“THE ONLINE INVENTOR” newsletter for inventors: April 2010 issue

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Dear Inventor --

You'll notice that this newsletter has a different look to it. Instead of being a text-only newsletter (which is now in its 12th year), it is now more enjoyable and professional looking, including the addition of pictures. Same great info ... but with a better format PLUS there's a new fun feature from my INVENTION MYSTERIES series at the bottom of each issue.

One other thing that may be of interest to you -- with this new format comes a special new offer for inventors, so be sure to check out the coupon at the bottom.

We welcome Jack Lander as a contributor to the newsletter. Now, on to this week's issue. Enjoy!

“People ask me what I do in winter when there's no baseball. I'll tell you what I do. I stare out the window and wait for spring” – Rogers Hornsby

Many of our clients aim for the top. Why not? It makes senses to try to license your invention to one of the giant corporations. They've got the marketing know-how, and the deep pockets to pay fair royalties.

But big corporations are difficult to work with. First, we may encounter arrogance. So many of them have the attitude that if an idea is worth anything, they already would have thought of it. And they presume that everything is in the public domain until you prove otherwise with a utility patent. Most large corporations view inventors as a pain in the butt to deal with, and often we are. And getting through to the person who might consider our inventions-the Director of Market-ing-is often impeded by legal gatekeepers, jealous engineering departments and officious underlings.

Along with these natural impediments we often find that corporate judgment regarding potential new products is impaired by-hmmm, how shall I say it?-"ivorytowertude." Jack Canfield and Mark Hansen, the authors of Chicken Soup for the Soul, submitted their manuscript to 134 publishers before one of the smaller, hungrier publishers picked it up. (A book written by an independent author has all of the attributes of an invention. Authors collect upfront monies, are paid royalties, and are rejected more often than not. The advantage of the publishing analogy is that more anecdotal and statistical data is available than for invention licensing.)

Okay, so how do we deal with ivorytowertude? One of the obvious ways is to deal with smaller, hungrier corporations. Good start. But even with these fellows we have to approach licensing with a certain protocol.

I'm an advocate of having an inside contact. Attend appropriate trade shows, and meet with Directors of Marketing and company Presidents. Men and women whom you would never get to meet by calling cold on their companies will be standing in their booths, ready to shake your hand. No gatekeepers at trade shows. However, they can't discuss your invention until you've signed their agreement. Agreement? Yes, all corpora-tions of any degree of sophistication will require that you give up all rights to your invention except those granted by your patent. Should you do it? Well, you won't get into negotiations unless you do. So, conven-tional wisdom is to sign. You should have your patent attorney look it over first, of course. But if you have to approach 134 companies like the Chicken Soup fellows did, you'll go broke.

Besides, this is a preliminary agreement that starts negotiations; it's not the final ....

Besides, this is a preliminary agreement that starts negotiations; it's not the final agreement that you'll sign if all goes well, and a licens-ing deal is offered. You must have licensing contracts reviewed by a patent attorney before you sign.

Here's what I suggest: Find out which companies are going to attend the trade show of your choice. Many trade shows publish this information in order to attract visitors. Contact their legal departments, (or marketing departments if they don't have a legal department), of all the companies you wish to contact, and tell them you want to submit an invention. Ask what its policy is. Chances are that it will send you the papers you'll have to sign. Sign them; make a copy; and return the origin-als to the companies. Now, when you attend the trade show, you can show that you've done your homework, and you should be able to talk with any executive.

Most of these fellows won't want to take time out of their busy days to discuss your invention, so, suggest that you meet around show closing time on the last day. Most shows contractually require that the booth remain intact until the last hour of the show, and this is usually a dead time for the regular contacts. If this doesn't work, suggest that you either call on the executive (if your time and budget allows), or submit your information directly to the executive (preferably the Marketing Director or President) a few days after the show.

