What is Brand Licensing? The Know-How to Get You Started in 2023
In the ever-evolving world of business and marketing, brand licensing has emerged as a powerful strategy to drive growth and expand brand reach. In 2023, mastering the art of brand licensing is non-negotiable. It's your golden ticket to harnessing established brands' power and prestige, seizing untapped markets, boosting revenues, and forging invaluable alliances. In this comprehensive licensing how-to guide, we will explore the realm of licensing, its significance, essential requirements for success, and examples of those who have mastered it. Let’s dive in!
What is Brand Licensing?
Putting intimidating jargon – like licensing – aside, the arrangement allows businesses to essentially ‘rent’ a well-known brand. If you decide to grant a license to your brand, you would essentially be authorising another business to use your legally protected brand identity to produce and market products under your name, while they bear the responsibility for the manufacturing expenses instead of you.
Brand licensing is everywhere; operating behind the closed doors of new businesses and major corporations, from non-profits to luxury retailers. But it can be hard to recognise if you don’t know what you’re looking for – which is where we come in.
Brand licensing agreements create a wealth of opportunities for retailers to use to gain exposure to new demographics or extend into new product categories, and is a great way for brand owners to extend into new markets while driving revenue and recognition. Popular brands already have an established customer base and a foot in the door – not to mention consumer loyalty – making licensing an accelerated profit route for licensors as well.
Connecting a powerful brand – with an established brand identity and brand image – to an in-demand consumer product is a surefire way to increase sales and drive additional revenue for both parties. Licensing is one of the most widely utilised means of brand extension – largely because it allows a brand to achieve new product introductions without taking on the production and marketing efforts.
The importance of brand licensing?
Licensing is integral to modern branding. In today’s world of information overload, consumers want brands they can trust, and brands have to develop different ways of earning and maintaining that trust.
Licensed products are an effective way of telling a brand’s story, communicating its message, connecting with consumers (sometimes for the first time), and strengthening brand meaning and reputation. Licensed products can conjure up powerful associations, which can encourage a consumer to buy what they feel to be an extension of a familiar or beloved brand.
Smart brands today are brands that don’t just sell things; they need to mean something and affect change in accordance with consumer considerations, which are growing to expect impactful and meaningful B2C relationships. Licensing allows customers to engage with beloved brands in novel ways – at its core, licensing is a communications tool.
How it works
Licensing is the process of leasing or renting a brand’s image to manufacturers looking to sell products associated with the licensor’s brand. There are two components to licensing; the licensor (the entity licensing their brand) and the licensee (the entity paying for the rights to a brand).
Brand owners lease a trademarked or copyrighted entity (known as a property or intellectual property) for use in conjunction with a product, service, or promotion. The property in question could be anything from a logo, graphic, slogan, character, name – or a combination of any of these elements. IP (intellectual property) can refer to anything, such as:
- sports clubs and players
- fashion brands
- television, book or film characters
- book or film franchises
Strategically, licensing brands can be a win-win. From a brand owner’s perspective, it can allow you to gain a new customer base, market sector or distribution channel. From the perspective of a licensee, you benefit by capitalising on an already established brand instead of having to break into a cluttered market starting from scratch. And, most importantly, consumers are happy because they can stay loyal to brands they already know and trust – and engage with them in new and fun ways.
The Main Players
Licensing comes with its own lingo – but don’t be intimidated, here breaks it down for you:
- The Licensor: The brand owner, who owns the rights to the logo or brand name.
- The Licensee: The party – be they a manufacturer, retailer, or service provider – who is permitted to use the trademark or intellectual property.
- Retailers: The party that agrees to sell the developed products.
- The brand agency: The party that facilitates the deal and secures retailers for the licensor’s product and secures appropriate licenses.
- The style guide agency: The party that creates a useable style guide and visual assets for licensees. The most important assets found in a licensed brand’s style guide are its design elements, such as compositions, badges, patterns, type treatments, borders, frames, backgrounds, textures and iconography. These ready-made assets showcase a brand’s unique visual aesthetic and are the primary tools for developing new consumer products. A style guide allows for collaborations and international licensing and it forms an essential part of the licensing partnerships.
While we’re breaking down the lingo, there are some other key terms worth noting:
- Licensing: Leasing a copyrighted or trademarked brand identity. This encompasses the tagline, brand name, logos, and signature to use in the company’s product line.
- The Licensing agent: The company appointed by the licensor to manage the licensing programme.
- License agreement: The legal document signed by both licensor and licensee that permits the manufacture, sale and use of the licensed product against agreed commercial terms.
- Licensed product: The product or service that carries the licensor’s IP.
- License period: The term of the license agreement.
- License territory: The countries that the licensed product is allowed to be sold or used in during the licensing agreement.
