Despite growing recognition that brands are more than just goodwill on a balance sheet, many companies could do more to capitalize on their established brand assets. One of the best ways for manufacturers to earn new profits from an existing brand is by licensing that brand's identity for use on other products. A licensing program can generate millions of dollars in additional revenue if it is professionally developed and managed.
Today more than ever before, image -- rather than technical points of difference -- distinguishes one product from another in the marketplace. Consumers base their purchase decisions on visual images, such as trademark, trade name and trade dress, if associated with quality and value. If a company has established a positive and protectable image for its brand, then it makes sense to leverage that image to help build business in new categories. With the $75 to $100 million dollar cost associated with launching and establishing new products (brands), an increasing number of manufacturers will turn to licensing to expand their product lines and penetrate new markets without making a huge investment in research and development, marketing and advertising. Licensing makes it easier to introduce new products because the licensed identity has already earned consumer acceptance and trust. Beyond providing a competitive advantage for new goods, licensing generates additional exposure for the original brand name and builds on pre-existing brand equity. One of the hottest trends in licensing is co-branding, whereby one manufacturer licenses its name brand for use as an ingredient or component of another brand. Today's supermarket shelves contain dozens of co-branded products such as Betty Crocker Peanut Butter Brownies with Hershey's Reese's Pieces, Pop Tarts with Smucker's preserves and Ben & Jerry's Heath Bar Crunch ice cream. It's important that both products be of equal quality; otherwise, both partners will suffer. Companies must be strategic to realize the tremendous potential of a licensing program. Some tips:
Evaluate your brand strengths and weaknesses to determine your true potential as a licenser, licensee, co-brander, and partner.
Establish criteria for evaluating licensing opportunities, such as revenue potential, market size and impact on other products bearing the samebrand name. · Look for qualified, reputable partners that are market leaders; your brand image should be strengthened -- not lessened -- by association.
Choose only those opportunities that complement the brand to be licensed. · Delineate what each party in a license agreement will give and receive.
Avoid overlicensing. Too many license agreements may open the door to competitors.
Theodore Selame is president of BrandAlliance, a full-service licensing and co-branding firm based in Wellesley, Mass. and Los Angeles.
