After shunning licensing for decades, Procter & Gamble Co. has decided its package-goods brands are flexible enough for such far-flung categories as children's clothes and hair dryers. Moreover, in another once-unthinkable-for-P&G leap, the company is putting most of its patents up for grabs and may soon even license the technology behind new brands to direct competitors soon after launch.
"Most people think of P&G as a marketing company," said Jeffrey Weedman, VP-licensing manager at P&G, "and the little secret we have is that we're really a technology company."
P&G leads other package-goods companies with 27,000 active patents and ranks in the top 25 of all companies in patents received, Mr. Weedman said. But it uses fewer than 10% of those patents in its products and spends more than $50 million a year just to maintain them, an expense expected to increase to $200 million by 2005.
To market its technology licensing business, which also includes software the company developed for itself but now wants to sell, P&G is considering a business-to-business branding campaign, a spokeswoman said. Though it has no plans to announce it yet, P&G has trademarked brand names for its technology licensing group, such as Idescence Innovations, in the past year. And P&G's technological prowess will likely also be a focus for a corporate branding effort from Leo Burnett USA, Chicago, to break later this year.
STEPPING UP LICENSING
P&G is likely to step up licensing and other marketing partnerships in the months ahead for several reasons, said Deutsche Banc Alex. Brown analyst Andrew Shore. Following its recent earnings disappointments and stock tumble, such deals save or earn cash without much investment or requiring the company to use its devalued stock for acquisitions.
Mr. Weedman, however, said P&G's licensing efforts are part of a long-term plan to make better use of the company's intellectual property. And, in the case of brand licensing, the goal is more to build brand equity than pick up spare change.
"We look to our [category managers] and ask what deal is going to help build brand equity the most," he said. "It's not based on which licensee pays the best royalty."
Within the past year, Mr. Weedman's group has licensed the Physique haircare brand for hair accessories and appliances; Pampers for children's clothes; Cover Girl for eyewear; Noxzema for women's razors; and Mr. Clean for household gloves.
A NATURAL EXTENSION
"Eyewear is a complement to [cosmetics] and was a natural extension for us," said Anne Martin, global cosmetics marketing manager and design manager for Cover Girl, which has licensed its brand to Marine Optical for a new line now hitting optical counters, backed by TV and print ads from Grey Worldwide, New York. Ads breaking later this month feature models wearing both the brand's cosmetics and glasses. Cosmetics-style special displays at optical counters and shops will help women choose glasses based on their coloring and facial shape.
"As we sell the eyewear, we can have it in a Cover Girl kit with a mirror and lipstick holder inside," Ms. Martin said.
Physique, launched in January as a haircare product, will incorporate accessories and appliances from American Design Group and Goody Products in ads from Saatchi & Saatchi, New York, when the new line reaching stores late this fall.
The licensing deal "helps us in our infancy stage in establishing brand equity, and actually expanding it," said Diana Shaheen, Physique global marketing director. "On Physique, every item is designed for a particular style, and the appliances and implements out there aren't really dedicated for a given style."
In another aspect of its new licensing push, P&G is auctioning about 100 Internet domain names through GreatDomains.com that the company registered in 1995 but has yet to use, including sensual.com, romantic.com, flu.com, dry.com and thirst.com.
Besides getting more return out of its unused patents, another motive behind P&G's technology licensing push is to spur faster product development.
'USE IT OR LOSE IT'
Under a "use it or lose it" policy adopted last year, P&G patents become fair game for Mr. Weedman's licensing group within five years of invention or three years of use in a P&G product. Many of those patents are now posted on Yet2.com, a technology transfer site launched last year with P&G as a charter member.
"No longer do we simply compete with people on the outside," Mr. Weedman said. "If we're now going to compete with our own technology, it causes us to run faster to stay ahead." Even that three- to five-year exclusivity window could soon disappear, Mr. Weedman said. "I think you'll see over the next six to 12 months that we'll actually be licensing technologies simultaneously with our introduction of them."
Earlier this year, P&G sued Clorox Co. and Reckitt-Benckiser for patent infringement over products with claims similar to its Febreze fabric deodorizer, launched in 1998. In the future, P&G might simply try selling the technology to such competitors, which could help pay to launch products like Impress plastic wrap, which will require a new plant and equipment when it rolls out in the U.S. next fall.
Running a business that sells technology to the competition makes him unpopular at some company meetings, Mr. Weedman admits, but he said some managers also are asking him to sell their technology faster on the theory that more players can help build new categories.
'LET THE MONEY TALK'
"I'm a shareholder, and we let the money talk," Mr. Weedman said. "Besides, we've got very good competitors. It doesn't take them forever to get products that have comparable claims."
"Use it or lose it" has another connotation for P&G trademarks. When P&G discontinued its White Cloud bath tissue brand in 1993, another company, Paper Partners, staked claim and ultimately licensed the brand to Wal-Mart Stores last year as a premium private-label for bath tissue and diapers competing against such P&G brands as Charmin and Pampers.
"I think it's safe to say that White Cloud is the poster child of my presentation to every [P&G] business unit when I go in to talk trademark licensing for the first time," Mr. Weedman said.
The risk isn't just for discontinued brands. Existing brands that don't license trademarks into new categories can also risk opening the door for other companies to do so. That was one factor that drove Coca-Cola Co. into licensing in 1980, a spokesman said. Currently, Coca-Cola licenses its flagship brand to more than 320 companies for more than 10,000 non-beverage items.
In the future, when P&G plans to sell or discontinue a brand, it also will consider licensing it for private label, Mr. Weedman said, though the thrust of trademark licensing is to build brands P&G plans to keep.
"There is no sacred cow," he said. "We will look at anything that builds our value and our [retailers'] value."
Copyright July 2000, Crain Communications Inc.