off or 75 cents off; three trips or 25 trips to Hawaii; a new car or five new cars; one in three odds or one in 18 odds of winning.

In market, the consumer receives one choice and determines whether or not he will purchase that product due to the offer. That is why in concept testing it is essential to replicate the in market environment whenever possible.

Preference testing results in the consumer selecting the offer with the highest possible cost to the client. Since they are not paying for the item, the consumer does not care whether the prize pool costs $500,000, $2 million or $10 milion. If a marketer utilizes testing to determine which concept is strongest, over 90% of the time the consumer will select the most expensive option.

By the same token, the consumer will express a preference for the more expensive option every time — and why not? As a consumer, wouldn’t you feel the same? But as a marketer, be warned: Preference testing ensures that you spend as much as possible on your campaign.

Instead of falling into preference testing, we follow our guiding principle and ask, “How little does a company have to spend to get the desired change in behavior and attitude?” To get this information, it is important to use a study design that:

  • Asks “Will the consumer purchase due to an offer?” rather than “What do they prefer?” or “What do they like?”
  • Seeks quantitative results for an accurate decision.
  • Is representative of the market’s entire geography — not just two or three major urban centers.

We recommend a monadic study design — one concept per respondent — which is the most accurate means to ensure your concept is relevant, will drive volume, will drive a positive attitude, and will be effective in the competitive environment.

Don Mayo is the managing director of IMI International, a consumer research firm based in Toronto, ON. He can be reached at

Less Is More

IN THE EIGHT CASES listed below, the client was surprised when the less-expensive offer drove the same amount of participation.

  • A 25-cent coupon was as effective as a 45-cent coupon
  • A $250,000 cash prize drew as well as $1 million
  • A three-car prize pool was comparable to 25 cars
  • Mail-in-free offers vs. $1 rebates were evenly weighted
  • One in three odds aren’t a better bet than 1 in 18
  • 10,000 prizes vs. 2,000 prizes were par with each other
  • $250,000 cash vs. $2,000/week for a year were perceived as comparably valued
  • Ten trips to Australia vs. three trips anywhere in North America drew similar results


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