A licensed brand is a brand name or trademark that a brand owner permits another company to use under a licensing agreement. This practice is common in various industries, including fashion, toys, electronics, and food and beverages. Licensing allows companies to expand their product lines, reach new markets, and generate additional revenue without significant investment in new product development or marketing.
Key Points about Licensed Brands
- Definition: A licensed brand is a brand name, logo, or trademark that is owned by one company (the licensor) and used by another company (the licensee) under a formal agreement. The licensee pays the licensor for the right to use the brand on their products or services.
- Licensing Agreement: The relationship between the licensor and licensee is governed by a licensing agreement. This agreement specifies the terms and conditions, including the duration of the license, the products or services covered, the geographic territories, the royalty fees or payments, and the quality control measures.
- Benefits for Licensors: Licensing a brand allows the brand owner to:
- Generate Revenue: By collecting royalties or licensing fees from the licensee.
- Expand Market Presence: By entering new markets or product categories without direct investment.
- Enhance Brand Recognition: Through increased visibility and consumer touchpoints.
- Benefits for Licensees: Using a licensed brand offers the licensee:
- Brand Recognition: Leveraging the established reputation and consumer trust of the licensed brand.
- Reduced Marketing Costs: Benefiting from the existing brand equity and consumer awareness.
- Market Entry: Accessing new markets or product categories with a known and trusted brand name.
Types of Licensed Brands
- Corporate Brand Licensing: This involves licensing a company’s name or logo for use on various products. For example, Harley-Davidson licenses its brand for use on clothing, accessories, and even home décor.
- Character and Entertainment Licensing: This type of licensing involves characters from movies, TV shows, or video games. For instance, Disney licenses its characters for use on toys, apparel, and stationery.
- Fashion Brand Licensing: Fashion brands often license their names to manufacturers of accessories, fragrances, or home goods. For example, the Calvin Klein brand is licensed for use on underwear, fragrances, and home textiles.
- Sports Licensing: Sports teams and leagues license their logos and names for use on merchandise like clothing, hats, and memorabilia. For example, the NFL licenses its team logos for use on apparel and accessories.
Examples of Licensed Brands
- Disney and Mattel: Disney licenses its popular characters, such as Mickey Mouse and Frozen’s Elsa, to toy manufacturer Mattel. This allows Mattel to produce and sell toys featuring these beloved characters, leveraging Disney’s strong brand recognition and fan base.
- Nike and Apple: Nike has licensed its brand to Apple for the development of the Apple Watch Nike+. This collaboration allows both companies to combine their strengths in sports apparel and technology to offer a product that appeals to fitness enthusiasts.
- Star Wars and LEGO: The Star Wars franchise, owned by Lucasfilm (a subsidiary of Disney), licenses its brand to LEGO. This partnership has resulted in a successful line of LEGO sets based on Star Wars characters, vehicles, and scenes, appealing to both children and adult fans.
Licensing Agreement Considerations
- Royalties and Fees: The licensee typically pays the licensor a percentage of sales (royalties) or a fixed fee for the use of the brand. The agreement should clearly outline the payment structure and schedule.
- Quality Control: The licensor often retains the right to approve the quality of the licensed products to ensure they meet brand standards. This helps protect the brand’s reputation and consumer trust.
- Exclusivity: Licensing agreements may be exclusive or non-exclusive. An exclusive license gives the licensee sole rights to use the brand in a specific market or category, while a non-exclusive license allows multiple licensees.
- Term and Renewal: The agreement should specify the duration of the license and conditions for renewal. Both parties should understand the terms under which the license can be renewed or terminated.
Conclusion
Licensed brands provide significant benefits for both licensors and licensees. For licensors, it offers a way to monetize their brand, expand their market reach, and enhance brand recognition without significant investment. For licensees, it provides an opportunity to leverage established brand equity, reduce marketing costs, and access new markets or product categories.
Understanding the dynamics of licensed brands and the considerations involved in licensing agreements is essential for companies looking to engage in brand licensing. This strategic tool can lead to successful partnerships that drive growth, enhance brand visibility, and deliver value to consumers.