The Danish toy manufacturer LEGO is known worldwide for its LEGO bricks. LEGO is a strong and wellknown 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 US and Japan, LEGO was not placed among the top 10, 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 ahead of brands such as Nestlé, Rolex, Jaguar and Ferrari.
2. A US survey, conducted in Europe, the US and Japan, showed that LEGO was number 13 in the list of most appreciated brands.
3. A survey by a German market analysis institute showed that LEGO was one of the most wellknown toy brands in the new German Federal Republic, with an awareness share of 67 per cent.
Matchbox was number two with 41 per cent.

The LEGO management decided to exploit this strong brand image and a managing director for the new business area LEGO Licensing A/S was appointed. The company’s objective was to generate income from licensing suitable partners, which would use the LEGO brand in marketing their own products.
The LEGO management noticed that Coca-Cola had an income of Danish Kr 3 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 KABOOKI (the company name is derived from ‘kabuki’ a traditional form of Japanese theatre, significant for colourful costumes), as it was given the rights to use the LEGO brand in connection with the production and sale of children’s clothes. KABOOKI’s managing director, Torben Klausen, was previously employed in LEGO’s 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. From 1993 things developed very quickly. By mid-1997, KABOOKI, which had 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 said:

We received a strong international brand from the first day. But with selling LEGO children’s clothes 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.
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 KABOOKI?
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. KABOOKI) apart from the use of the LEGO brand?
5. What values/benefits can the licensee transfer to the licensor?

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