The Licensor is the brand owner and the Licensee is taking care of the execution of the strategy.

In Product management

Licensee DOES:

  • develops prototypes according to licensors design direction
  • manufactures final product samples

Licensor DOES:

  • creativity mood, inspiration and stylistic guidelines

In Communication

Licensee DOES:

  • local media plans & PR

Licensor DOES:

  • full control of creativity in communication strategies
  • media plan usually defined by licensor, leveraging the media presence of other Licensor categories

In Distribution and Retail

Licensee DOES:

  • develop retail business and sell to final consumer in several retail formats
  • pricing strategy and general conditions of sales

Licensor DOES:

  • creativity development of defined tools such as point of sale materials
  • sometimes licensor defines or limits some parameters in the commercial policy

Main Advantages in Licensing

  1. Sharing the risks and costs of the new business
  2. Earning initial licensing fee and ongoing income from royalties
  3. Faster market penetration leveraging on licensee’s resources and capabilities

Main Disadvantages in Licensing

  1. A diminished ability to enforce quality controls (production, distribution) with a potential negative impact on the licensor’s reputation and goodwill
  2. Risk of infringement upon the licensor’s intellectual property (counterfeiting, parallel imports)
  3. Less opportunities to understand the market and the customer

Key success factors of a Licensing Agreement

  • Co-markership: creative project (licensor) and knowledge/experience on the product/distribution (licensee) and dedicated brand management and product development teams
  • Duration (increasing)
  • Professional management (contract, management of details, approvals)
  • Distribution plan