- Royalties: The money paid to the licensor. Typically, the licensee pays a guaranteed minimum payment plus a royalty on all sales to the licensor.
- Minimum guarantee : The total royalty income that is guaranteed by the licensee.
Ten Benefits of Licensing
Licensing is immensely beneficial for all parties involved – when executed correctly. It allows brands and businesses to refresh products for contemporary audiences and respond to ever-changing marketing trends and consumer desires. Likewise, it allows customers to engage with beloved brands in novel ways – it can be playful, explorative, and fun, all the while giving brands a competitive edge, enabling them to enter new markets and boost retail sales. The main benefits of licensing are:
1. Increasing brand awareness:
Licensing will improve the use and visibility of your brand, and raise consumer awareness. Depending on the range and networks of a licensor or licensee, this could mean reaching new types of consumers in untapped areas or markets.
2. Improving credibility:
Working with a licensor or licensee who has established expertise could allow you to benefit from their credibility and capabilities.
3. Entering new markets and distribution channels:
Instant access to a brand’s customers, audience, and their brand reputation – and vice-versa. Whether you’re the licensor or the licensee, both brands lend each other their audiences to grow and expand – entering new markets is much easier when you’re partnered with a brand already established in said market.
4. Connecting with new customers:
A huge benefit of licensing is that it offers opportunities to connect with consumers in different areas, appealing to new target markets who have not historically been interested in a licensee’s product or service. It allows brand owners to move into new business areas without major investment in new manufacturing processes. It’s a win-win.
5. Forging stronger customer relationships:
As your brand grows, so to do your customer’s expectations and needs. Licensing your brand is one way to drive repeat sales and meet your customer’s growing expectations.
6. Boosting commercial revenue:
One of the biggest benefits of licensing your brand, or taking a license, is the additional stream of revenue created.
7. Protecting from counterfeit products:
Licensing your brand can help you stay ahead of the counterfeit curve.
8. Co-branding opportunities:
Licensing fosters the potential for diverse strategic collaborations, including co-branding arrangements, wherein both parties mutually license their brands with the intention of leveraging the combined power of their respective brand identities.
9. Increasing brand strength:
Licensing allows you to create long-term competitive advantages, as well as broadening your retail presence.
10. Capitalising on brand loyalty:
Take advantage of your customer base’s established relationship with your brand by providing products outside of your usual offerings.
What is the difference between licensing and franchising?
Licensing and franchising are like two sides of the same coin. Licensing lets you share your intellectual property, like your beloved brand or trademark, with others for a fair fee. The licensee retains control over their own operations and assumes manufacturing and distribution responsibilities.
On the flip side, franchising creates a deeper connection. As a franchisor, you empower franchisees to run an entire business using your brand, systems, and support. With specific guidelines and ongoing fees, it’s a dynamic partnership built on mutual growth.
Essentially, licensing is all about unleashing your brand’s potential, while franchising goes the extra mile with comprehensive business concepts and unwavering support.
Types of Brand Licensing and Who They’re For
- Brand and trademark: Businesses can own the rights to use a brand name or logo. These trademarks exist to prevent other parties from using a company’s assets without permission.
- Patents: Similar to a trademark, but patents are given to new inventions, not names or logos. A patent registers your invention and lets you take legal action against anyone who makes, uses, sells or imports your invention without your permission.
- Character, entertainment or art: Characters are another kind of trademark that brands oft license. An obvious example? Global brand superstars: Disney. Their characters are used across all sorts of markets – more on that later.
- Software: If you’re paying to use software, you tend to be purchasing a single-user or team license. Unless you have a multi-user license, you’re not permitted to sell that software on to other parties.
- Sports: Sports teams around the globe broker massive licensing deals. Their agreements allows third-party companies to produce merchandise with the team’s logo or player names (which they often own the rights to). Manchester United, for example, makes more than £90 million from licensing agreements every year.
Five Examples of Brand Licensing
- The Walt Disney Company do licensing right. According to License Global, they reported $54 billion in retail sales worldwide from licensed products alone. The company has signed thousands of licensing deals, enabling other businesses to use their characters, music, series names, and other trademarks. Those businesses handle the nitty-gritty details, like printing Mickey Mouse T-shirts, Marvel mugs or Star Wars lunch boxes.
- Monopoly, we’ve all played it – and after winning or losing and putting it back in the cupboard, that is where our relationship ended. That is until Monopoly partnered with fast food giant McDonald’s, bringing the board game to life in an instant win promotion. Monopoly gains continual exposure and McDonald’s benefit from an uplift in sales as people aim to increase their chances of winning.
- Marmite have propelled themselves into new product areas, without taking the risk of a full launch. Having licensed its brand to other products, such as other sweet and savoury snacks, beers, and even easter eggs.
