Licensing phenomenon: what is important and makes customers happy?

How to make the most of all options in marketing

It may be clothing, toys or furnishings but whatever it is there is bound to be at least one licensed product in your home. The licensor and licensee market is huge but also full of challenges. You can read all you need to know about licensing and exactly what is important from a marketing perspective here.

Licensing & customer interaction – in this article you will learn:

• Why the licensing market has become so big and important
• What players form part of licensing
• What challenges brand owners face in licensing
• The best way to label your licensed products

Take the latest Premier League or Champions League winner shirt, an original doll from a popular cartoon blockbuster or a chart-topping band’s T-shirt: wherever passion and personal stories meet products, ardent fans become good customers who spend a great deal of money. Today, every star, team, film or character has a comprehensive merchandising concept behind them that is becoming an ever greater source of revenue for brands and license holders in times of corona.

But what players are actually behind this licensing phenomenon? How big is the market? Where does it now play an important role? What is possible from a marketing point of perspective in today’s world? We have summarised all the key facts for you.

What roles are there in licensing?

Licensor:

Let's take the example of a Premier League club shirt. The club has the rights to its brand and everything that includes: rights to the name, the use of the logo and colours, the original player names, the rights to the stadium's name and usage or to the club’s own concepts and so on. The Premier League club can sell all these rights to its fans in the form of merchandise. As this is an important, reliable source of income for the club, all licensing tasks are often handled by licensing agencies these days. Such outsourcing aims to acquire as many suitable licensees as possible for its brand, purchase license rights and produce brand-appropriate licensed products or have them produced.

Licensee:

Licensees are all those who pay money for the club’s trademark rights to use the brand for clothing or other products, such as toys, sanitary products and much more. A typical example of this would be a sportswear manufacturer who is allowed to produce shirts for the club and uses the shirt's original logo and features for this purpose. But even small manufacturers, such as those who produce fan scarves or stationery items such as calendars, buy licences in the hope of being able to use them profitably for their products.

Royalties:

Royalties are the usage fees that the licensee must pay to the Premier League club. These vary depending on their valorisation – for example, a shirt may incur significantly higher licence fees than an eraser.

Licensing agent:

Licensing agents act as the middlemen between the Premier League club and all licensees. They do work on the Premier League club’s behalf and make sure that everything is produced in keeping with the brand’s values and that royalties are paid in full.

End customer:

In this example, the club’s fans can be described as end customers. They have a deep emotional connection to the club and identify strongly with their great love through fan merchandise. As a result, they readily accept that an original will cost significantly more than a comparable product. 

What are the difficulties in licensing from the customer's perspective?

Lack of interaction with fans

Although the customer may pay a lot of money for their original product, it is not uncommon for licensed products to be sold without a smart security feature. There are two reasons for this: either the licensor does not offer product markings for the licensed products or the licensee is not obliged to use them. Using a smart security feature gives fans the option of verifying that their product is an original and both the licensor and licensee can get to know fans better and make contact with them from the time of purchase.

Counterfeit products & product piracy

As with many other products, the main licensing problems are mostly related to counterfeit products and copyright infringement. Counterfeit toys, clothing or fan merchandise mean that the licensors miss out on massive potential sales every year. There is also the risk that the licensor's image will be damaged for the long term due to the poor quality of counterfeit products or that the club will lose its fans. Anyone who pays a lot of money for a supposed original shirt will be very disappointed if it irritates the skin or shrinks after its first wash due to poor quality. 

What is the best brand protection strategy in licensing?

Label & hologram sticker

The simplest forms of product labelling are holograms, premium labels or elaborately designed security tags. Many licensees want to provide customers with a guarantee for a product’s high quality and authenticity. However, even holograms can easily be counterfeited and often do not offer any means of interactive authentication by customers themselves. This is why anyone who truly wishes to get to know their fans and offer high added value should use smart label which also allow fans to verify a product for authenticity digitally and offer added value for customer loyalty.

QR code

More and more licensees are therefore choosing standard QR codes cobined with a security tag. They offer the advantage that customers can scan their product for authenticity directly after purchase. To do so, they can either download an app or perform a scan directly using their smartphone. 

Smart QR code connected to a platform

The rapid QR code check builds trust and brand loyalty and, what’s more, it is significantly safer and more advanced when combined with a unique security feature. Nevertheless, many brand owners and licensees miss out on valuable opportunities for interaction. Anyone who provides their fans with additional relevant information, organises competitions or conducts surveys once the scan and authentication are successfully completed generates important customer data for other sales campaigns. You also learn a great deal about customer behaviour and can combine cross-selling campaigns, for example. In the long term, this all leads to increased sales and you can learn even more about the customer.

Conclusion: maximum potential is far from being fully exploited on the licensing market

The trade in licensed products is booming, especially in the sports and entertainment sector. But many licensors and licensees neglect valuable potential and do not think beyond mere product purchases. Today, it is easy to guide customers quickly and conveniently to an intelligent platform, where they can check their product’s authenticity and experience numerous added values associated with the licensed product. Our smart products allow us to help licence markets such as the popular Ligue Nationale de Rugby to have contact with fans while protecting themselves against counterfeit products.