The mechanism and system for the creation and management of contracts between the brand owner and another person or an organisation that is willing to use the brand associated to a product, within an agreed territory, for a certain predetermined time period is known as brand licensing. Brand owners generally use licensing for the extension of trademark or character into a completely distinguished product. Brand licensing is seen as a well-developed concept for the business encompassing both the trademarks and patents. Licensing can be used for any strong brand. At the core, brand can be seen as the situation when a firm rents it’s brand to some Other firm to derive certain advantages from the association. Brand licensing is beneficial as the company that owns the brand it can simultaneously use and rent the brand for a stipulated fee from the other firnl. The renting out of the name, mascot and logo of a university to produceB of apparel can be seen as a familiar example of licensing. Licensing provides the opportunity to famous universities to earn a lot of funds. Most of the recognised schools and institutions have now dedicated licensing managers since renting out the brand equity has turned out to be a main source of income. Despite being a good tool for earning some excess money, brand managers have a lot of concerns regarding licensing, since the firms who use the brand equity may neglect the best interest of the brand. Thus, it is very important to monitor brand licensing so that a good image of the brand can be sustained in the long-run.
Importance of Brand Licensing
The importance of brand licensing is described below:
- Importance of Brand Licensing
- Trademark Protection in Category
- Brand to Gain Incremental Shelf
- Access to patented Technology
- Satisfy Consumer Needs
- Provide Market Support
- Increased Consumer Connections
- Entry into New Distribution Channels
- High Preference to Unlock Brands
- Test Viability of new Category
- Effective Way to Combat Rival
Trademark protection in Category
A brand has to be aggressively sold in a category if it wants to take the advantage of the trademark protection related to that product category. Other brands might claim the rights to utilise the trademark if the category does not have any merchandise or is left unused. Through licensing the brand owners can address the requirement of fulfilling the standards of commerce by expanding the brand into a certain category.
Increased Consumer Connections
Licensing helps in gaining knowledge regarding the categories which are licensed as well as improving customer relationships. There are numerous beneficial opportunities regarding maintaining good relations with the customers when a brand is expanded through licensing. A brand owner can acquire more knowledge about the brand by providing a toll free number or a survey on the product package.
Brand to Gain Incremental Shelf Space
A lot of exposure will be received by the brand in a new category and in outlets where it is sold if it is expanded through licensing into a new category. For example, a brand can gain new heights of exposure in a new category if it is sold via popular retail chains.
Entry into New Distribution Channels
The access to different distribution channels can be obtained with the help of licensing relationship when the brand is licensed to a producer who is selling into a retail channel in which the presence of the brand is still lacking.
Access to Patented Technology
Proprietary innovation to the brand owner is offered by majority of the firms which opt for brand licensing. When the position of the brand is further strengthen by the patented technology, a lot of customer appreciation and increased demand can be experienced by the new product offering.
High Preference to Unlock Brands
The latent value potential of the brands can be unlocked with the help of licensing. This also helps to meet the increased demand. Licensing facilitates the entry of brand owners into the new categories in a very short period of time and thus provides them with the opportunity to increase their presence in stores and media.
Satisfy Consumer Needs
Firms can meet the requirements of the customers in those categories which they do not mainly deal in, with the help of brand licensing. For example, the auto adaptor kits, Nike-4- running shoe and various Other products are included in the licensed products for the iPod.
Test Viability of New Category
Licensing is used by some licensors for testing the viability of a new category without making any huge investment in the new production processes, facilities and machines. An extensive and increasing flow of revenue from the royalty can be generated with the help of a well-operated licensing plan and this will further help the main business of the organisation.
Provides Market Support
Marketing assistance to the main business of the firm is provided through brand licensing. There are many situations where marketing assistance is provided by the licensee to the licensed category. This helps the brand get more exposure. For example, a product will generate sales and its brand will be highly promoted if it gets placed in a weekly magazine by the licensee. Similarly, a movie receives promotion and exposure if the costumes and other merchandise related to it are placed in a retail outlet.
Effective Way to Combat Competition
Brand licensing can prove to be an intelligent way to neutralise the competition in situations where rival firms control a new product category in which the brand wants to make an entry. Through this offensive approach, the rival firm gets compelled to deviate from its main course of business.