If the company is interested, and it wants a prototype, be sure to get the name of an internal contact who will shepherd it from department to department, etc., and whom you can contact for its progress. I've had good results working with the secretary or executive assistant to the marketing manager. You can almost always get through to these people. Also agree on a latest date by which you'll receive some kind of answer from the company. Karla and I hear horror stories from our clients about prototypes being lost or collecting dust on top of a file cabinet in the engineering department, etc. Some companies have a procedure for the handling of submissions, but many smaller companies don't have one. It doesn't hurt to ask if your prospect has a formal procedure.

And always remember the Chicken Soup fellows. Rejection is not necessarily a reflection of the value of your invention. Executives make mistakes. Persistence is the key.

Jack Lander is a mentor to inventors. He has written a column for Inventors' Digest for the past 14 years. An inventor as well as a writer, Jack has 13 patents. His web site is www.inventor-mentor.com

Jack Lander is a seasoned inventor with 12 patents and always working on more. His most commercially successful patents are assigned to U.S. Surgical Corporation. Jack served as President of the United Inventors Association and is presently the Vice President of the Yankee Invention Exposition. He has been a feature columnist in Inventors' Digest magazine for the past 12 years writing the "Lander Zone." He is a published author of "How to Finance Your Invention or Great Idea," "All I Need Is Money," and more than 50 special reports for inventors. Jack has supplied this newsletter with articles in the past, and I'm glad that he agreed to provide us with more articles in the future. He and Karla Hunter have a wealth of knowledge and experience to guide you.

Karla Hunter is an experienced inventor with 10 U.S. patents that redefined wireless communication. After years of providing Fortune 500 companies revenue gains through her innovative new product ideas, she now helps independent inventors create revenue streams that exceed anything the corporate world has to offer. She has uncovered a blueprint that helps inventors map out go-to-market strategies and she mentors them along the way, including providing legal advice, advice on technology and best practices to run your business, the latest technology marketing practices, and more.

If you want to sign up for their weekly newsletter, titled "INVENTION MARKETING WEEKLY: THE authoritative column for independent inventors and small businesses based on innovation," please go to www.KarlaAndJack.com

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I often get the “What is it that you guys do?” question from inventors. I get it so many times, in fact, that I decided to explain EXACTLY what it is that I do for inventors …

1. The main thing that I do is build web pages for inventors. Prices range from $295 up to $495 and includes your web page being hosted on MarketLaunchers.com for 1 or 2 years. Also includes free consultations by phone for as long as you have your web page here.

In fact, this is all I did for the first 12 years. Now, I’m adding additional services to you:

2. Speak to your inventor group or any business group. I can give your inventor group advice on how to promote your invention, whether it be about licensing or manufacturing and marketing. Call me at (800) 337-5758 for details and rates or send me an e-mail to niemann7@aol.com

3. Consultations by phone. Rates are $50 per hour, but you purchase your own web page from MarketLaunchers, then it is free.

4. Research the market for your invention. Rates are $50 per hour, whether or not you’re a MarketLaunchers customer.

“People ask me what I do in winter when there's no baseball. I'll tell you what I do. I stare out the window and wait for spring” – Rogers Hornsby

Article # 2: “Selling Big: Finding the Right Marketing Partners”
by Don Debelak of One Stop Invention Shop

Once inventors have a product ready to sell, they need to decide how to market the product. They might choose to sell the product themselves, which generates the most profit per sale, but the main drawback is that sales might get off to a slow start or never get started at all. Another option is to land a marketing partner–another company already selling into the target market—which has the potential for very fast sales growth, but the main drawback is they will need to give 20 to 25% of their sales volume to the marketing partner to cover sales and marketing costs. At first glance the 20 to 25% seems high, but in reality most consumer products companies spend approximately 20% to cover sales and marketing costs. Selling through a marketing partner may not be viable if you have small margins, but it is often the best course for fast sales growth for inventors with high margin products, where the product’s wholesale sales price is at least twice the product’s manufacturing costs. This article covers how to find a strong marketing partner to sell your product.

