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Licensing is the business of granting certain restricted rights to use a form of legally protected intellectual property (e.g. a registered trademark) in association with a product, service or promotion.
A license is a contractual agreement between the property’s owner (licensor) and a third-party business or organisation who wishes to benefit from the reputation, status and goodwill associated with a particular piece of intellectual property in order to enhance and add value to their business offering (licensee). A license grants the licensee the right to use the property subject to certain terms and conditions (including geographical, durational and category limits) in exchange for a royalty payment (which is usually based on a guaranteed minimum and/or a percentage of sales).
The Benefits of trademark licensing for licensees
Through licensing a well-known trademark licensees can provide added value through the transference of associated brand attributes, recognition and reputation to their product, service or promotional offering. Licensees can also benefit through association with core product ranges and continuous multi-region and global marketing activity designed to build top-level brand value and awareness across all (licensed and core) product, service and promotional categories. Furthermore licensees may benefit from enhanced competitive advantage through increased product/service/promotional offering differentiation, new and wider target market appeal, the possibility of entering new market sectors through product extensions and additional retail support.
Keys to success
In order to ensure the success of the brand and license agreement for the mutual benefit of both licensee and licensor there are certain key activities that each party must follow.
The licensor
- Continues to add value to the brand through top-level multi-regional and global strategic marketing activity
- Provides support material to the licensees in the form of brand usage guidelines, brand imagery and marketing support material, strategic business planning and support and access to a global network of licensees, distributors and manufacturers
- Reviews and provides input on all product and marketing activity to ensure consistency with the brand
- Supports the licensee in selling-in to retailers and wholesale trade
The licensee
- Designs and produces high quality product/service/promotional offering that remains faithful to the brand and compliant to the brand usage guidelines
- Markets the product/service/promotional offering on a local regional level to support both trade and consumer sales within their particular region
- Ensures a good level of customer satisfaction
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