Ready to Increase Your Revenue with Brand Licensing? Here's What You Need to Know.

  • By Susan Burns
  • 16 Mar, 2016
Have you heard of Harley Davidson’s cake decorating kits, Heineken shoes, or Zippo perfumes? No? Believe it or not, these are actual products (some of them are still for sale), and some of the worst brand extensions that have ever hit the shelves.

Brand licensing, when done wrong, can cause unnatural, and just plain wrong mixes of brands and products. (Colgate frozen entrees, anyone?)

But, when done right, brand licensing can be a great way to increase your revenue, expand your brand and your company, without having to invest in developing, manufacturing, advertising, and distributing new product lines, which maybe isn’t the best use of your resources.

Take Bugatti, for example, and its recent partnership with yacht builder company Palmer Johnson. They have recently released the “Niniette,” a $2.2 million yacht, with personalization options such as gilded bathroom fixtures or diamond-crusted steering wheel. What Bugatti has done right is licensing the brand to a product that reflects its opulence and exclusiveness —luxury yachts--even though their main business is not making boats.

So, while Bugatti is busy getting ready to release the new Chiron later this year, someone else is making inroads into the yacht market for them, launching the Bugatti of the sea. The genius in this strategic brand licensing agreement is that it allows Bugatti to continue focusing on what they do best, namely engineering luxury performance cars while, at the same time, expanding their brand and increasing revenue. Kind of like making money while you sleep. What is not smart about that?

What is brand licensing?

Brand licensing is the process by which the owner of a brand (the “licensor”) gives permission to an individual or company (the “licensee”) to use their brand as part of a product or service, in exchange for a specified portion of royalties, during a set period of time, and within a pre-established territory. All of these aspects are clearly stated in a brand licensing agreement, outlined below.

What are the benefits of brand licensing?

There are several benefits to both parties involved in a brand licensing agreement:

Benefits for the licensor:

  • It increases brand loyalty, as consumers are more likely to choose a specific brand, the more they buy it. This reduces future promotion efforts and expense of future sales.
  • It allows companies to develop their main product to its full potential and provide consumers with complementary products that facilitate a more meaningful and complete experience.
  • It reinforces the idea of reliability, quality and price level of the brand, when the licensed products are manufactured to the same standards.
  • It provides a steady stream of royalty revenue.

Benefits for the licensee:

  • It positively associates the new product with the reputation and good image of the brand, which adds value to the product.
  • The brand gives the new product an edge over its competitors, facilitating marketing and making it more effective.
  • The brand will be easily recognized, which resulting in product awareness, and ultimately, more sales.

Tips for good branding licensing

One of the most important steps towards brand licensing is to protect your intellectual property from the beginning of your business. Don’t put yourself in a vulnerable position. Contact a specialized attorney to trademark your brand and register your copyrights, first and foremost. Then, develop your brand and start looking for licensing opportunities that can help you grow and benefit from your licensee, while providing value as a licensor as well.

As the licensor, you must be very clear about the terms of use of your branding and imaging. These aspects should be stated in your licensing agreement, but most importantly, you need to have deep knowledge of your brand in all its aspects, and have clear, defined goals for the alliance you are about to start.

It is of utmost importance that licensees make every effort to analyze and understand the brand and its consumers. By doing so, the resulting product will be a true reflection of the brand, and not a random object with branding plastered over it. Licensees must produce a high-quality product or service, with standards and style comparable to the internal product, and that can be easily associated with the brand.

Finally, both parties should approach this agreement with a winning and collaborative attitude. Part of the reason why odd products such as Vespa perfumes or Paula Deen’s furniture hit the market is that the brand is so well-known. But in the long run, these disconnected licensing agreements may damage or dilute the brand image. At the same time, licensees shouldn’t look to take advantage of the brand, but rather work hard to give back the prestige and awareness that the brand will give to their products.

Brand licensing can be a great expansion option for a recognized brand. By combining forces, the brand owner and its licensee can reach an entirely different market, and increase their profits, something that could be extremely hard and costly to do on their own. It may be worth considering it, don’t you think?


