Brand licensing is becoming increasingly common as people realize that to make money, they do not need to reinvent the wheel but can license a brand for someone else’s product. The owner of the brand benefits too as he increases his market share not to mention his profits.
All forms of licensing are still in early days and there are a couple of issues that have to be ironed out. One of the most contentious is the idea of valuation. How do you put a value on a brands worth? Some people will insist on using financial data while others will look at how other similar arrangements were valued but this is not an exact science. Some product names have more built in good will than others which mean that customers will automatically trust a new product that is launched under this name. Some brands have very efficient marketing campaigns and they could almost launch coal dust yet their customer base would still buy it. That is more valuable than a brand name that is recognized but doesn’t inspire the same loyalty in their clients.
You can also use brand licensing to add a similar but different product to a recognized household name. For example, you could add a car product to a brand name that everyone associates with automobiles. The benefits for the brand owner are still the royalty payment but for the license they get to test the market with their new product under the protection of a big brand name. There is already a certain amount of loyalty and goodwill towards that product name and they can leverage this to make sales.
When you enter into a brand licensing contract you are usually authorized to use that particular product name for a specific length of time and only in certain areas or countries. Don’t assume because a license has been awarded to you, that you are free to market your product under this name anywhere in the world. You need to understand the agreement and all the implied terms and conditions. For this reason, you need an attorney who specializes in this particular area of contract law and not someone who just dabbles on the occasional basis.
When you are looking for a brand to license with a view to marketing your product, you need to be sure that you are picking the right image. For example some character brands associated with TV would not suit some educational products. Sesame Street has a different image to The Simpsons.
The producers of Gone with the Wind used brand licensing to help raise money to cover the production cost of the film as they were very worried it was not going to make a profit. These images still sell today and have made a lot of money for the company.
Before you think about entering into any contract or negotiations with brand names, it is important that you spend time educating yourself about the advantages and disadvantages of licensing. The best way to do this is to learn from an expert who has many years experience in this field. His knowledge will help you avoid the mistakes most amateurs make which can cost you a lot of dollars thus reducing your potential profits.
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