Ka-Boo-Ki: licensing in the LEGO brand
The Danish toy manufacturer LEGO is known worldwide for its LEGO bricks. LEGO is a strong and well-known brand. In the 1990s LEGO management received (among others) the results of three consumer surveys:
1. ‘Image power' is a measure of brands' impact, where consumers' awareness of the world's leading brands is combined with their judgement of the brands' quality. In the United States and Japan LEGO was not placed among the top ten, but the results from Europe were impressive. Here LEGO was placed at number five after four car brands: Mercedes-Benz, Rolls-Royce, Porsche and BMW. LEGO was in front of brands such as Nestlé, Rolex, Jaguar and Ferrari.
2. A US survey, conducted in Europe, the United States and Japan, showed that LEGO is number 13 in the list of most appreciated brands.
3. A survey by a German market analysis institute showed that LEGO is one of the most well-known brands in toys in the new German Federal Republic, with an awareness share of 67 per cent. Matchbox is number 2 with 41 per cent. The LEGO management has decided to exploit this strong brand image and a managing director for the new business area LEGO Licensing A/S has been appointed. The company's objective is to generate income from licensing suitable partners, which will use the LEGO brand in marketing their own products.
The LEGO management has noticed that CocaCola has an income of Danish Kr3 billion from licensing alone. Coca-Cola's strategy can be characterized as ‘brand milking', where a brand is sold to the highest bidder in each product area. Ideas become viable In 1993 the idea of licensing the LEGO brand became viable for the Danish textile firm Ka-Boo-Ki, as it was given the rights to use the LEGO brand in connection with the production and sale of children's clothes. Ka-Boo-Ki's Managing Director, Torben Klausen, was earlier employed in LEGO's CASE STUDY 11.2 Ka-Boo-Ki: licensing in the LEGO brand international marketing department, where he was in charge of coordinating the European marketing of LEGO bricks.
From this position he was able to follow the development of the licensing concept. Since 1993 things have been developing very fast. In mid- 1997 Ka-Boo-Ki, which has invested a considerable amount of money in the R&D of LEGO children's clothes, was selling to approximately 900 shops, primarily in Scandinavia and England. Torben Klausen says: We received a strong international brand from the first day. But in selling LEGO children's comes an obligation to live up to the LEGO company's unique quality demands. LEGO must approve all new models that are put on the market, and that is between 350 and 400 a year.
Attachment:- Figure 1.rar
LEGO children's clothes distinguish themselves from other brands by being functional and having strong colours and an uncompromising quality. This means a relatively high price for the clothes, and that the products are not sold in discount shops. The clothes are sold on the basis of a shop-in-shop concept, where merchandising and display facilities are very important
QUESTIONS
You have just been employed by LEGO Licensing A/S in connection with the development of the licensing data. You are given the following assignments.
1. What are the most important factors determining future market demand for LEGO children's clothes from Ka-Boo-Ki?
2. Which other products could be considered for licensing out the LEGO brand?
3. List some criteria for choosing suitable licensees and future products for the LEGO brand (licensing out).
4. What values/benefits can LEGO transfer to the licensee (e.g. Ka-Boo-Ki) apart from the use of the LEGO brand?
5. What values/benefits can the licensee transfer to the licensor?