Among all the partnerships in the brand licensing chain, the one between the licensor and the licensee is, undoubtedly, of the highest importance. Licensee and licensor are jointly responsible for the unique product-equity match that lays the foundation of a licensing program. Many licensors consider their licensee partner as the most difficult task in the whole licensing journey. Initiators of the collaboration, licensors often feel stuck and hesitant when choosing a licensee for your brand.
Usually, the main stumbling stone for licensors is not being able to determine the right selection criteria. These criteria depend on the goals that brand owners pursue through licensing their intellectual properties. Nonetheless, there are a few commonsense aspects that can help licensors to decide on a candidate. If you are in the position of looking for new strategic partners in licensing, read on.
The best match for a licensor is a licensee that has previously worked with other brands in the same or similar as that licensor's industry. Ideally, a licensee will have to be renowned brands. The more such partnerships are in the licensee’s portfolio, the better their understanding of the brands' licensing routines and product development processes. A big plus to a candidate is their knowledge and capabilities outside their native (categories and) market. If the licensee's product range is wide enough and regularly expanded, the perspective of a long-term partnership automatically increases.
By now, you might have realized that brand licensing is purely a relationship business, and licensors along with licensee are its main stakeholders. But even more, the ultimate success of a licensing program largely depends on the work performed by the teams of both parties. On the licensee's side, performance is predominantly measured by the work of sales and marketing teams. Therefore, savvy brands evaluate the competence level of these teams before the licensing progress begins. Once they have carried out the evaluation, they move onto ensuring that these teams get along with the brand’s internal teams, which is essential for further joint marketing and merchandising efforts.
For licensing partners to achieve positive results from their collaboration, the licensee should have enough funding to bear the expenses of implementing a licensing agreement. The licensee’s financial strength usually presents itself in the ability to meet the financial requirements, such as minimum guarantee and advanced payments, as well as the performance requirements (i.e. timely payment of licensing royalties). Licensees are also expected to be stable enough to expand beyond the licensing agreement. This criterion is especially important if licensing partners plan a long-term collaboration.
Let’s be frank - no brand has ever wanted to put their logo on low-grade products. Doing so puts a brand's licensing prospects in danger and may entail significant losses for all involved stakeholders. Moreover, such practice can cost brand profits from its core activities. This is why it's so important for licensors to verify that their brands add real value to the products of their licensees.
This process usually occurs at the early stage of the collaboration with licensees - sometimes as early as during the licensee research. Many candidates drop out because of the poor fame of their production or the bad quality of the output. Top licensed brands have recognized the importance of quality control, which reduces the risks of brand damage throughout the licensing program.
Relationship with customers
Another advantage of launching licensing program is that it grants brands access to the customers of their licensing partners. However, long before it happens, licensors need to strengthen the relationships with their existing fans. The primary goal of licensors is to validate stable market growth and customer satisfaction. Examining the licensee's core consumers helps to determine whether they are likely to convert into the brand's new fans.
Relationship with retailers (and other licensing stakeholders)
Retail as the main revenue-generating source in licensing makes tight collaboration between licensors and retailers more of a standard practice. With the increasing popularity of the direct licensor-retailer agreements, licensees have become fearful of losing great licensing deals. The smartest of them now attempt to invest in improving their distribution and building long-term retail partnerships. Notably, these licensees succeed at establishing strong connections with agents and other mediums that operate between them and the consumers.
Level of commitment
Like every other business partnership, the one between licensors and licensees requires focus and devotion from both sides. A smart licensor is unwilling to risk the reputation of their brands, which will manifest in their approach to choosing a licensee. Thus, they aim to make sure that their licensees are just as serious about the licensing program as their team. A great licensee can recognize the value a brand adds to her products and is willing to make the most out of collaboration.
Brand licensing is a win-win business model for both the brand and the product owners. It is, therefore, best for both sides to work in close cooperation. Choosing a licensee implies finding a trustworthy partner whose products make a perfect fit for your brand's equity. The best deals, however, happen for those licensing partners who manage to maintain close relationships. In such partnerships, the sides manage to understand each other’s needs, concerns, and expectations associated with the licensing agreement.
Do you maintain close partnerships with your licensing partners? Tell us about your partnership hacks and cooperation strategies and tactics!