A variety of approaches can be followed for brand licensing, depending on a slew of factors. The two main approaches that are possible to be taken up are merchandise based and equity based. What is the different between the two and which factors are instrumental in the decision making process? Some insight about the same is provided in following lines.
It is possible that a brand owner may go for creating multiple consumer products. This approach is essentially focused on the merchandise under question. Other product owners focus their efforts towards establishing fewer, yet exceptionally popular products. This is known by the name of equity based approach.
Some factors which have an important role in the decision making process are discussed here. These factors include the type of brand, finances, control of the licensor, resources, processes and results.
The brand type has quite a big influence on the approach to be followed. The owner of product of everyday use can opt for any one of the approaches. It has to focus on increasing its interactivity with the consumers and its product gives enough leverage for that. The cola companies tend to have enormous opportunities in this regard and make immense use of the same.
While the merchandise based approach is better option for such products, premium product owners follow the other one. For instance, sports car manufacturers tend to be very particular about the products that are licensed by them. Premium pricing is followed by them and this approach enhances the personality of the product in question.
One has to note that finances play an important role in determining the means. Smaller deals tend to consume a lot more time than bigger ones. These have to be micro managed and hence, full of hassles. Greater mobilization of resources, costs and manpower is required for accomplishing such deals.
At the same time, it is possible to manage a larger deal in a much better way. Fewer such deals result in higher profits as compared to multiple smaller deals. These are devoid of the hassles that accompany the small ones. There is a larger return in terms of profit when the resources utilized, time and money invested are considered.
How closely the trademark owners work with the licensee is another important factor in the decision making process. Some of them want to have a greater control over the product of the licensee than others. An approach based on equity is more suitable for such product owners. Packaged goods manufacturers tend to prefer this approach over the other.
Extensive deployment of processes and human resources is required by merchandise based approach. The licensing efforts should be backed by a considerable budget and a large team of professionals.
All these factors have an important say in the approach that ought to be attempted for brand licensing. Any trademark owner can ill afford to ignore these factors for a successful licensing campaign. A thorough examination of available resources, finances and time should be made before arriving on a decision.
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