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Read. No, really. Read it. It will be obvious if you skip this necessity.

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An easy way to get started on the topic of Brand Licensing is to break the subject into its two component parts - brand and licensing.

Let's start with the latter part first. What is licensing? Licensing means nothing more than the renting or leasing of an intangible asset. An example of intangible assets includes a song (Somewhere Over The Rainbow), a character (Donald Duck), a name (Michael Jordan) or a brand (The Ritz-Carlton). An arrangement to license a brand requires a licensing agreement. 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). Before we move any further, let's discuss what we mean when we use the term brand.
What Is A Brand?
According to Philip Kotler and Gary Armstrong a brand is defined as "a name, term, sign symbol or combination of these, that identifies the maker or seller of the product" or service. The brand or its legal term, trademark, affixed to the product helps the consumer understand where it was manufactured or produced. In essence, a trademark simply states "I made this". From the brand owner's perspective, it distinguishes the products or services from those of its competitors. Consumers, in turn, can be assured the product they are purchasing is exactly what they want. Based on its reputation, a brand will convey a level of quality, reliability and durability.
Why Do Companies Brand Their Products?
The primary reason companies choose to brand their products is to differentiate them from their competitors' products. For example, most consumers have no problem differentiating a Coke from a Pepsi. By giving their products a brand, a company or brand owner can begin to communicate with their consumers regarding the attributes of their products. Over time, a consumer can rely on the brand to connote not only a product's value but also its reputation. If a consumer likes what a brand represents and they have purchased it before, there is a higher likelihood they will choose the brand of their preference over a competitor. In fact, consumers will often purchase a brand for the first time if it has a strong reputation or if it is used by friends or celebrities. Brands also lead consumers to develop certain expectations of products. The longer they experience predictable, consistent quality and performance, the more they will expect any new products sold under the same brand to have the same. The brand, therefore, adds value to these products.

For example, customers expect new products sold under the BMW brand to be of the same quality as an existing BMW. Consumers will associate a brand with a certain price level and standard of performance. If we look at two distinct watch brands: Rolex and Timex, one is associated with a high price and high performance and the other with value through a low price and durability. These same attributes can also be of benefit to businesses. Many companies as well as consumers look to UPS for their shipping needs because Brown has developed the reputation of actually adding value to an organization through its understanding of its customers' needs and its consistent reliability.

When consumers and businesses get into the habit of buying certain brands, they automatically buy them again. This reduces the amount of time and promotion needed to make future sales, and it results in brand loyalty. According to Philip Kotler, brand loyalty, in marketing, consists of a "consumer's commitment to repurchase or otherwise continue using the brand" and can be demonstrated by repeated buying of a product or service or other positive behaviors such as word of mouth advocacy. Brands usually pass through successive stages of brand loyalty, which is the customers' allegiance to a particular brand. The stronger the brand loyalty, the higher the value of the brand and the greater revenue it will drive for its owner.
Why Do Companies License Their Brands?
As we said above, 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 will have a good understanding of the equity of the brand. A brand's equity is derived from the awareness and image a brand holds with its consumers.

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; Apple could have chosen to manufacture and distribute these themselves, but decided they were not core to the business and therefore, chose to satisfy the need through licensing. 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. All these accessories are sold by licensees.

