The 8 Benefits of Brand Licensing to Manufacturers and Service Providers | Brand Strategy | Business Branding

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There are tremendous benefits of brand licensing to manufacturers and service providers (licensees), as well. That is why this strategy is so powerful. Licensees borrow the rights to a brand to build into their merchandise, but traditionally they do not share ownership in it. Having access to major national and global brands, and the associated logos and trademarks, 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 name 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 implication of quality.

1. Achieve instantaneous recognition

Consider a tee shirt manufacturer with specialty printing capabilities. While they may have a good network, they are relatively unknown beyond that. Through licensing one day they could be selling unbranded tee shirts; the next they could be an official Disney licensee of Mickey Mouse and Winnie the Pooh. Having the Disney license means immediate and instantaneous global recognition. The value of this recognition cannot be measured, but the sales the manufacturer will now make certainly can.

2. Enhance their authenticity and credibility

Consider the videogame manufacturer who has developed an amazing soccer game. They have presented their game to a number of retailers, but all have turned them down. If, however, they can license the FIFA World Cup trademark they stand to gain immediate legitimacy and authenticity to their game.

In fact, many retailer buyers will tell a manufacturer if they had a recognized brand, they would issue a purchase order. Similarly, a maker of automotive parts or accessories will license specific car brands such as Toyota or Ford specifically to establish in the consumer’s mind that its products will work seamlessly with the cars of the parent brand. These are then purchased by automotive distributors, service shops and the brands owners driving substantial incremental revenue.

3. Reduce in-house costs

A manufacturer or service provider which acquires the rights to license a brand often gains the licensor’s preferred pricing by its suppliers. This can include commodities, such as resin, shipping and creative services. In addition, they gain access to the licensor’s style guide, which provides them with most of the imagery and artwork they need to design their products.

Having the style guide not only assists the licensee with design time, it streamlines the approval process and ensures their products have the same look as the other manufacturers or service providers which have licensed the brand.

4. Gain access into new distribution channels

Taking on a license can help manufacturers and service providers gain access to new distribution channels. For example, a manufacturer may have an established private label business selling into the mass merchandise channel. By licensing the rights to a mid-tier brand, they could gain access into department stores (that wouldn’t carry the private label brand) and double their revenue.

5. Enter new regions

A door mat manufacturer based in Germany and selling its product in Europe may be able to enter the US market by licensing a major household brand like Better Homes & Gardens. The Better Homes & Gardens brand can give them entry into the channels they currently are selling other categories of product. In some instances the licensees pool their products to create an integrated program, which can be appealing to some retail buyers.

6. Acquire strategic knowledge

Licensees gain access to intangibles such as the licensor’s subject matter expertise in areas where they are not proficient such as marketing, supply chain management, customs, etc. In addition, manufacturers and service providers can benefit from the licensor’s databases and libraries which can include a variety of topics including market research, manufacturing and product design. As true partners, licensor and licensee are not limited to these areas, but can identify where each other’s strengths are and tap into them.

7. Obtain other licenses more easily

Once a licensee acquires one license they will almost automatically gain approval from other brand owners wishing to extend their brands into new categories. For example, a pin licensee of Major League Baseball (MLB), will have an easier time acquiring the rights to the National Hockey League or the National Basketball Association because these brand owners know the licensee meets the standards for MLB and already has an understanding of the licensing process.

8. Add value to the business

Gaining the rights one of the world’s great brands can add instantaneous value to an organization. This could be an important consideration when the owners are considering selling the company. More and more brand owners are aware of this and are requiring they approve the new management before automatically authorizing the continuation of the license. In addition, the brand owner may require a payment recognizing the increase in value upon the sale of the company.

The diagram below illustrates the different stages that are a part of the Licensed Product Process Flow:

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