Branding Strategy Insider readers know, we regularly answer questions from marketers everywhere. Today we hear from Laura, a Marketer in New York, New York who writes…
“What is brand licensing and what is its effect on brand equity? Please give me a general overview.”
Thanks for your note Laura. Let’s take it from the top. The stronger a brand’s reputation, the higher the value of the brand and the greater revenue it will drive for its owner. Prospective licensees seek to license brands with the strongest reputation, as these are the brands consumers demand and retailers prefer most. The stronger the brand, the higher likelihood retailers will buy the licensed products and that they will be subsequently purchased by consumers. Brand loyalists and advocates look to their preferred brands to deliver more and better products year after year. When this occurs, the brand gains permission to extend into categories that complement its original offering. This is known as brand extension.
For example, the Mr. Clean brand, owned by P&G, was launched in 1963 as the first household liquid cleaner. Over time, the brand gained a strong reputation for its ability to clean effectively on a variety of surfaces. By delighting its consumers, Mr. Clean built significant brand loyalty and allegiance. When asked, consumers told the Mr. Clean brand team that they expected the Mr. Clean brand to offer additional products that simplified and enhanced the household cleaning experience. To satisfy these consumers, Mr. Clean developed a line of branded mops, brooms, and brushes.
These products were met with enthusiasm and eventually, consumers demanded even simpler and more effective ways to clean their homes. Today, the Mr. Clean brand can be found on an expansive list of products including scrubbing tub and shower pads, Magic Eraser cleaning pads, auto dry car wash systems, multi-surface disinfecting wipes, rubber gloves and many other products. Many of these Mr. Clean products are licensed. By owning a brand that can be extended into numerous categories, companies are able to attract and retain multiple prospective licensees. Using licensing to augment internal resources actually accelerates a company’s overall time to market.
Brand Equity and Extendibility
Companies that know their brands well will have a good understanding of the equity of each brand. A brand’s equity is derived from the awareness and image a brand holds with its consumers. Often brand managers will leverage a brand’s equity to enter or extend their brands into new product categories to help drive strategic growth for the company. For example Crest extended its brand from toothpaste into whitening. Before Proctor & Gamble (P&G), who owns the Crest brand, launched Crest Whitestrips, they conducted research to understand if the brand had ‘permission’ to enter into the retail whitening category, long held by established brands such as Rembrandt and Aquafresh.
P&G wanted to find out if consumers would expect Crest to offer a whitening product and if so, purchase this new product based on their preference for the Crest brand. As many of us are aware, Crest Whitestrips have performed well in the marketplace, achieving high rankings and advocacy ratings. While P&G decided to enter the whitening category by sourcing the product overseas and distributing globally, they could have chosen either to manufacture it themselves or enter the market through licensing and have their licensee manufacture and distribute the product.
In the case of Mr. Clean, P&G discovered that consumers expected the company to offer cleaning accessories under the Mr. Clean brand. In this instance, they decided to enter the market by licensing the category to Magla, a company that already had expertise and presence in this category. When we say that P&G entered the cleaning accessories category through licensing, we mean that P&G allowed Magla, a manufacturer of cleaning accessories, to use the Mr. Clean brand in exchange for a licensing fee.
Best in class brand licensing programs are designed with a highly strategic process that aligns the meaning of your brand with the licensed brand. In other words, if the alignment is not there strategically you do not do the deal.
Laura, you can find more on brand licensing here.
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