Education Licensing Your Invention How much for the brand license? | How much for the brand license? |
Page 1 of 3 Corporate or brand licensing represents a growing share of the many trademark license agreements developed each year. Given the value of these brands, it's surprising that few licensor's use a formal valuation process for new license opportunities. Although valuation remains a hotly debated subject, a modified 'value in use' approach can help to determine the market value of brand extension license opportunities. Numerous studies have found that brands provide greater value than other corporate assets. Perhaps best known is the “Global Brands” study conducted by Interbrand; it concludes that brands account for more than a third of shareholder value (on average), and in many cases, more than 70% of shareholder value. Today, there is a consensus among many academics, analysts and marketers that a strong brand can provide powerful competitive advantages such as greater customer loyalty, higher margins, and opportunities for brand extension and licensing. The recognition that brands are a powerful yet underutilized assets is why trademark licensing has become a popular marketing strategy. Because many brand owners don't have the resources to pursue every viable business opportunity, they utilize trademark licensing to enter new markets beyond their core competencies. Brand extension licensing (i.e. licensing the brand in new product categories) allows companies to obtain even greater ‘leverage’ from their brand assets. For the brand owner or licensor, brand extension licensing provides royalty revenue and a variety of brand benefits. For licensees, licensing a strong brand can provide high consumer awareness and a clear, appealing image for their products. Although a brand extension license relationship can offer significant benefits to both licensor and licensee, determining the value of the license, and gaining agreement on the terms of the license agreement, can be quite challenging. Unfortunately, valuation methodologies that focus only on financial metrics or comparable transactions are not adequate to determine the value of brand extension license opportunities. Brand is important, however, the licensor’s operations and stakeholder relationships can also have significant value to the licensee and need to be considered. In addition, the value must be determined in the context of each licensee‘s business. The Brand License ValuationTM (BLV) provides a solution to the limitations of traditional valuation methodologies. The BLV model brings together brand metrics, market analysis, and finance to accurately assess the value of brand extension licenses. This 'value-in-use' approach also considers important licensee business objectives, needs and resources. The BLV methodology reflects the licensor’s brand, marketing, operations and stakeholder relationships as well as the capabilities and interests of each licensee. Uncovering the needs of qualified licensee candidates, and identifying how the brand license can meet their needs, is at the heart of the valuation. The BLV model assesses two key drivers: ‘brand fit’, which reflects category dynamics; and ‘business fit’, which reflects licensee dynamics. The methodology is based upon four premises:
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