- Netflix licences movies, TV series, and documentaries from third-party production companies.
- Ford Motor Company. Whether it’s apparel, toys, or collectables – the iconic American brand Ford and its top-rated licensing program are successfully exploiting all markets, including Japanese fashion retailer, Uniqlo
Steps to Get You Started
There are lots to consider before licensing. Not only do you stand the risk of choosing the wrong partners, or pursuing the wrong product categories, but you risk rushing into a licensing agreement without having a congruent brand strategy.
Before embarking on licensing ventures, it’s vital that brand owners have developed a unique visual and verbal design that sets them apart as a brand. Style guides should be developed to assist and support licensees to ensure consistency in the way their brand is being presented. This is the crucial first step when it comes to brand licensing – ensuring that you have a cohesive brand to work with. Only then can you:
Research, research, research
It’s wise to create an overarching strategy that outlines what you want in a potential license. Evaluate potential licenses to see if they’re a good fit. Are your customers interested in this product? Does your brand’s equity translate to this product? Will this licensee add value? The Global Licensing Group is the worldwide licensing industry’s leading trade show organiser and media partner – by organising industry-leading events, providing valuable information, and offering data services, they facilitate connections between brands, manufacturers, and retailers. Their primary goal? To foster business growth through consumer products and brand extensions.
1. Find the right space:
This comes after research – identify your place in the market, somewhere you’ll command higher profit margins.
2. Lawyer up to protect your intellectual property:
Ensure your brand’s assets are trademarked and protected from the very outset.
3. Choose the right partner:
Like any other relationship, find a partner you want to be with for a long time. Analyse the level of commitment – financial and otherwise – and gauge how well their investment matches your objectives.
4. Set your terms:
Draft a licensing contract and establish your flat fee. An attorney or licensing agent will help ensure your contract includes all it needs to and is legally binding.
5. Establish your guidelines and timeframes:
How long are you granting the license? When it comes to product categories, price range, and distribution channels, determine the extent to which you are willing to extend your brand.
6. Develop and implement a thorough training program:
This will allow licensees to guarantee that all licensed products adhere to your brand’s standards during their development and marketing processes.
The importance of branding in licensing
As touched upon above, licensed brands achieve greatness through design. Before entering the licensing area, you must build, protect, and manage your brand and it’s esteem. Clear strategy, consistent brand management – not to mention bold, brave and memorable design – are what will give your brand a competitive advantage.
Start your process by deconstructing both yours and the licensor’s brand to identify the unified brand backbone which then directs a strong creative strategy. Licensed products don’t just benefit from – they rely upon – a unique, unified, and unambiguous branding backbone. This framework should be consistently employed in the development of every design asset and consumer touchpoint, and incorporated into every consumer product.
Developing a brand style guide
You want to demonstrate that you have a flexible brand, developing a style guide that weaves your brand through each fibre of the licensing program’s design elements – compositions, badges, fonts, patterns, type treatments, or iconography; all the while representing a broad range of consumer categories, making it abundantly clear how limitless the possibilities are.
This is a partnership and it’s about working together to maximise branding and business potential – so don’t don’t fall into the habit of sticking a logo onto existing products. Instead, product applications should be uniquely designed to work specifically with the licensed brand and the product market.
To reap these benefits of licensing, licensees should align their company with the actions that are being taken by the brand owner, and brand owners must give their licensees the guidance and support that they need to be effective.
As licensees, use the style guide as inspiration, adopting elements that align with the brand in both a visual, verbal and tactile manner – this has the power to connect the brand story to consumers and elicit an emotional response.
As a brand – you need to have a strong commercial identity that can transfer well across new product ranges. Developing a well conceived brand strategy and implementing it through style guides before pursuing licensing partnerships will allow you to drive a consistent customer experience.
Capitalising on trends
To keep your licensing programme fresh and relevant, and to forge new licensee relationships, look to create trend-orientated style guidelines throughout the year. These style guidelines focus on ‘what’s next’, allowing you to stay ahead of the curve and capitalise on upcoming trends. This will ensure that your licensing programme is continually relevant to the consumer, retailer and the markets you work in – and aspire to be in. This insight-driven approach is integral in forming brand direction and development while also giving licensees fresh and exciting inspiration and ideas for new product development.
See how Studio Noel can help
Here at Studio Noel, we know that at the heart of brand licensing, lies powerful brands. We work closely with brand owners – from small businesses to global titans – and licensors to extend their brands into new product categories, and enhance their recognition through the creation of brand experiences and style guides that engage, inspire and connect.
Get in touch to see how we can help you to enter new markets or drive sales through the creation of style guides and product inspiration that are memorable, imaginative and ownable.