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Things to Consider Before Licensing Your Brand

Marty Brochstein is Senior Vice President of Industry Relations and Information for The International Licensing Industry Merchandisers' Association (LIMA)

Whether yours is a young company or industry stalwart, licensing is a great way to extend a brand into new businesses without the capital investment and time commitment needed to move into manufacturing and sourcing new product lines on your own.

But, before you embark on a licensing venture, there are several things to be considered.

Make Sure You Own It
Be absolutely sure that you own all the rights to the brands and trademarks that you're looking to license out. Is your brand protected in all the countries in which you expect your own and/or the licensed product to be marketed, and for all potential merchandise categories? Any licensing agreement will include a statement warranting that you own the rights, so be sure that you have all your legal ducks in a row.

Know your brand, and create an appropriate strategy
What does your brand stand for? The answer might be less obvious than you think. For example, Jeep is a brand of vehicles, but the licensing program has been built around ruggedness, the outdoors lifestyle and ecological consciousness. It was able to carry those brand equities into such categories as consumer electronics, apparel and even baby strollers. So think broadly about what your brand does and can mean.

Define Your Goals
There are lots of reasons to license your brand. You might be looking to get into a new merchandise or service segment without the cost of building a new business internally. Perhaps you're trying to move your brand into a new distribution chain. Are you primarily trying to support your core business by exposing the brand to a wider audience? (Remember, a display of licensed Budweiser beer steins on a shelf in Wal-Mart might bring in relatively minor revenue to the parent company, but it's great exposure to a lot of potential beer drinkers.) You might be aiming to protect your brand from being usurped in a particular country or merchandise category. Establish your hierarchy of goals, and it will help you create your strategy.

Be Disciplined: Just Because You Can, Doesn't Mean You Should
As in the rest of your business, be disciplined about the companies you do business with and the product categories you authorize. Does the potential licensee that you're considering have the right kind of distribution and can they make the appropriate quality and quantity of product? Can they meet your timeline? If you don't have the right match, don't do the deal just to get into the category. It has to be a good match.

Understand the Competitive Landscape
What else is vying for the product categories that you think your brand should be in? Why would a potential licensee choose to license your brand, as opposed to a competitive one? Why would a retailer carry a product with your logo or character on it, rather than somebody else's? The first step toward figuring out the answers to those questions is to "invest some shoe leather" — go to stores and analyze what's already on the shelves that you'll be vying for.

These are steps to help you prepare for a successful licensing venture. It's a great business model — and it's also one that requires a strategic mindset and disciplined business approach.

The views expressed are those of the author and do not necessarily reflect the views of BusinessNewsDaily.