Apart from benefits to licensors, there are benefits to licensees as well. 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, and the logos and trademarks associated with those 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. 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. For example, Crest several years ago extended its brand from toothpaste into whitening (Crest Whitestrips). Before, Procter & Gamble (P&G), the owner of the Crest brand launched Crest Whitestrips, they conducted research to understand if the brand had permission to enter into the retail whitening category, long held by established brands such as Rembrandt and Aquafresh. 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. As we know Crest Whitestrips have performed well since their launch in the market and have achieved high rankings and advocacy ratings. While P&G decided to source the product overseas and distribute globally, they could have chosen to manufacturer it themselves and distribute or enter the market through licensing. In the case of P&G's Mr. Clean brand, P&G discovered that consumers expected them to sell cleaning accessories under the Mr. Clean brand. In this case, 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:
What Are The Expectations Of Licensors And Licensees?
Licensors expect that the licensee will be committed to investing in the category they license. This means they will work hard to understand the essence of the brand and develop their licensed product in a way that captures that essence. In other words, the licensed products should connect with the consumer both functionally and emotionally. If the licensee does this, the products they develop will normally be approved without delay or difficulty. To achieve this takes time and money. So while both parties want to commercialize the category as soon as possible, the licensor will expect the licensee to start with building the brand into the product first. The licensor will also expect the licensee to be familiar with the contract and to meet the obligations of the contract. That is why it is important for the licensee to ensure all employees in the licensee's organization working on the license are familiar with its contractual obligations. For example, when a product becomes approved, the licensor will expect the licensee to commercialize the licensed product expeditiously in each of the authorized channels. Finally, the licensor will expect the licensee to meet or exceed the projected sales targets for the category as outlined in the contract. When all of these things happen, the result can truly be award winning products that meet or exceed annual sales and royalty projections.

Licensees, in turn, expect that the license they have acquired will provide them with sales growth, and rightfully so. This sales growth may be in the form of growth within existing channels or the opportunity to enter a new channel or new market. To accomplish this objective, licensees expect that the brand they are licensing is as strong or stronger than they believe or have been told, that it will open doors and ultimately help them meet or exceed their business objectives. Moreover, licensees expect that the licensor or their agents will run a simple, straight forward licensing program that will not administratively tax their organization. Finally, they expect that the licensor will approach the licensing relationship with a win-win attitude that will allow them to move quickly to take advantage of opportunities that present themselves. Because licensing contracts obligate the licensee to sales targets and royalties, the licensee's goal will be to quickly achieve sales of licensed product to meet these requirements.
Royalty And Payment Flow
Royalty is the monies that are paid to a licensor by the licensee for the right to use the licensed property. It is calculated by multiplying the Royalty Rate by the Net Sales. Below is an example of how the royalty payments would flow from the retailer to the licensee and ultimately to the licensor. The example assumes a 10% royalty rate.

Brand Licensing is probably one of the least explored methods to enter a new product category by most brands. However, we hope that through this article, we have been able to explain what Brand Licensing is and the numerous benefits that it has to offer both to licensors and licensees.

Needless to say, the entire process is lengthy and time consuming. One must also keep in mind that the goal is not to achieve the license but to make a success of it and the activities that follow the signing of the contract. These processes, if executed well, on the one hand, can ensure huge success of the program. While on the other hand, if either the licensee or the licensor do not live up to their commitments, it can affect sales, and more importantly the reputation of the brand.

The Blake Project offers a brand licensing workshop to help brand owners develop a strategy for licensing or refine an existing one. Another way we serve our licensing clients is through Brand Licensing Audit.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education
FREE Publications And Resources For Marketers

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Brand Licensing Basics | Branding Strategy Insider

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An easy way to get started on the topic of Brand Licensing is to break the subject into its two component parts - brand and licensing. Let's start with the latter part first. What is licensing? Licensing means nothing more than the renting or leasing of an intangible asset.

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Yup. You guessed it. This needs to be read, too. Sigh. Trust me, it's groovy. And, necessary for project success. Plus, it will make you smart. So, yah. Do it with passion.

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When your niece's birthday is coming up, you don't have to go far to find a gift with Minnie Mouse screen printed on it.

Why is that? Why are some brands so ubiquitous and easy to find?

The answer is brand licensing. Disney doesn't manufacture every T-shirt or coffee mug with one of their characters on it - thousands of other businesses contract with Disney for the right to use their characters and other trademarks. And those businesses handle the nitty gritty details, like producing and manufacturing those products.

OPEN Forum describes brand licenses as "legally protected agreement[s] through which a third party leases the use of the company's brand, name, or likeness from another entity." In its simplest form, it's a contract that allows one company to use another's trademarked creation.

