*****************************************************************
*****************************************************************

THE ONLINE INVENTOR -- October 2001

(c) 2001 Market Launchers, Inc.

http://www.marketlaunchers.com

Publisher: Paul Niemann

*****************************************************************
*****************************************************************

FAMOUS / INFAMOUS Quotes

"If she was any good, she would have seen that coming," -- anonymous, on the announcement that so-called psychic "Miss Cleo" was being investigated on fraud charges by New York's attorney general

"It may seem to hurt a little, but it's all in your head," -- this newsletter author's dentist

************************************************************

In this issue:

Article # 1:    "Thoughts on TV Marketing," by Mike Marks of InventionCity.com

Article # 2:    "Design References List," by Jim White, author of "Will It Sell?"

Article # 3:    "Three Short, Important Tips On Sending Information to Companies," by Paul Niemann of MarketLaunchers.com 

************************************************************
************************************************************

Article # 1:    "Thoughts on TV Marketing," by Mike Marks of InventionCity.com 

TV is a great way to introduce a new product. Features and benefits can be quickly communicated to a large audience. Retail buyers are more likely to say "yes" if a new product has TV support. And when a TV product has wide retail distribution, sales volume grows exponentially. 

If it's possible to sell your product on TV, you should do it. But be prepared for knockoffs. Nothing gets the attention of knock-off artists like TV success. Ideally your TV campaign should begin after your patents have issued. That way you'll have a loaded weapon to fire when knockoffs appear. A pending patent is like a gun without bullets - it has potential to protect you in the future, but is impotent today. 

The following discussion does not apply to home shopping channels such as QVC and HSN. Viewers of these programs often feel a relationship with the hosts and business and trust that what they are seeing and being told is true. Home shopping products typically sell at 1.5X-3X cost. 

This article applies to 2-minute direct response TV "spots" and 30-minute infomercials - the kind you often see on the Weather Channel, Animal Planet and ESPN-2. 

The biggest lesson I've learned in TV marketing is that the true quality of a product has virtually no impact on its success or failure on TV. I've participated in the production of 2 direct response TV spots (Gator-Grip and SqueezeDriver) where ALL of the people involved said things like, "Wow! This is really a great product! What a change from the usual junk we deal with! This has to succeed." Only to find that the wonderful aspects of my genuinely great products did not immediately communicate to a mass audience - the initial TV spots failed (later ones had success). Meanwhile, much to my chagrin, inferior junk was seeing great success the first time out.

Most people watching TV spots believe they are being lied to. They discount 50% of what they see. Thus, to communicate the true benefits of a legitimate product, a marketer needs to exaggerate by 100%. (It's a chicken and egg thing; we don't need to worry here about how this situation came about). Some products lend themselves to easy exaggeration while remaining within the bounds of law. Others do not. 

For example, we all KNOW we need to sweat to get an effective workout from an exercise product. The people who buy from TV (primarily women) know it, too. But no one wants to believe it. We are always looking for an easy way. If I show sweat and effort in the TV spot for my new exercise product, I'll probably fail. A successful exercise product should look like it does the hard work for you ... and it should look fun. This concept can be generally applied to all TV items.

Ideally a product can be exaggerated 100% on TV but also be legitimate and really useful. That's the case with our Gator-Grip. The TV spot implies that this one tool will replace an entire toolbox (of course it won't), that it's the only tool you'll ever need (no way). However, the product DOES do everything we claim (we make some big fat claims). It really works. And when someone buys it they are happy with the quality and performance - it works better than they thought it would. 

The basic rule of sales is under-promise and over-perform. In TV marketing this rule roughly means that you should exaggerate by less than 100% - that way the received product will be better than expected. Note that any claims you make in your spot must be true. Exaggeration comes not from claims but from implications.

Typically the products you see on TV sell for 5X or 4X cost. Thus, a $20 item typically costs the TV marketer between $4 and $5. If the seller of the product is making a typical markup of 50%, then the actual product cost is something like $3. There's little room for healthy inventor royalties in this equation. (Read the article Money & Inventing to learn more about product pricing and how much is available for the inventor.) 

In the case of Gator-Grip, the product that's now sold on TV for $20 costs more than $5 produce and no royalties are paid. Because of the value of TV advertising, WorkTools (the inventor) agreed to take no royalty and Endeavor (the manufacturer) agreed to sell to the TV marketer at below cost. If we had actually produced the spot and purchased the TV time ourselves, it would have cost us more than what we are losing on the units we sell to the TV marketer. This way we get the advertising we need at a fraction of the cost - the advertising supports a solid retail sales program where both Endeavor and WorkTools will make real money from the invention.

