Brand extension license agreements typically result in complex relationships between licensors and licensees that impact multiple stakeholder groups such as suppliers, employees, resellers, and consumers. When licensing an established brand, stakeholder perceptions and relationships are often the critical factors in the success of new licensed products. Alignment of the licensor’s marketing objectives with the licensee’s business objectives is essential to optimizing the licensing benefits for both parties.
Goldmarks’ Licensing Alignment services include the evaluation of new or existing trademark license relationships and development of strategies to increase the licensing benefits or value for licensors and licensees.
License agreements and relationships should be developed to reflect the interests of both licensor and licensee, and then routinely evaluated and adjusted as needed to reflect changing business conditions. Of course, this is easier said than done. Different business objectives and agendas make it difficult to create fair and balanced agreements. In addition, negotiating leverage and prowess are not often equal.
Brand extension licensing is a long-term proposition. It is not unusual for these product lines to include multiple SKUs and continue for five to ten years or longer. It is the exception that these long-term license relationships remain unchanged over time. The reason is that business conditions change, and success in most businesses requires that companies adjust their products and services to reflect changing market conditions and customer needs. License relationships are not immune to market forces.
Trademark license agreements do not always reflect key marketing objectives and/or terms that properly leverage brand image. Typically, the focus of the license agreement is on financial metrics such as royalty rates and minimum royalty guarantees, and as a result, the licensee’s performance is based on metrics that do not emphasize or measure the marketing benefits created by licensed products. This is a serious deficiency in many license agreements and relationships.
Although sales and royalties are important, there are other metrics that can be incorporated into the license agreement that create ‘alignment’ to better reflect the interests of licensor and licensee. From the licensor’s perspective, these metrics should include brand image, customer satisfaction, and loyalty. From the licensee’s perspective, the metrics should include distribution, sales, and profits.
The involvement of an experienced third party can be invaluable in aligning licensing objectives and resolving problems by developing useful solutions.
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‘Licensing Alignment’ is a service mark of Goldmarks Company.