Many companies overlook Brand Licensing as a strategy for expansion and market entry because they often focus on more traditional methods of growth, such as direct sales, exporting, or setting up subsidiaries.
Here are some reasons why Brand Licensing is sometimes unjustifiably overlooked:
Lack of Awareness
Many companies may not fully understand how Brand Licensing works or its potential advantages. Licensing is often associated with well-known consumer brands or entertainment, and companies outside these fields may not realize its applicability. However, Brand Licensing can apply to most industries and is not limited to big players.
Preference for Direct Control
Companies may want complete control over product development, marketing, and customer experience. With licensing, brand owners grant some control to the licensee, which can be a concern if they fear it could dilute their brand identity. However, a well-handled negotiation and agreement can overcome these initial concerns.
Perceived Complexity
Licensing requires negotiating agreements, setting quality standards, and managing relationships with Licensees. Companies unfamiliar with licensing may see it as complex and challenging, especially if they lack experience in structuring these partnerships. A consulting company specializing in Brand-related services and Brand Licensing will address all these concerns and simplify the complexities for both the Licensor and the Licensee.
Focus on Traditional Models
Many companies are accustomed to traditional growth strategies such as direct investment, acquisitions, or franchising. Licensing can be a less conventional approach, and companies may not think of it when first exploring expansion options. However, it represents a significant opportunity for both parties to achieve business growth and enter new markets.
Concerns About Brand Integrity
Companies may worry about Brand misrepresentation or inconsistent quality if a Licensee handles production and marketing. However, prior market research and analysis to guide the selection, approach, and negotiation with the Licensor and Licensee allow for maintaining Brand integrity, strong quality controls, and clear guidelines.
Misconceptions About Profitability
Some companies believe licensing might not be as profitable as direct sales or ownership. However, licensing can offer a low-risk, high-reward strategy by generating revenue through royalties with minimal upfront investment.
Overlooking Local Partnerships
Companies may not realize that licensing to local partners offers an effective way to enter unfamiliar markets. These partners often have in-depth knowledge of the local market and distribution channels, which can enhance the Brand’s reach and credibility.
Concerns Over Legal and IP Issues
Companies may worry about the complexities of IP protection, enforcement, and legal regulations in new markets. However, Licensing involves Intellectual Property agreements and protection.
In summary, companies sometimes overlook Brand Licensing because they may not be aware of its benefits, feel it involves complex legal and quality considerations, or prefer more traditional, direct methods of market expansion. However, for those that pursue it, licensing can be a powerful and efficient way to enter new markets with reduced risk and investment.