Most trademark licensing relationships are defined and evaluated based upon the terms in a license agreement contract. In the case of a brand extension license, there can be a lot at stake, including the health and well being of the licensor's brand. Surprisingly, many license agreements do not include specific terms or requirements that reflect key marketing objectives. This lack of 'license alignment' can be a serious deficiency in the license agreement that impairs the licensor - licensee relationship and limits the licensed business.

While careful planning can go a long way in creating successful new licensed businesses, this paper focuses on problem situations with existing brand license relationships and agreements.

The license agreement attempts to define a complex relationship between licensor and licensee that impacts multiple stakeholder groups such as suppliers, employees, resellers, and consumers. Problems can occur when license agreements fail to reflect key marketing objectives of the parties.

It is critical that the brand license agreement reflects marketing objectives of both licensor and licensee. Licensee performance should be evaluated based upon key performance indicators and metrics that are part of the license agreement. Of course,this is not often a simple task. In addition, negotiating leverage and prowess are not always equal between the parties.

Alignment of the licensor's marketing objectives with the licensee's business objectives is essential to optimizing the licensing benefits for both parties. The end-goal is to develop terms that reflect these objectives and integrate related metrics into the license. Regular performance reviews and adjustments to license terms should also be considered as part of the license alignment process.


Key Alignment Factors

Brand licensing and brand extension is a long-term proposition. It is not unusual for these product lines to include multiple SKUs and continue for five to ten years, or longer. Indeed, it is the exception when one of these long-term relationships remains unchanged over time.

The reason why is relatively simple: business conditions change, and success in most businesses requires that companies adjust their products and services to reflect changing market conditions and customer needs. Successful license relationships are no different, and they too may require adjustments to the license agreement to reflect changes in the market place.

Whether you are planning a new license or evaluating an existing license, there are four critical elements of the marketing mix that should be defined, measured and adjusted within the license agreement to reflect the key marketing objectives of the parties: brand positioning, consumer/end-user, distribution, and advertising and promotion. The following guidelines relate to products.