The second category of products in the corporate trademark licensing world is brand extensions. A brand extension is when a brand is applied to another product because the intrinsic equity values of the brand are appropriate for products other than the original use of the brand. For example, when Maytag licensed its brand to State Industries (the nation’s largest manufacturer of home water heaters), State Industries extended the Maytag brand into the water heater category. The Maytag equity elements of quality, dependability, and association with home appliances were perfect for the water heater. Under a licensing arrangement, Maytag could, in essence, enter the water heater category without the normal investment and risk. State Industries could obtain the services of a tremendous brand without the huge investments required to build the brand on its own. Brand extensions are generally large deals, but are very difficult and time consuming to execute, typically tying up a large amount of agency resources to be successful.
Trademark licensing is a tremendously large industry, representing well in excess of $75 billion in annual sales in North America alone. Corporate trademark licensing represents about $15 billion. Even at this level, it is estimated that only 15%-20% of Fortune 500 companies have a pro-active licensing program, independent of merger and acquisition activities.