There are several principles to follow when selecting a partner. The partner needs to be selling to the right market and they also need to be able to generate significant revenue per year with your concept. The partner should also have a strong reputation and have had strong sales growth. But the critical point is to work with companies where the inventor can find someone inside the company who is willing to push management to carry your product. Ideally this person is a regional manager or marketing person with enough clout to move the project forward. The marketing partner can be chosen from a wide range of businesses: a manufacturing company that makes other products it sells, a distributor who sells to the same target market, a manufacturer’s representative firm that plays an important role in a particular market, a large end user of an industrial product, or even a major retailer looking to sign a private label agreement for its stores.

Potential Marketing Partners:

Typically when people think of a marketing partner, they are thinking of bigger companies that have large marketing and sales staff. Those companies can be good partners, but they are also partners that can take a long time to sell. What you need from a marketing partner is a commitment to take the product for a period of time, which means a marketing partner is a very broad term for inventors. For example, a retailer is a partner if it agrees to buy a fixed number of units for three years in return for an additional ten percent discount and an exclusive sales agreement.

Companies with Branded Offerings:

Products and services are branded when they are sold under a name the company promotes. The Geek Squad sells branded computer repair services and the Crank Brothers sell branded bike repair products to bike shops. Companies with branded products typically sell through established distribution channels, compete with many other companies, and have a somewhat steady stream of business. These companies will be interested in marketing inventor products when those deals improve their competitive situation.

Distributors:

Distributors often look for exclusive deals on “hot” products or services that have strong customer demand since it boosts all of their products’ sales.

Retailers:

They already buy lots of private label products, which are typically nonexclusive agreements for a product with the retailers name on it. A private label agreement is one option to an inventor when the retailer makes a three or four year commitment.

Companies that Market Others’ Products:

Many markets have one or two companies that market products from overseas manufacturers or small US companies. They also make strong marketing partners.

Finding Potential Partners:

If you want to have your invention manufactured overseas, but don’t know where to turn, WE CAN HELP.

Finding Potential Partners:

Finding partners starts with the target customer. Anyone who is active with your target customer is a potential partner. Make a list of all the companies and organizations that interact with your targeted customers. The best way to find these companies is by using directories that are posted on web sites for trade magazines and associations and from exhibitors lists from industry trade shows.

Trade magazines typically have directories where you can often get a list of manufacturers, manufactures’ representatives and distributors. As an example, I learned rock salt lamps are popular in Pakistan , both for their soft ambient mood lighting and because the rock salt lamp releases ions when the light is on that have some medicinal value. To look into potential partners I did an internet search for lighting retailer trade magazines and at the top of the list was the site for Home Lighting and Accessories, the trade magazine for lighting retailers. The site contained a directory for manufacturers, manufacturing representatives, and some distributors. I also subscribed to the magazine (most trade magazines are available at no charge) so I could keep up with the industry. You can also find trade magazines in Gale’s Source of Publications and Broadcast Media, which is available in larger libraries.

Associations can also be located using the internet in exactly the same way as trade magazines. For the associations related to lighting I found several sources but the best one was the National Home Furnishings Association. The association’s directory for products contained a list of many manufacturers and distributors and a list of auxiliary members had the names of manufacturers’ representatives. Gale’s Book of Associations, also available at libraries, contains the most comprehensive list of associations that I’ve run across.

Trade shows are another good source for finding potential partners because most key market suppliers will exhibit at a trade show. Most shows have directories that list all the exhibitors, what their products are and contact information for each company. Your best bet is to just call the trade show sales office and ask for a copy of last year’s show directory. You can find the right trade shows contacts in trade magazines and at www.tsnn.com, which is a comprehensive web site directory of both big and small trade shows.

When Marketers are Receptive to a Deal:

Marketing partners take on product from an inventor when it helps enhance their overall market presence. Inventors should research the target marketer to understand what sales approach will work best. I’ve listed a variety of reasons that might make the marketing partner be receptive to your offer.

