StrategyMay 30, 2017

The 3 Advantages Brands Enjoy With The Licensing Strategy

8 min read
The 3 Advantages Brands Enjoy With The Licensing Strategy

In today’s world of brands, the licensing strategy seems to be actively gaining momentum. According to the License!Global, the top 150 licensors generate more than $272 billion in revenues altogether - a true sign of the industry's dynamic nature. Still, some licensors don’t understand what opportunities it unlocks that extending own production doesn't. As the majority of them have likely never had any experience with brand licensing, such skepticism isn't surprising.

The thing is, these licensors are missing out.

Thanks to the broad spectrum of properties existing in the modern brand industry, licensing presents itself as a uniquely multifaceted strategy. An extension of brand’s marketing campaign, brand licensing enables licensors to expand their brands' market horizons, increase consumer awareness and generate additional revenue.

Extending The Brand

The first objective of brand licensing is to bring the brand beyond its horizons. This objective is achievable through the extension of the brand's equity into new categories, expansion in the new geographical markets, and building new partnerships with manufacturers and retailers.

Introducing New Categories

Think about the licensing strategy as of a powerful marketing tool that consolidates the brand’s image. Precisely, it does so by targeting segments that have previously been out of the brand’s reach. The new segments become available for the upon expansion of its product range and integration of its equity with the new products. There are certain risks associated with choosing the right product categories to match with the intellectual properties selected for licensing. Nevertheless, licensing helps brand owners to determine the direction in which they can expand their brands.

Validating The Market

Implementing the brand licensing strategy in the new geographic market is an excellent way to test the brand’s fit for that market. Compared to the market entry, embarking on a licensing program first is a much cheaper option. It also allows brand owners to test customer responsiveness towards the brand in those markets. On the other hand, if the brand licensing experiment yields decent profits, the brand may want to switch to independent distribution to the tested market.

Building New Licensing Relationships

The ultimate goal of every brand is maximizing profits, which is nearly impossible to implement without the brand’s strong international presence. As mentioned before, brand licensing grants brand owners an opportunity to get started with minimal resources. In reality, licensing isn't always seen as a temporary solution - it may eventually prove itself as the most suitable expansion strategy for some brands. Thence, establishing new licensing partnerships overseas is essential for every brand that strives for strengthening its development prospects.

Increasing Brand Awareness

The brand awareness boost that comes with brand licensing has a bilateral influence on the brand's ability to reach its audience. Not only does it allow the brand to consolidate the engagement with its core audience, but it also grants access to the new targets.

Keeping The Existing Fans Happy

Even the brand’s most loyal fans won’t stick around if the brand's offer remains unaltered for a long time. On the one hand, the brand should timely plan the diversification of its core products. On the other hand, however, seizing new product opportunities can enhance the trust of the current consumers. Once the brand has found the perfect licensing partner and determined the ideal property-product match for licensing, it can start taking advantage of the previously hidden growth opportunities.

Finding New Fans

While brand extension certainly gladdens the existing audiences, its unique function is conquering new fans. It's typical for new fans to discover brands via multiple channels, such as books, tv-shows, movies, games, and many others. Often this turns to be their first encounter with a particular brand, which wouldn't happen weren't they interested in the product in the first pace. If these customers detect added value in the licensed product, they'll likely come back again in the future.

Unlocking New Income Streams

Brand licensing is a great technique for generating additional cash from the brand’s equity. There are two major financial takeaways in implementing the licensing strategy:

Leveraging Brand Recognition With Product Range Expansion

As the brand's customer base grows with the brand's expansion into new product categories, so do its revenues. With the increased consumer reach that licensing unlocks, brand owners tap into new profitable opportunities for their businesses. The right merchandising strategy can drive demand for the licensed products. Thereby, it fosters the growth of buyers' purchasing intention, considering both the existing segment and the brand’s fresh converts.

New Income Streams To Greenlights Other Projects

Licensing as a form of marketing extension secures the brand with both the extra revenues and the increased brand awareness. As licensing cash hits the brand’s account, licensors can re-invest it back into the brand's core development projects. However, many experienced licensors recommend reinvesting at least a third of the licensing royalties into the brand’s future licensing projects.

Brand licensing reinforces the brand’s presence on the desired market and creates additional space for it in the new markets. Likewise, there's hardly any better external marketing tool as to driving brand awareness among the consumers. Executing the licensing strategy can also bring the extra buck to the brand’s cash through achievement of the goals above.

These are just a few ideas of how the licensing strategy can boost the brand’s prosperity. As practice shows, brand licensing seldom becomes a strategic mistake, taken that licensors conduct a thorough preliminary research and follow the best licensing practices. Licensing is about putting the brand's equity at stake, but if implemented wisely, the outcomes are truly rewarding.

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