Standing out from the crowd is the premise of The Blue Ocean Strategy, a book written a few years back by W. Chan Kim and Renee Maubourgne. It challenges companies to go where the profits and growth are – and the competition isn’t – by identifying unique opportunities to hatch non-traditional products and services to sidestep the crowded waters already reddened with the ‘blood’ of failed also-ran concepts. And in an industry where properties are fighting for shelf space, often with competing products manufactured by the same shared group of core-category licensees, it’s a concept worth exploring. Read on to find out how a number of IP owners and manufacturers are getting to that end of the ocean.

Certainly, inking deals for key categories such as toys, apparel, publishing and video games remains the backbone of any licensing program with mass-market aspirations. But there’s a lot of room in that blue ocean to enhance a retail offering with non-traditional goods and category partners. Just ask Robert Miller, president of Toronto, Canada-based Studio Licensing, which has served as Nickelodeon’s exclusive Canadian licensing agent for the past 10 years.

‘The red ocean is full of competitors creating all the same products and fighting for the same pieces of the product sales pie. Our blue ocean strategy makes the competition irrelevant by finding existing items with new twists or brand-new items to associate with a licensed character,’ says Miller.

Opening up uncontested market space via unique merchandising, such as placing motion detectors on a sign so it speaks to shoppers as they pass by or lights up to catch their attention, is just one of the ways Studio helps Nickelodeon’s products stand out at Canadian retailers. But the core of Miller’s strategy has been to partner with small to medium-sized Canadian manufacturers on unique products, taking a nominal guarantee and often seeing returns 10 to 100 times larger than the initial outlay.

For example, Studio signed on Insignia Trading, also based in Toronto, last June to put a blue ocean twist on an everyday product for most families. The company’s line of Nickelodeon-themed lunch bags featuring SpongeBob, Dora or Diego that kids can personalize launched last March at Canadian retailers such as Zellers, Toys ‘R’ Us, Wal-Mart and Sam’s Club. Sell-through to date has been steady, and Insignia is getting secondary orders for the product even without having sold its entire first run. ‘When Insignia approached us, I was immediately intrigued because it was a blue ocean idea of taking an old product and adding a twist to make it new to the consumer,’ confides Miller.

Similarly, Toronto’s Clean Freak Patrol sees putting Dora, SpongeBob and Diego on an existing non-alcohol hand sanitizer as a way to grow its business. After being contacted by Toronto-based Tag Agency, which searches out new licensees, Studio Licensing met with Clean Freak executives and worked out the details of a deal. The resulting backpack clip (US$1.99), filled with the aloe-based sanitizer, will be available in all Canadian retail channels by year’s end. ‘The program started because of a social issue in the marketplace, which is that kids are not educated in washing their hands,’ says Michael Morris, president and CEO of Clean Freak Patrol. ‘Our new deal brings kids’ favorite characters to our product line and offers us an opportunity to spread our message.’

Uncovering hidden potential

Miller and Studio are definitely not alone in recognizing the potential of combining an uncharted product with a license to further open up a retail program. For her part, Jamie Cygielman, SVP of consumer products at HIT Entertainment, is a firm believer in the strategy. ‘Non-traditional licensees help enhance existing programs,’ she says. ‘They introduce our brands to new consumers or help secure placement for them in new aisles or forms of distribution. All of these niche products create incremental distribution and revenue, as consumers find the brands in fun and surprising places.’ Perfect examples for HIT include Thomas & Friends and Angelina Ballerina customizable photo books that are available online at Shutterfly.com, and seasonal items such as Thomas & Friends and Bob the Builder bubble kits and sand toys from L.A.-based Imperial Toys.

In fact, these off-the-beaten-path product offerings are a welcome addition to most planograms, says Lisa Streff, VP of domestic consumer products at DIC Entertainment in L.A. ‘Retailers are anxious to identify and partner with companies that have a compelling product story to tell,’ she says. ‘It’s always our hope to find that golden ticket and identify a new company that is knowledgeable and experienced and has the wherewithal to expand into mass distribution.’

And there’s the rub. Identifying these partners is a challenging task. While every company has its own criteria when evaluating a potential partnership, most align with companies that share the same strategic vision, work ethic and, more importantly, believe in the property enough to sometimes go out on a limb. More often than not, they also want to follow standard operating procedure and ask to see the potential partner’s detailed marketing and promotional plan and review planned or anticipated retail placement.

According to Michael Peikoff, SVP of licensing and merchandising at Twentieth Century Fox, some of the questions licensors ask a potential manufacturer looking for incremental dollars and exploring licensing for the first time include, ‘How risk averse are you? And do you have the retail chops?’ Licensing, particularly for nascent licensees, he adds, is not for the faint-hearted or those who just have an eBay storefront and PayPal account. ‘We vet these companies, and our objective is to partner in success. Otherwise, it isn’t worth the time, effort or resources for either of us,’ says Peikoff.

‘Approaching a manufacturer new to licensing is challenging, but it can open up new doors,’ adds Leslye Schaefer, SVP of consumer products and marketing for Scholastic Media. That its brands have staying power because they are rooted in publishing benefits Scholastic when seeking out new partners, she adds. ‘It’s something that appeals to manufacturers because there’s a sense of stability.’

