Do's and Dont's Of Brand Licensing

Posted on Tue, 11/21/2017 - 16:58 by avantgarde

In this article, we will discuss some of the Do's and the Dont's of Brand Licensing. THis will also clarify some concepts associated with the subject. 

Don't!

Never bite off more than you can chew.  Licensors interested in licensing a category to a prospective licensee will ask the licensee for sales projections by region and by channel, along with a sales plan. In trying to "win" the license, the prospective licensee will often provide the licensor with a “best case scenario” instead of a more realistic case. These initial projections will then be used by the licensor to develop minimum sales targets and royalties, which will become part of the contract agreement.

Do!

Make a more realistic plan which might be more favorable for your company to fulfill rather than promising something that might spoil your company's name. Even if your numbers are small but what matters in the work you can put forward without having any pitfalls.

Don't!

Get in over your head. While negotiating their license, prospective licensees often try to secure multiple regions or channels as part of the deal. This may be because the licensee really believes it can take full advantage of all of the rights offered and sell its product into each of the channels or regions. 

Do!

Most brands only offer or can offer one opportunity to the licensees per area/region so take your time while deciding on a region based on your aptitude. 

Don't!

Create unrealistic expectations. Licensees may not fully understand the true strength of the brand whose license they just acquired. The licensee may overestimate the power of the brand, believing the brand alone on their product will result in acquiring new clients or larger programs with existing clients. Even if the licensee has invested in product development and built the essence of the brand into their product, they may not win new business immediately. 

Do!

Research well, just because you have a well made brand name on your product doesnt mean that it'll sell the same unless you put in the same effort and energy it first took for other people to get the brand to the heights it is at today.

Don't!

Base everything on the logo. Licensees often do not understand when signing an agreement that the licensor will expect them to custom design the attributes of the brand into their product, and not just slap the trademarked logo to the licensee’s product.The licensor wants the licensee to develop the product following the brand’s style guides carefully and to follow externally a similar protocol to the one that the licensor follows internally. They want the licensed product to be of a quality that the licensor would be proud to have on a retail shelf next to the internal product.

Do!

Ask every detail and specifications of what the brand wants the product carrying its name to look and function like. Ensure that quality checks are of top grade.

Don't!

Fail to follow the approval process. The licensee expects that approvals will come relatively easily and quickly. Instead, many products are not approved because the licensee has not followed the approval process. This often results in the licensee missing a modular shipment date or selling an unapproved product. The price of missing a ship date can mean the loss of millions of dollars in sales.  

Do!

Pay attention to every small detail while filing for approval, set the prices right and ensure that all dates are mentioned on every one of the products as every product costs money to you till the time a consumer buys it from you and gives you your cost back.

Don't!

Sell in unauthorized channels. Sometimes, to meet contractual sales minimums or guaranteed royalty commitments, the licensee can be tempted to sell licensed product outside of their authorized channels or territory, thinking they won't get caught.

Do!

Be very open about all your dealings with the licensor to avoid any penalties as entioned in the contract. 

Don't!

Trust the other party has your best interests in mind. Licensees can get into trouble when they trust that the licensor has their best interest in mind. A licensor may license a category they are vacating because they have strained a relationship with a retailer or failed the consumer in a category. Licensees often may share ideas with the licensor only to have them "taken" by the licensor.

Do!

Maintain good business relations but also have a mind of your own. Dont be fooled into believing that all big companies and brands care about other businesses, they might lead you into a bigger failure in the market wich might cost your business its very existence.

Don't! 

Indulge in not following the written contract. Licensees can get into trouble when they follow verbal directions that are in direct conflict with the contract. This is a difficult predicament because the licensee may feel pressure to comply with the verbal direction. If they don't get their direction in writing, they can later be held liable for breaking the contract. 

Do!

Always take note of all meetings and directions as these may not make sense at first but later on when the business relationship becomes stronger and deeper then these notes will come in very handy.