Originally posted 2014-08-04 11:00:47.
By Diana Chan | amdlawgroup.com
Thinking about expanding your brand? An advantage of licensing a brand includes expanding the brand in connection with high-end products. Designers often license their brand to companies that specialize in making accessories and beauty products such as perfumes, make-up, and sunglasses. For example, Dolce & Gabbana, Gucci, and Hugo Boss all have licensed their brands to Procter and Gamble to make signature fragrances for their brands. Licensing can also generate financial revenue through royalties that the licensee pays to the licensor.
Another advantage of licensing is that it expands the consumer base. The brand reaches several markets instead of reaching only a few, allowing more consumers to notice the brand and to become loyal consumers of the brand. Marc Jacobs expanded into the cosmetic industry by partnering with LVMH, a unit of Sephora.
But licensing also has its pitfalls. Pushing your brand into too many markets can lead to diminished exclusivity, diluting the brand. For example, Burberry allowed several companies to use its famous “Burberry check” which ended up on baseball caps, candy bars, and dog diapers. Only after Burberry bought back twenty-three of its licenses did things turnaround for the brand.
What to remember when licensing a brand:
1. Have control over your brand. It’s not always possible to make every product on your own, but remember what your brand stands for.
2. Maintain exclusivity. Becoming the next “big” thing is enticing, but in the long-run, it could hurt your brand’s image.
3. What products fit your brand’s image? If the product doesn’t mesh well with your brand, look elsewhere or don’t license.
Licensing is a good thing. But too much of it can lead to dilution of the brand. With the right amount, a brand can reap the benefits of licensing.