When you grant a licence to a client, you give them permission to use your artwork in a certain way, but you still retain the copyright. A license can be “exclusive” meaning only one client can use the image while your licence lasts, or “non-exclusive” meaning that you can licence the image to several clients at one time.
When granting a licence, you and the client will agree on:
Territory: Where they can use the artwork geographically
Duration: How long they can use it for
Usage: What context they can use it in
Your quote will be based on the value of the licence you’re offering. This is a win-win because it means that the client is only paying for the uses that they need, and you get to control exactly how your artwork is used.
This doesn’t just apply to illustrators. Lots of other creative roles use a licensing model, such as photographers, musicians, and authors. Licensing is, however, more typical for freelance creatives. It’s important to note that if you are an employee of a company (as many designers are), the copyright in your work will belong to your employer. This is standard practice, as you have the payoff of a guaranteed regular income.