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You've probably heard references to the TPP in recent campaign coverage. It is the result of years of trade negotiations, and has been hailed as a hallmark victory for the Obama administration. However, the agreement is still in limbo, pending ratification by Congress--a delay that hardly comes as a surprise. And, both presidential candidates for the major parties have come out against the TPP. Given this, the future of the TPP is up in the air.

 

Supporters hope for a vote during the lame-duck session, but the TPP's passage could very likely depend on the next presidential administration. In the meantime, we are left to consider the implications of passage of this agreement, as well as its impact on NAFTA, a pre-existing trade agreement of a similar nature.

 

The TPP is a piece of legislation I have been closely following, and recently had the opportunity to moderate a panel entitled, "The Impact of TPP on NAFTA: Opportunity for Strengthening Ties -- Or Recipe for Disaster." Panel members included Aristeo Lopez of the Mexican Embassy, Laura Sierra of Alston & Bird, Nicholas Guzman of Drinker, Biddle & Reath, and Greg Kanargelidis of Blake, Cassels & Graydon.

 

The American Bar Association Section of International sponsored this event with the intention of presenting US, Mexican, and Canadian standpoints on the TPP and the impact of its passage on NAFTA. What followed was a thoughtful and informative discussion, and although the topic is highly complex, I thought I'd share some highlights with you.

 

Ms. Sierra explained some of the political context surrounding the TPP, including that the US has historically been pro-trade, and this is the first time since 1992 that trade has been a significant issue in presidential election year politics. US FTAs are modeled after NAFTA. The agreement eliminates a significant number of tariffs that would be beneficial to US businesses, but there are dissenting voices. Some of the concerns include employment issues, the manipulation of currencies by various countries, and opposition in specific industries such as auto, segments of agriculture and pharmaceuticals and biologics whose concerns were not addressed in the agreement. For example, intellectual property protection for biologics is not included in the agreement.

 

Mr. Lopez pointed out the benefits of NAFTA--growth in trade between Mexico and the US, especially--and explained that the TPP is intended to expand upon this growth, with attention to subjects that were treated less comprehensively in NAFTA. Another goal of TPP, in Mr. Lopez' view, is to strengthen Mexico's ties to NAFTA and other FTA partners, allowing Mexican goods to reach new markets.

 

Mr. Kanargelidis noted that the TPP is not intended to replace or override NAFTA, but that the two agreements can co-exist. He pointed out US, Mexican, and Canadian businesses can operate under the clauses of whichever agreement is most favorable to them in a given transaction. For example, the "de minimis" value threshold is 10% under TPP, and only 7% under NAFTA.

 

An audience member posed the question of whether TPP shipments will be exempt from US Merchandise Processing Fees (MPF) like NAFTA shipments are. Mr. Guzman explained that even though TPP does away with "ad valorem" fees, US Customs might find another way to collect MPF that is compliant with the agreement. He also described the TPP's "focused value" methodology for determining goods' origin, which might be more stringent than NAFTA methods.

 

Opponents to the TPP often cite concerns about the Investor-State Dispute Settlement (ISDS) provision, which outlines the mechanism by which agreement disputes can be settled. Mr. Lopez explained that the TPP’s ISDS provisions are more transparent than those found in NAFTA.

 

At the conclusion of the panel, Ms. Sierra suggested that a full renegotiation of the TPP is unlikely, given that the agreement was difficult to reach in the first place, and that several countries have already ratified it. However, we might see some side letters that result in alterations to the text pertaining to certain issues. Panelists agreed that the TPP will pass. It’s a matter of time and final form.

 

The TPP has been negotiated between 12 countries who together form about 40% of GDP, and 1/3 of world trade. The agreement is of an unprecedented scope, and the implications of this agreement are huge. We will soon know if it can pass during the lame-duck session before the election, which is fast approaching!

 

To learn more about the TPP, visit this site . The full text of the agreement can be found here .

 

Sources:

Granville, Kevin. “The Trans-Pacific Partnership, Explained.” The New York Times. 20 August 2016. Web.

 “The Trans-Pacific Partnership.” Office of the United States Trade Representative. Executive Office of the President. 2016. Web.
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