As for how to find these promising prospects, many licensors start by attending manufacturing-centric trade shows – such as Toy Fair in New York and Hong Kong, Food Marketing Institute Show, New York International Gift Fair and Licensing Show – and scouring retail floors for innovative products ripe for licensing. Oftentimes, the L&M team gathers for brainstorming sessions and keeps an ear to the ground for companies with a truly unique view and approach to the marketplace.

Scholastic Media discovered this unique sensibility in Cascadian Farms and ended up with Clifford Crunch Cereal, the first organic cereal to feature a licensed property on its box. The Young Scientists Club also sent Scholastic’s spidey senses tingling. The resulting Magic School Bus science kits line has grown from one to five SKUs since debuting in 2007.

New twists, core attributes

Above all, even the most out-there blue ocean product has to connect with and play upon the key attributes of a property. Damon Baker, manager of brand licensing at Nintendo, notes, ‘Non-traditional categories are viable particularly for our fan base, which is very passionate. Our core business certainly doesn’t want to forget about those consumers and fans that have been with us all along the way. We are happy to be doing apparel, toys and plush for all our contemporary fans, but we appreciate our core gamers and want to give them some retro or non-traditional categories that they will enjoy.’

Working with Venice, California-based blik, the gameco has developed both a contemporary and retro line of decorative decals that can be used to recreate a specific level of a game in a fan’s room or highlight a favorite character. The decals can be ordered online at blik.com or purchased at bricks-and-mortar retailers such as Urban Outfitters and home décor stores. Nintendo World in Rockefeller Center will soon have kiosks where fans can customize their own decals or pick from a variety of pre-made ones.

Enfield, Connecticut-based Lego certainly didn’t stray from the innate customizability of its classic construction toys when it looked to branch out into new categories over the last year or so. Seeking non-traditional partners helped Lego ‘backfill its already [established] licensing business with categories that can build the brand and are crucial for market credibility,’ explains Stephanie Lawrence, global director of licensing.

And what could be more Lego-esque, if not unusual, than customizable glasses frames? Licensed frames for kids are not new, but the ones slated to roll out at optical stores and opticians in holiday ’08/spring ’09 from Ronkonkoma, New York-based Aoyama USA are definitely putting a new twist on the concept. The line of frames (US$99 to US$120) offers children the opportunity to build their own look with interchangeable ear pieces, tips and personalized carrying cases.

‘The ophthalmic category was discussed for quite some time and we looked at several potential partners and ultimately chose Aoyama for its attention to detail and unwavering commitment to quality,’ says Lawrence. ‘We had a big placard [for the frames] at the Vision East show last April, and retailers were taking the line, sight unseen,’ she says, adding that retailers are very receptive to innovative products that can start a new conversation with their consumers.

Scrapbooking is getting a similar Lego touch. A wide assortment of scrapbooking papers and accessories targeting adults and children should be landing at US arts & crafts retailers including ACMoore and Michael’s this fall. But it’s the online component of the product range that plays into Lego’s key attributes. Users visit Creative Imaginations at www.cigift.com, where they customize their own web page by clicking on Lego imagery, downloading it and printing it on their own specially chosen high-quality paper.

Got lemons? Make low-sugar, organic lemonade

Perhaps nowhere has the blue ocean notion been applied more rigorously in recent years than to the food category. Forced by the now-global concern over childhood obesity to present kid consumers with healthy food offerings, licensors have been hooking up with all varieties of manufacturers and growers new to the business, replacing lost income, if not creating new sources. Historically, food sits at the lower end of the royalty scale (due to the impact of slotting fees paid out by licensees), but the brand equity pay-off is often worth it.

For example, Disney Consumer Products was so encouraged by its 2006 partnership with grocery giant Kroger that produced the groundbreaking direct-to-retail Magic Selections line of healthy foodstuffs, it’s gone on to uncover new food categories to keep swimming in the blue ocean. Most recently, DCP paired with Santa Ana, California-based Stremicks Heritage Foods on a Little Einsteins milk beverage line fortified with an Omega-3 DHA nutrient that supports brain and eye development and is a source of calcium for strong bones and teeth. The product, currently available in US grocery stores, is the first to launch as part of a series of healthy dairy and non-dairy beverages currently in development by Disney and Heritage.

Eating fruits and vegetables has also gotten more fun, thanks to increased interest on the part of licensors in teaming up with the likes of Wallingford, Connecticut-based Edible Arrangements. The company built on its licensing business this past January with the introduction of a Kids & Kids At Heart collection that included The Hello Kitty Friendship Bouquet. This assortment of fresh fruit features special Hello Kitty-shaped pineapple chunks stuffed into a themed container. Besides Hello Kitty, Edibles is having success with Mickey Mouse, Dora and SpongeBob assortments distributed through 700 retail outlets across the US, as well as online and via a phone ordering service.

This kind of non-traditional category was a perfect fit for Hello Kitty, says Janet Hsu, president of Sanrio Consumer Products. ‘It reinforces the relevancy of healthy living and brings fashion to fruit.’ What could be more Hello Kitty than that?