What is Brand Licensing?
Brand Licensing is a business methodology where the proprietor of intangible assets, for example, a brand name or logo, awards authorization to other businesses to use the brand on their products.
Commonly, this kind of plan requires the making of what is known as a licensing agreement or contract between the owner of the property i.e., licensor, and the one who gets permission to use property i.e., licensee. In its simplest type, it is a contract that permits one company to use another’s proprietory creation.
Let’s look at an example to understand this concept more clearly:
The Walt Disney Company and Forever 21 collaborated to launch a new collection of women’s apparel accessories. Here The Walt Disney is the licensor and Forever 21 is the licensee.
Importance of Brand Licensing
A brand does not grow out of anywhere. It requires appropriate strategies and a market approach. And brand licensing is one of the most powerful strategies as it benefits both licensor and licensee. It helps licensor to expand their brand in the market and at the same time help licensee, or manufacturers, to build global recognition.
Following are some substantial benefits of brand licensing:
1. Helps in expanding the market
It is nearly impossible for a brand owner to produce a huge quantity of products that meet global demand. Here steps in the concept of brand licensing allowing local manufacturers and producers to use the brand name or logo on their products, thus expanding the brand across the globe. For instance, Mickey Mouse as a cartoon character is loved by all and has been successful in reaching out to the world by granting license to various licensees to produce a range of products from Mickey Mouse toys to apparel to footwear and achieve global recognition.
2. Minimal Investment
Brand licensing agreements help brand managers in reducing their investment as now it is the manufacturers who are liable for everything from the development of the product to the management of inventory. Imagine your favorite candy brand on shoes. Looks strange, right? But not anymore. According to Complex, M&Ms has teamed with Adidas for a new line of sneakers to be launched in multiple colors of M&M like brown, red, blue, and yellow.
3. Increasing customer expectations
Customer’s desires and expectations grow when a brand grows. It might be tough for small retailers and producers to grow their business in a significant manner that maintains tempo with one’s customer expectancies. Licensing is one of the effective solutions to this problem. It bridges the gap between the product lineup of such businesses and the products their clients are searching for.
4. Creates self-employment opportunities
Such licensing agreements enable people to start their businesses. You can buy a license instead of the property and start making profits right away. Less upfront cash is required to pay for a license. If a licensee can improve a product, they can make even more money from your business. Even if the desired item is a brand or a brand name, the new business benefits from the awareness and knowledge of the information among the consumer.