The Clean Boot Blog

Ever wondered how PepsiCo, a company focused on catering beverage needs of consumers, sells branded tees or caps? While companies sometimes produce these things themselves, other times they may select another producer to manufacture and market these items under their brand name. In return for printing their brand name, these brands ask for a certain sum of money from the licensees. Such a settlement is called ‘Brand Licensing’ that can be defined as a contractual agreement that entitles a company that markets a product/service to lease a brand from the producer. The brand owner gets a portion of the profit in return.

Benefits of Brand Licensing to Manufacturers and Licensees

There are a plethora of benefits of brand licensing to producers and licensees. That is why this approach is so powerful. Service providers borrow the rights to a brand to integrate into their products, but generally, they do not share the ownership. Having access to prominent brands, their logos and trademarks, provide tremendous benefits to the licensee.

The most significant of these is the marketing power the brand transfers to the licensee’s merchandise. Building a brand is a tedious process and can take years, hefty finances and above all lots of luck.

Benefits for the Licensee

Instant Recognition

You may have the best product in the world but it’s of no use if it fails to grab customer’s attention in the market. Having a brand license means immediate international recognition. While you may not be able to measure its worth now, the revenue the manufacturer will generate in the long run can make all the difference.

Augments Credibility

Let’s take an example of a software house that develops amazing gaming software. They have introduced their products to a number of retailers, but all have turned them down. What if they can license the FIFA trademark? They now stand to gain instant authenticity and credibility to their games.

Cost Reduction

A manufacturer that holds the rights to license a brand usually acquires the licensor’s chosen prices by its suppliers. This can include a wide range of factors including resin, delivery and other services, Also, they’re entitled to gain access to the brand’s style guide, which provides them with the opportunity to create better products. Having the licensor’s style guide not only helps with design time but also facilitates the approval process and guarantees that their items represent the same look as the other licensed service providers.

Enter New Regions and Distribution Channels

Taking on a brand license can help service providers and producers gain access to new distribution channels and even enter new regions. For instance, by licensing the rights to a mid-range brand, they could easily get access to departmental stores and increase their income. Similarly, a Europe-based manufacturer may be able to gain access to the U.S. markets by licensing any of the major U.S. brands.

Opens the Door of Opportunity

Once a manufacturer or service provider acquires one license, it will open more doors in business. They will more likely get more licenses from popular brands as the brand owners know the company meets the standards for the licensing process.

Benefits for the Licensor

Marketing Support

In many cases, the licensee will be needed to provide marketing funds to back the licensed category. This marketing commitment, in turn, provides supplementary support to the brand presence. For instance, if a licensee markets its product in a regular circular and gains access to an end-aisle display, the marketing doesn’t only augment product sales but also advocates the core property.

Access to New Channels

Licensing provides the brand an opportunity to check the feasibility of a new category without actually contributing anything additional to the manufacturing process. In a fully-established licensing program, the property owners preserve control over brand presence and get additional profit in return.

Enter New Business Regions

Through licensing, the licensor can test new business ideas or move into new regions where there are more room and acceptance for their products. Since manufacturing and distribution is the responsibility of the licensee, there’s very little brand engagement with the product as well as no inventory commitment at all.

Strategic Knowledge

Since licensees are experts in their specific fields, they provide the brand access to their intellectual property. As true partners, both parties can begin to share platforms where they share ideas and work in collaboration to grow the licensed category.

In conclusion, brand licensing offers many benefits to both parties, but more than that, it empowers consumers to invest in products and services they want from their favorite brands.

Are you interested in upgrading your brand influence? What strategies do you have in mind to strengthen customer relationships and generate a continuous stream of revenue through royalty returns?