When we first started our practice in 1985, the concept of strategic brand extension licensing didn’t really exist. Many companies looked utterly puzzled after listening to our presentations — “What are you talking about?”

Twenty-five years later, things are very different.

The concept of corporate brand extension licensing has taken root and blossomed in many Fortune 1000 companies. The term now denotes the business practice that a brand owner uses to further enhance its brand equity while generating ongoing royalty revenue stream.

Over time, LMCA has developed sophisticated methodologies and tools to design, implement and manage corporate brand licensing programs on a global scale. With the growth of the industry, a new vocabulary of licensing terms, honed and refined over time, has been created.

Brand Equity — Brand equity is defined in terms of the marketing effects uniquely attributable to the brand. It can be measured across different dimensions like brand awareness, brand loyalty, perceived quality and brand associations.

Brand Extension — Brand extension involves using an existing, successful brand name to launch a new product in a separate category. A successful brand helps a company enter new product categories more easily, more cost effectively and with higher success rates. For example, a car manufacturer like Honda may use a brand name to launch a lawn mower.

Brand Guidelines — Brand guidelines are valuable tools to educate, reinforce and motivate all parties involved in building and maintaining a strong brand. They can take various forms, and may consist of brand vision, brand identity, brand strategy guidelines, a short description of the brand, brand values, brand positioning, positioning guidelines, communication tips, writing style guidelines and design style guidelines.

Brand Licensing — Brand licensing is the leasing by a brand owner of the use of a brand or trademark to another company, usually with a formal legal agreement. The brand licensee pays an agreed licensing fee or royalty rate for use of the brand.

Corporate Brand Licensing — The leasing by a corporate brand owner of the use of its corporate brand or trademark to another company, usually with a formal legal agreement. The brand licensee pays an agreed licensing fee or royalty rate for use of the brand. For example, Westinghouse has been licensing its brand to several large manufacturers for a variety of consumer durable products, such as TVs and kitchen appliances, following its divestiture of businesses in these categories many years ago.

Corporate Brand Extension Licensing — The leasing by a brand owner of the use of a brand or trademark to another company for a product category that is not being pursued by the brand owner itself. The brand licensee pays an agreed licensing fee or royalty rate for use of the brand. For example, Kodak has been licensing its brand to another company that manufactures and markets progressive prescription eyeglass lenses, which is not a part of nor in conflict with Kodak’s core business.

Licensing Agency — An independent professional firm that helps brand owners to devise licensing strategies, engage licensee candidates and arrange licensing deals on behalf of their clients. Traditionally, brand owners have used licensing agencies to save time, reduce upfront start-up costs, and to take advantage of their expertise in brokering the best deals.

Licensee - The corporate entity that obtains the license to use others’ brands.

Licensor - The brand owner who licenses its brand to others.

Retail Direct Licensing — Instead of licensing their brands to manufacturers, brand owners license their brands directly to large retailers who are responsible for sourcing the products themselves. Retail direct licensing is a powerful business model as it combines the best of the two business elements — a well-known consumer brand and guaranteed retail shelf space. Many large retailers have adopted retail direct licensing, include Target, Wal-Mart, Tesco and China’s largest electronics and appliance chain store, Sunning.

Trademark Licensing — Similar to brand licensing.