Companies who know their brands well will have a good understanding of the equity of the brand. A brand’s equity is derived from the awareness and image a brand holds with its consumers.
Licensing enables companies whose brands have high preference to unlock a brand’s latent value and take advantage of demand that exists for non-competitive products.
Apple’s IPod is a good example of a brand (and product) that created an immediate need for accessories. Since these accessory products were not core to Apple’s business, they chose to use licensing to meet the demand for these accessory products, and benefit from the incremental revenue. Licensing the iPod brand provided great opportunities for savvy companies to produce all kinds of terrific products to make the iPod more user-friendly and enhance the listening experience.
Examples include the iPod docking station, alarm clock radios featuring iPod docks, wireless blue tooth receivers and other products that enable an iPod to be heard through a vehicle’s built-in stereo and iPod holding devices that allow users “to take their music with them” when they go running.