20+ Benefits of Licensing

31 07 2013

As I make calls to manufacturers, I’ve been thinking about the many benefits of licensing, and specifically those for artists and manufacturers in the industry (who are  commonly referred to as the licensor and licensee, respectively). I suggest that your understanding licensing benefits from the perspectives of the Licensor (Artist, Brand/Trademark Owner, Cartoonist, Designer, etc.), Licensee (Manufacturer, Retailer, etc.) and Agent (Representing the Licensor) is important when it comes to developing marketing plans, making sales calls, managing your trade show booth and negotiating contracts, to name a few instances.

Let’s start with the Licensee, since many of my readers are Licensors and might not have analyzed this subject from the manufacturer’s’ point-of-view.

For a Licensee, licensing can:

1. Generate incremental income from the sales of licensed products.
2. Create additional product lines by borrowing brand equity from various properties and artists.
3. Provide credibility to the manufacturer’s product line through the licensing of high profile brands and properties.
4. Expand awareness of all products in a manufacturer’s line and attract new customers.
5. Target more audiences through the use of different licenses.
6. Help build a competitive advantage when you have a variety of lines making up your product mix, and even offering exclusive properties (brands, artists, etc.) that your competition doesn’t have.
7. Develop more product lines without adding more expense or work load to the creative department.
8. Find HOT talent and trends.
9. Increase market share, which is the percentage of total sales volume in a specific product market (bedding, craft kits, tea towels, etc.) captured by one manufacturer or brand.
10. Create efficiency. Manufacturers with their own production facilities or factories gain efficiency, and more profit, when operating at an optimum level. Often manufacturers start off producing basic products and then add licensed properties so they can run their plant 24/7 and take advantage of economies of scale. Likewise, manufacturer/wholesalers gain purchasing power with suppliers by increasing quantities on production orders and building better relationships with their factories, thus obtaining lower prices and reducing their costs per unit.
11. Open new channels of distribution by offering product designs and styles which require different retail options, such as mass market, specialty stores, home shopping networks, catalogs, internet, dollar stores and deep discounters.
12. Increase a manufacturer’s retail shelf space with a broader, as well as stronger, product mix.

For a Licensor and their Agent, licensing can:

1. Generate revenue or an additional income stream based on the intellectual property (IP) rights (art, cartoon, designs, etc.) you own.
2. Leverage the equity you have built through your brand.
3. Enhance brand positioning through product design and messaging (website, advertising, catalogs, product, packaging).
4. Strategically grow the value of the brand via product (and artist’s) exposure and sales.
5. Generate product without an up-front investment.
6. Help find partners with important production expertise to create relevant brand extensions.
7. Help find partners with existing and well-targeted distribution channels.
8. Protect your intellectual property. When you register and use your trademark, such as through licensed product sales, you then have the right to use legal action in claims against fraudulent use.
9. Promote stronger relationships with existing customers and find new customers for your brand.
10. Build a competitive advantage though exclusive licensing opportunities.

Put this list on your wall or somewhere you can access it and review it over time. Perhaps when you are making a call to a potential manufacturer you can ask yourself, “Why do I want to license my art to them?” And more importantly, “Why would they want to license art from me?” Being able to understand the benefits of licensing to both the Licensor and Licensee is crucial to developing those answers.

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4 responses

1 08 2013
Sandy Laipply

Great post Jeanette! Very thought provoking-thank you!

1 08 2013
Pat Saunders-White

I definitely posted this on MY wall. I have enjoyed a good relationship and excellent exposure for the past several years with a licensor. I have often wondered what the high and low is for royalties paid to artists. My online sales of canvas reproductions has been very strong and I am one of their best sellers. How often can I ask for another .05-1.0% raise based on my sales? Each year I have beaten the year prior.

1 08 2013
blogjnet

Thanks for your comment and question Pat. If you haven’t already asked for an increase, you should do so. But remember that since royalty ranges for certain product types fit with the profit margins of that product type, there is only so high a manufacturer will be able to go. You can also ask for added exposure, packaging, press, other benefits once you max out the royalty range. Congrats on your success!

31 07 2013
Betsy Cordes (@f13creative)

Brilliant, as always, Jeanette! In my experience, artists often don’t realize the tremendous benefits their license may bring to a manufacturer. They feel fortunate to have been approached (for all the sound reasons you list) and are therefore sometimes reluctant to even try to discuss the terms of the agreement, for fear of losing the deal. Your advice points the way to a win-win for everyone, when the discussion is undertaken in that spirit. It reminds me why I feel all warm and fuzzy about licensing. 😉 Thank you!

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