Brand Licensing: Everything You Need to know
Brand licensing pertains to the licensing or renting of intangible assets. The arrangement in licensing a brand must include a license agreement.3 min read
Brand licensing pertains to the licensing or renting of intangible assets. The arrangement in licensing a brand must include a license agreement, and the agreement gives authorization to another party to market a service or product. The licensee rents or leases the brand from the owner, which is the person who manages the license program (the licensor).
A brand can comprise of the following:
The brands may also come in the form of a combination, and such markers are identifiers of a brand or company. The brand also pertains to trademarks and are associated with a product, helping consumers understand where the product was produced. From the perspective of a brand owner, the brand differentiates the services or products from the competitors. Moreover, they can be assured that the product they purchase comes from where they desire. Based on reputation, the brand will convey the following qualities:
Brand License Basics
Brand licensing refers to a brand’s leasing to a business other than the owner of a company. For instance, a beer company that’s based in Europe can license its name to an American brewing company. The main reason why companies can choose to brand products or items is to separate themselves from competitors.
By licensing a brand, an owner can communicate to consumers about the attributes of items or products, and consumers can rely on brands based on reputation and value. In addition, companies who are familiar with the brand will have a solid understanding of the brand’s equity. The brand equity is based on image and awareness of a brand it retains with consumers. The licensing allows businesses whose brands retain high preference to unleash a brand’s inherent value while satisfying built-up demand within the marketplace.
Licensors expect that a licensee will invest properly in the brand, meaning that the licensee will work hard to understand the brand and foster the licensed product in a manner that captures the essence of the brand. The products should relate to consumers emotionally and functionally. If a licensee accomplishes this, the products created will be approved with no difficulty or delay. To achieve such a feat, it will take money and effort.
The license programs comprise a vital commercial element for corporate brands, allowing corporations to receive important rewards through the granting of third parties. Licensing not only generates new income streams. Licensors benefit in the following ways:
- Strengthening of relationships with customers while attracting new ones
- Extending brand awareness to potentially new consumers
- Market entrance into new areas without the burden of spending additional capital
- Promoting the brand via the licensee’s marketing and advertising efforts
- Trademark protections within licensed fields
Creating a Licensing Program
Before using resources and effort in setting up a license program, brand owners must assess how the license will be issued. Take note of the following five core attributes:
- Emotional Connection with Consumers: The trademark value pertaining to an emotional connection that consumers feel with a product. Further, a strong emotional connection instills a need that compels them to use that product.
- Brand Awareness: This means that the brand owner has invested in a trademark to foster a wide-reaching influence among consumers. Overall, positive awareness is a vital factor in marketing the brand
- Market Trend or Gap: Owners attempt to maintain and create a brand that’s consistent and is well-established. For instance, they must be the same products in similar categories, with similar features around the world. Moreover, the product must be tailored to a customer’s preference based on region.
- Market Opportunity and Consumer Permission: This pertains to the fundamentals of demand and supply.
- Unique Differential Point Regarding Competitor Brand: Introducing the product into territories and categories, brands will also come across newer competitors, which may be separate from the competitors of its vital products.
When it comes to developing a solid foundation of a license program, owners should consider the following:
- Brand essence (ex. soul and heart of what a brand stands for)
- Trademark history
- Brand promise (ex. what a customer expects from a certain brand)
- Important brand attributes (ex. characters that identify various aspects of the brand)
- Core existing product
- Goals and objectives of the program
- License vision
- Areas of concern
Any plan should also include a channel regarding distribution, target customer demographics, merchandise and marketing plans, and the competitive nature of the market.
If you need help with brand licensing, post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.