Why Lowe’s Will Leverage NFL IP to Sell League and Team-Branded Merchandise
BY ADAM GROSSMAN
Lowe’s announced earlier this week that it will begin to “carry more than 10,000 licensed NFL-branded merchandise items.” This includes products with NFL league and team logos for categories such as tailgaiting, “homegaiting”, grills, décor, automotive, pet, and holiday items.
One common question Block Six Analytics (B6A) receives is what is the value of sports properties’ IP rights. In particular, how can both a potential licensor (typically a property) and licensee (typically a company) determine the revenue and brand impact that comes from licensing the marks, logos, likeness, or image of a league, team, athlete, or event.
To answer this question, B6A created the Intellectual Property Analysis Platform (IPAP) within our Partnership Scoreboard. IPAP enables us to analyze the expected lifts in top-line revenues, gross margins, and operating margins that can occur from licensing IP.
Examining both Bud Light and Lowe’s NFL partnerships demonstrate how we can apply this type of analysis. Bud Light has used NFL team logos on its cans since the beginning of its relationship with the league in 2015. That season, “A-B saw volume increases of 3.8 percent…in markets where Bud Light was sold in cans featuring local team logos” as compared to the prior year when no logos were featured on the cans.
Bud Light has generated consistent value from local team logos in following seasons as well. The NFL-licensed cans have now become “its most powerful ROI driver” for the brand overall (and not solely from its sports partnerships).
This is particularly notable because this impact on revenue is occurring even (or especially) within the “mature beer category.” Bud Light operates in a market with large competitors where brand differentiation is critical but difficult to achieve. One could argue the reason the category is “mature” is that consumers often will often not change consumption patterns and / or see relatively little differences in product quality between competitors.
Having NFL-licensed cans enables Bud Light to have a clear point of differentiation with its competitors in ways that also drive lifts in brand sentiment, engagement, and awareness. This is important because B6A’s proprietary research has discovered a strong correlation between lifts in these brand metrics and positive changes in revenue growth. Both IPAP and our Corporate Asset Valuation Model (CAV) incorporates this research to determine the tangible value of using IP using both revenue and brand metrics.
It is likely that Lowe’s factored in Bud Light’s licensing success into its decision to pursue its NFL partnership in 2019. Lowe’s operates in the very competitive home improvement retailer industry where it is often difficult to achieve differentiation. This is very similar to the challenge Bud Light faces in the mature beer category. NFL-licensed products can have a similar impact on revenue growth for Lowe’s as it did for Bud Light in ways that can be predicted and measured as B6A does with both our IPAP and CAV products.
While we have focused primarily on revenue increases, IP valuation must also factor in cost considerations. More specifically, the reason we use margin analysis with IPAP is that there often significant costs associated with leveraging IP. For example, Bud Light stated it has “put a lot behind this” relationship with the NFL including a “massive out-of-home” campaign and a 90-second commercial for the first game of the 2016 NFL season. Lowe’s likely will need to make similar commitments to maximize the benefits of using NFL IP for its product categories.
In addition, we are not to saying the leveraging the NFL license is the only benefit for Lowe’s in this partnership. In our previous post on the NFL-Lowe’s relationship, we showed how the company will leverage unique experiential marketing opportunities to help facilitate retention for both its more valuable “pro customers” (i.e. contractors that typically work on multiple projects) and its 300,000 in-store associates.
However, Lowe’s more recent announcement focused on NFL-branded merchandise highlights the importance of using sports IP for products as a way to differentiate a company in a competitive market. It is also one clear way that sports partnerships can add tangible value to companies that are difficult for other industries to replicate.