Extend Your Brand's Reach With Licensing The practice has prospered for nearly a century, and the playbook is dogeared, yet many brand owners hesitate.
By Pete Canalichio •
Opinions expressed by Entrepreneur contributors are their own.
Since the origination of brand licensing in the late 1920's to early 1930's with Steamboat Willy, licensing has grown at a unfettered rate. So much so that brand owners have wondered, "Should I license? Will licensing my brand encourage growth? Or, will licensing cause my organization to enter a state that will deplete the goodwill I have built over time?" These are all valid questions that deserve thoughtful answers, and if the question whether licensing is a legitimate route to pursue is being pondered, the following information will help clarify it.
Why license?
There are a variety of reasons why brand owners should license their brand. If a brand has a high preference, licensing enables the brand owner to unlock its latent value and satisfy pent-up demand. Through licensing, the brand has the ability to enter new categories in a matter of months, gaining an substantial brand presence on store shelves and often in the media. Licensing also affords brand owners to try out new potential businesses or untapped geographical markets with a relatively small up-front risk, virtually eliminating the cost associated with building and staffing internal operations.
Related: Licensing Another Brand's Name Could Help Your Company Grow
Another advantage of licensing includes the transfer of knowledge from one source (the licensee) to another (the brand owner). Moreover, the brand owner gains access to the specifics of the licensee's operations. This partnership provides an inside view of methodologies and process throughout the licensee's organization, many of which may be better than within the licensor's own organization.
Also, any newly created technology or innovative products that the licensee intends to develop using the licensor's brand are discussed prior to creation. Furthermore, brand owners gain access to a licensee's distributor and retailer relationships, which creates an opportunity for the brand owner to develop their own relationships. Having insight into this knowledge can drive a brand owner's core business, proving to be tremendously profitable.
Will licensing encourage growth?
Licensing, if correctly performed, will encourage the growth of a company and its brand in untapped markets irrespective of size. The act of leasing the brand to a licensee enhances the brand's presence and encourages brand loyalty through constant exposure. The combination fosters growth and increased awareness.
Related: Market Research Is Key to Recognizing Licensing Opportunities
Extending brands through licensing enables brand owners to dedicate their focus toward their core business. The licensee, in turn, can focus on fashioning newly branded products in the categories they have permission to enter. This is an extremely beneficial aspect of licensing that is foundational to its success.
Will licensing reduce a brand's value?
Unfortunately, the merits of licensing have come into question as many horror stories have come to light. Certain licensees have exploited organizations' intellectual property and over-extended into misaligned categories. While brand licensing, when practiced poorly, can manifest itself in malfeasance, those practices should not be attributed to brand licensing, per se. It is a rare occasion when negative consequences grow directly out of a licensing agreement. So, don't let another's inexperience or misdeeds dictate the decision to expand through licensing.
Related: Why Branding Experts Need to Step Out of Their Silos
Brand licensing builds brand equity. This is directly attributable to its repeatable and scalable strategic platforms. As such, licensing can grow a brand in a variety of ways and unbridle a company's resources for other initiatives that are core to the business. Together, licensing amplifies a brand's significance and reinforces the organization's position in the marketplace.
Why should brand owners license?
Honestly, there is no single answer. Brand owners might choose licensing for a multitude of reasons:
- Licensing requires limited time and resources
- Licensing encourages expansion and growth
- Licensing extends brand awareness
- Licensing builds brand equity
- Licensing generates revenue
Of course, there are negative sides to licensing, but with sufficient research and best-in-class licensees, these pitfalls are avoidable. Thousands of brands and organizations are taking advantage of licensing. Therefore, refusing to consider its merits based on uncertainty or lack of resources might be shortsighted. The benefits for brand owners are too many not to consider it.