Once you get past the basics, a brand licensing agreement accounts for every detail involved in how two companies will work together. For example, the licensee (the company buying rights to license a brand) often pays a portion of each sale of the licensed product back to the licensor (the brand being licensed.)

Benefits of Licensing Your Brand

As a retailer, you have the option to be on both sides of brand licensing. Depending on the specific goals you're hoping to achieve, it might make sense to either license your brand or to lease the rights to another, usually larger brand (or both!)

When done right, brand licensing can be a huge boon for both companies. From tapping into new audiences to earning incremental value, there are countless benefits for both licensee and licensor. That's why it's such a common arrangement in today's marketplace. And that's why it's an option retailers should be familiar with.

As a reminder, licensing your brand means you give another company permission to use your brand's logo, name, or other intellectual property (IP) on their products. And you don't have to be a behemoth brand to make it happen. If your brand has value, even locally or within a targeted niche, you can license that brand.

There are a myriad of ways an arrangement like this can boost your business. Let's talk about a few of them.

Grow Your Brand and Reach a Wider Audience

Licensing your brand essentially means forging a partnership with another business - one of the main benefits of marketing partnerships is being able to reach a wider audience. Working with another brand gives you instant access to their customers and audience. Deliberate brand licensing creates an immediate opportunity for your brand to grow and expand strategically into a new age demographic, geographic location...you name it.

Build Stronger Relationships With Customers

As your brand grows, your customers' desires and expectations grow with it. As a small retailer, it can be hard to grow your business and product lineup in a meaningful way that keeps pace with those customer expectations. Licensing your brand is one way to build a bridge between your manufacturing and product design capabilities and the products your customers are looking for.

Generate Incremental Revenue and Diversify Your Revenue

With a brand licensing agreement, and as the licensor, you'll typically receive royalties for every licensed product sold. Royalties aren't typically going to take your business from $1,000 in revenue to $1 million, but they can be a good way to add incremental value and diversify the ways your brand can make money.

Depending on the licensed product, that incremental revenue can even help to smooth out seasonal swings in your retail store.

Protect Your Brand Against Unauthorized Products

If you've ever been to a public market, you've probably seen unlicensed and counterfeit products being sold illegally - think of those $20 "Coach" handbags or $10 "Ray-Ban" sunglasses.

When a brand gets big enough, counterfeiters are never far behind. Licensing your brand can help you stay ahead of this curve and help you to be proactive about protecting your intellectual property. A licensing agreement also enables you to take steps toward protecting your brand's prestige with explicit terms around discounting and similar issues.

How to License Your Brand

If you've decided brand licensing is a good fit for your retail business, you might be wondering how in the world to get started. An effective brand licensing strategy ensures that your brand's assets are safe and protected, and that any licenses you hand out will ultimately benefit your brand. Here's how to get started.

Step 1: Protect Your Intellectual Property

Protecting your intellectual property is one of the most important factors behind licensing your brand. The last thing you want is to accidentally give someone full, unfettered access to use your brand assets without getting anything in return.

If that sounds crazy, consider Dale Earnhardt Jr. who, for years, didn't own the license to his own name. Or the creators of Superman, who sold 100% of the rights to the character for a measly $130. Or The Beatles, who sold off 90% of the rights to their likenesses. Think about all the products you've seen with those iconic bowl cuts, and then imagine The Beatles themselves only seeing 10% of the royalties.

The best way to protect your brand is to work directly with a lawyer who specializes in intellectual property - and to get started early. Ensure your brand's assets are trademarked and protected from the very outset. Then you can think about licensing them down the line.

To find an intellectual property lawyer in your area, try searching Avvo's database.

Step 2: Do Your Research

Licensing your brand isn't a one-and-done process. If you're looking to aggressively pursue brand licensing as a growth engine for your brand, it's best to create an overarching strategy that outlines what you're looking for in a potential licensee. That way, you can make a quick decision about which companies to approach and approve.