New Market Trends:

Downloading music for fees, cell phone conference calls among teenagers, backyard water ponds, and hybrid golf clubs are all new trends where some companies are winners and others losers. For inventors, especially ones that are users of the product, these trends open up opportunities because companies participating in the market don’t know for sure what the fast changing market wants, and may use an inventor’s product to better explore the market. Scrapbooking is a good example: that market went from low to no sales to five billion dollars in sales in a just a few years. Many of the new products in that market came from inventors or others who were diehard scrapbookers–they knew what the market wanted because they were one of those target customers.

Product Line Gaps:

Marketers can’t afford a hole in their product line because companies avoid having multiple sources of supply, which is expensive and complicated. Having an incomplete product line causes companies to dump one marketer in favor of another marketer with a complete line to keep hassles and expenses down. Limited supply sources is even more important to service providers, since both companies and consumers tend to prefer just one supplier. A potential marketer will be receptive from a proposal from an inventor who fills in a product line. Filling a product gaps causes the marketer to get all of his products or services into more outlets, thereby increasing sales across the board.

Improved Margins:

Distributors and retailers might sell a product at a 30 to 40% margin. If the distributor commits to a three year deal for an exclusive selling arrangement he might receive an additional five to seven percent margin, either as a discount or as a share of the profits. That’s a good deal for distributor.

Increased Revenue:

Certain functions are critical for a marketer to continue, such as newsletters, service support, or sponsorships of events, to keep connected to their customers. But often those activities barely break even in profitability for their companies, and the marketer is looking for ways to create new revenue streams to help cover all of their fixed marketing costs. Small companies, who have trouble creating enough revenue to afford an effective marketing program, might add an inventor’s product to build up their revenue stream to help offset these fixed marketing costs.

Change in Top Personnel:

New management is always looking to make an impact on their employees and the market. They will go out of their way to look at new ideas and concepts from inventor/entrepreneurs in the hope that they might have an idea that will sell. This situation is especially advantageous for inventors because they can often get right to the top management people in the company.

Unable to Fund Their Own Introduction:

Sometimes the best marketers to approach are mid to small size companies that lack the resources to introduce a product on its own. Look for companies in the market that feature mostly accessories or peripheral equipment or services for companies and can’t afford a major introduction. With the work you’ve done developing your idea, and the other resources you bring with you, you and the marketer can succeed together.

Choosing the Best Marketing Partner:

Types of Deals for Marketers:

Inventors’ deals with manufacturers can be set up in a number of ways. I’ve listed an array of deal structures you can suggest to marketers to find the one that suits them best.

Firm Purchase Commitment:

The simplest inventor deal is a two to three year purchase commitment that’s large enough to help the inventor sell all the products it can afford to make. Retailers are a good example of a company that will do this, as well as distributors or integrators, who buy your product and then include it in as a component of their own product. An exhaust system manufacturer, for example, is an integrator who might buy large volumes of an innovative component from an inventor that it will incorporate into its final product.

Firm Purchase Agreements in Return for Considerations:

The agreement might call for exclusive rights nationally or in a territory for either a short time or it could be for the duration of the agreement. Rather than a total exclusive agreement, the consideration might be that certain features or applications are exclusive to the marketing partner. For example a chain of skateboard shops might have exclusive rights to a new style of polyurethane wheels on a skateboard, but not exclusive rights to the entire skateboard line. Agreements also can be entered with price concessions in additional other considerations. In return for a firm long term agreement you might have to give up both, and might also need to offer protected pricing, which you can only raise under certain restricted circumstances.

Private Label Agreements:

A private label agreement is really no different than the first two options, except that rather than branding your product or service with your name, it is instead branded with the marketer’s company name. For example you might sell your skateboard wheels with the name of the distributor or retailer on the box. This is the deal that most often works if you are selling to a marketing company that sells products from overseas and other small manufacturers.

Don Debelak has been working with inventors for over 25 year. He and a team of expert associates run the One Stop Invention Shop, http://onestopinventionshop.net

You can pick up your copy of "10 Steps to Bring Your Product to Market" there.

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