Why Do Companies License Their Brands | Business Branding

1. WHY DO COMPANIES LICENSE THEIR BRANDS? PETE CANALICHIO A licensing agreement authorizes a company which markets a product or service (a licensee) to lease or rent a brand from a brand owner who operates a licensing program (a licensor). Companies who know their brands well have a good understanding of the equity of the brand. BENEFITS FROM A BRAND’s EQUITY A brand’s equity is derived from the awareness and image a brand holds with its consumers. 1. Licensing enables companies whose brands have high preference to unlock a brand’s latent value and satisfy pent up demand that exists. After Apple launched the iPod a number of years ago, it created an immediate need for accessories. Licensing the iPod brand enabled many companies to produce all kinds of terrific products to make the iPod more user-friendly and enhance the listening experience. Examples include the Bose Sound System with iPod docking station, other products that enable an iPod to be heard through a vehicle’s built-in stereo and iPod holding devices that allow users “to take their music with them” when they go running. 2. Licensees lease the rights to a certain property for incorporation into their merchandise, but traditionally they do not share ownership in it. Having access to major national and global brands gives the licensee significant benefits they previously did not possess. The most important of these is the marketing power the brand brings to the licensee’s products. Building a brand from scratch can take years, millions of dollars and a lot of luck. 3. The company which licenses a brand gains immediate access to all the positive brand and image building that went before it. The licensee also takes with them the reputation of the licensor. Often this “halo” effect can translate into many intangible and immeasurable benefits such as returned calls, an agreement to meet, or simply the benefit of the doubt. USING LICENSING TO ENTER NEW CATEGORIES Often brand managers will enter or extend their brands into new product categories to drive strategic growth for the company. P&G wanted to find out if consumers would expect Crest to offer a whitening product and if so, based on the preference for the Crest brand, purchase this new product. While P&G decided to source the product overseas and distribute globally, they could have chosen to manufacture it themselves and distribute or enter the market through licensing. P&G discovered that consumers expected them to sell cleaning accessories under the Mr. Clean brand. P&G decided to enter the market by licensing the category to Magla, a company that already had expertise and presence in this category. The diagram below illustrates the different stages that are a part of the Licensed Product Process Flow Grab V aluable Resources from Brand Licensing Experts for 100% Free Today Are you interested in extending your brand’s influence, strengthening consumer relationships, and generating unlimited revenue from guaranteed royalty payments? Get Your FREE Membership Today PeteCanalichio.com/fast-track PETE CANALICHIO