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How to drive purpose and profit through strategic brand licensing – exclusive best practice insights

June 30, 2021 | Industry Insights

• Lack of familiarity with the licensing business model means that companies too often underuse their licensing programmes
• Successful licensing is not just about the bottom line – alignment with the business is key
• Electrolux’s transformation into an ambitious champion of sustainability shows change has been driven by the brand and how it is licensed

For as long as trademarks have existed (with the earliest trademark law passed in England in 1266), their primary purpose has been to stop others from using identical or similar signs. Likewise, trademark or brand licensing was originally another way for brand owners to prevent others from directly imitating what they do.

So what changed that lead trademark owners to consider monetising their brands – that is, letting others use their marks for profit? The answer, put simply, is the convergence of three forces:

• the development of a brand licensing business model that could result in a high-margin, low-risk revenue stream for trademark owners;
• the opportunity for brands to become more ubiquitous – and therefore more famous – through partnerships with category experts (ie, licensees) across multiple channels and territories; and
• the need for trademark owners to protect their brands more widely across numerous classes and territories.

As this business model developed, so did rigour and expertise around the discipline. Early licensing examples were more an extension of merchandise product lines from the entertainment sphere – putting a logo on an existing product such as a t-shirt, backpack or cap – than a unique offering reflecting the equity of the brand. However, brand licensing programmes, at their best, are now strategic tools to promote the brand, protect trademarks and drive profitable revenue in a way that is both relevant and engaging for consumers.

Brand licensing programmes in silos

Corporate licensors too often treat the brand licensing programme as a kind of orphan child of the main business. This is because few in upper management are familiar with the brand licensing business model, even though it usually brings with it much higher margins than the core business.

Where awareness of the model does exist,  it frequently triggers two different reactions in senior management – but lead to the same conclusion:

• The margins are too good to be true. Something must be wrong with how our brand is being used. Let us keep it siloed until we feel more comfortable.
• The margins are marvellous, but let us keep this business separate from the rest of our activities because it is ‘different’.

The lack of integration with the main business and, therefore, the lower priority given to brand licensing in many large corporates often leads to an opaque decision-making process and further reluctance by senior management to risk the brand with anything close to core – that is, those products and services that might be the most meaningful and relevant to the consumer.

Of course, some consumer brands, such as Westinghouse and Blaupunkt, are entirely licensed. The decision-making processes should be more straightforward in these cases – there is no core business to harm – but there will still be the necessary protection of the brand equity and the need to have a clear strategy for licensing.

Getting alignment and buy-in

To break out of the silo and make brand licensing an integral part of any brand’s day-to-day business, corporates need to overcome several hurdles and put in place the following structures/processes:

• alignment with the key objectives of the brand and the business;
• alignment with the company vision or purpose;
• efficient and effective decision-making processes;
• quality, responsible sourcing and sustainability processes throughout the value chain;
• committed partners – licensees – that understand the brand and the requirements of the programme;
• efficient and effective governance processes; and
• an experienced brand licensing team and/or agency.

Let us consider each of these in turn.

 

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