Posted in Marketing and Strategy Terms, Total Reads: 930
Definition: Brand Licensing
A licensing agreement allows a company (a licensee) which markets a product or service to rent a brand from a brand owner (a licensor). The responsibility of licensee’s is to produce, promote and distribute the product while the licensor gets royalties for its brand.
After license branding, a licensee gets access to the logos and trademarks associated with the brands. Association with the brand gives marketing power to the licensee’s products. It takes years of hard work, huge amount of money and luck to build a brand from scratch. Brand licensing is a shortcut way to gain immediate access to all the positive brand quality. It also enables companies to differentiate their product from competitors and communicate attributes of their products to consumers.
For example: Huge popularity of Reese’s peanut butter cups created an immediate need for other peanut based chocolates. Reese’s instead of manufacturing other peanut chocolates chose to go for brand licensing. Betty Crocker being a licensee handles the production, sales and distribution because of its experience and expertise in the market position. This partnership enabled Reese’s to generate more revenue by extending its brand into an unfamiliar and unexplored area; in return Betty Crocker was able to increases its revenues by leveraging on Reese’s brand which appealed to masses.