So, how do you go about drafting a brand licensing strategy? It all starts with extensive research. Like any partnership, you'll evaluate potential licensees to ensure they're a good fit for licensing your brand. There are a ton of factors that go into brand fit, but let's boil it down to a few questions you should consider:

Are your customers interested in this product? If customers frequently ask if you offer a product (and you don't), that's a good opportunity to offer someone else a license to produce that product under your brand name.

Does your brand's equity translate to this product? Sports teams license their logos and names to apparel companies because fans snap up Red Sox hats like there's no tomorrow. That's fits. It doesn't make quite as much sense for Tampax to license their brand to a company that makes breakfast cereal.

Does the licensee have the operational capacity to add value? You gain the most from brand licensing agreements when the licensed products sell (a lot.) That's why it's important that the licensee has the operational capacity to make it work. Can they produce enough of the licensed product to make the agreement lucrative?

You know your brand and audience best, but a qualified licensing agent can help you answer these questions and will become indispensable when it comes to the next step.

Step 3: Set Terms and Restrictions

Once you've found a potential licensee who's a good fit for your brand and customers, it's time to draft the licensing agreement. As you just read, you should work with a licensing agent or attorney to help ensure your contract includes all the necessary terms and that the agreement is legally binding.

As your agent draws up the license, there are several terms and restrictions you'll decide on. These lay out the specifics of the partnership and set expectations for both you and the licensee.

Royalties

How will your portion of the revenue from licensed products sold work? Your brand license will go into extensive detail on the structure of your financial compensation. The licensee may pay an initial flat fee to license your brand, and ongoing royalties (usually a set percentage of unit price or specific dollar amount) for each licensed product sold.

Products and Quality Assurance

When you give another company permission to use your name, logo, or likeness on their products, you're taking a calculated risk. Your brand is automatically associated with - and to some extent, held accountable for - the quality and content of those products. That's why it's vital to include quality assurance terms in your licensing agreement. The license will also lay out the specific products the agreement is limited to.

Exclusivity

The vast majority of brand licensing agreements are non-exclusive. That means you can license your brand to as many competing apparel manufacturers as you choose. Even though non-exclusivity is the norm in brand licensing, it still needs to be outlined in the contract. In some cases, you may choose to offer an exclusive license - in which case, you can often command higher royalties.

Moving Forward With Licensing

No matter how big or small your retailer is, brand licensing is always a possibility down the line. That's why it's beneficial to understand the basics of what it means and how you can obtain a brand license. Whether you become licensee or licensor is up to you, your brand, and your goals.

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Licensing 101: Brand Licensing and What Every Retailer Should Know

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When your niece's birthday is coming up, you don't have to go far to find a gift with Minnie Mouse screen printed on it. Why is that? Why are some brands so ubiquitous and easy to find? The answer is brand licensing.

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You and your team have been contracted to create a new brand for a Syracuse NBA team. Syracuse has recently been granted a new franchise. Your job will be to create a new name, logo, mascot, color scheme, team slogan and uniforms (home, away and special edition theme). In addition to creating a new NBA brand, you will need to an itemized plan of how you will license the logo/team (i.e. YES - you need to read the articles to your left and research!). You also need to create one unique and creative product for licensing for your new NBA team. Judges will choose the franchise winner.

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So, before you say you don't know what to do, read this. It spells it all out in an easy to check off list:
- Team Name (Location, Syracuse)
- Logo (Design it!)
- Mascot (Design it!)
- Court (Design it!)
- Team Colors (Use fabric, or visit your local hardware store for paint sample papers)
- Team Slogan (You must design it!)
- Uniforms (Design it!) You need a home uniform, away uniform, and on 'special' uniform.
- A plan of action written out that described the process for branding and licensing something. This will require you to read the articles posted AND look up more information. STOP YO COMPLAINING!
- Create one unique and creative product for your new NBA team (merchandise with your logo). What's your Target Market for your Product, Price, Promotion,  and Place it will be sold. Create an ad/market strategy for this creative item.
- Your presentation can be via GoogleDocs, Visme, Prezi, Glogster, etc. Total free choice.
- A breakdown of what each team member did. NO FREE LOADIN'.