Much of the cost of TV marketing goes toward the purchase of TV time. The remainder goes to product cost, the TV marketing company and the producer of the TV commercial itself. A typical 2-minute direct response TV spot costs $20,000 for a video production + 2% of sales (paid to the producer). Also note that the TV marketer typically gets a cut of around 5% of sales made to retailers during the time when the TV spot is running and for up to a year or more after the spot terminates.

The standard measure of success in TV marketing is a term called Cost Per Order (CPO). CPO equals the cost of the product (including royalties) plus the amortized cost of TV time per order. For example, a product costs $5, the TV spot costs $500 to air and 50 people order -- in this example the CPO is $15: $5 for the product plus $10 for the TV. If only 20 people order, the CPO is $30: $5 for the product plus $25 for the TV. To make money, the CPO needs to be below the offer price. If the offer price is $20, then a $15 CPO would be very successful and a $30 CPO a loss.

In addition to considering CPO, TV marketers also look for income earned from up-sells. An up-sell is something the consumer learns about after responding to the TV offer. For example, in an earlier version of the Gator-Grip spot we offered a ratchet wrench as an up-sell. When a consumer called to purchase a Gator-Grip, he/she was asked, "Would you like to buy a ratchet for an additional $10?" Up-sells can turn a marginal TV offer into a winner and are thus very important. If you think your item is right for TV, consider other items that you can sell along with it as up-sells.

Negotiating deals with TV marketers can be complex. Beyond standard contract issues such as payment terms, product cost and territory, there are also issues of rights. For example, who owns the TV spot? Deals can go in all kinds of different directions. It's important to use an attorney specifically familiar with TV marketing deals.

# # # #

Mike Marks is President of InventionCity.com and has been active in the field of product development since 1987. In conjunction with WorkTools, Inc., he has brought numerous products to market directly and through licensing agreements with others. WorkTools, Inc. also produces prototypes for their inventor clients and brings some of those inventions to market.

Inventors seeking help may also submit their ideas to Invention City for possible financing, licensing and other forms of development assistance. To submit your consumer product to Invention City, go to their site (www.InventionCity.com) and click on "How to Submit an Invention."

************************************************************

Article # 2:    "Design References List," by Jim White, author of "Will It Sell?"

PUBLISHER'S NOTES: In order to keep these newsletters short in length, we sometimes print a list such as this one in place of a longer article. I think you'll find these sources of engineering, design and manufacturing to be beneficial. To get more information such as this, you can purchase Jim's book, "Will It Sell?" at http://www.willitsell.com 

******************************

Some recommended reading materials on engineering, design, and manufacturing are:

"Product Design for Manufacturing and Assembly," Boothroyd & Dewhurst, 1994 (earlier, similar books should be useful also).

"Designing for Manufacture and Assembly," Therese R. Welter, Industry Week, September 4,1989.

"Designing for Simplicity," Byoung Sung Kim, Mechanical Engineering Design, Nov. 1999, pp. 34-36.

"Effective Product Design & Development," Stephen R. Rosenthal, Business One Irwin, 1992.

"The House of Quality," John R. Hauser and Don Clausing, Harvard Business Review, May-June 1988, pp. 63-73.

"Juran on Leadership for Quality," J. M. Juran, The Free Press, 1989.

# # # #

This list is from Jim's book, "Will It Sell?" To purchase "Will It Sell?" for 19.95 plus $5 S/H, please go to www.willitsell.com.

************************************************************

Article #3:    "Three Short, Important Tips On Sending Information to Companies," by Paul Niemann of MarketLaunchers.com 

Many of us have sent information to companies concerning our inventions, but are we really doing all that we can to increase our chances of success? Here are three simple tips that will benefit anyone (anyone who will use them, that is). 

1.    Always find out who to send it to before sending it. You should find out who the correct person is by calling the company and asking the receptionist, for the proper name, title and spelling. If the contact person has a name that could be either for a man or a woman, be sure to ask the receptionist, as there is no surer way to have your presentation thrown out as junk mail than to address a man as "Ms.," or a woman as "Mr." 

2.    This one almost sounds too obvious to even mention, but I'll mention it anyway: Always include a picture or two of your product, because "A Picture is Worth a Thousand Words." Even if your product can be explained in simple, everyday terms, you should include a picture of it because some people can grasp a concept just by seeing a written description or hearing the words that describe it while others must see a picture in order to fully understand it. Besides, there may be another product with the exact title as yours, and a picture or illustration will clarify it for him. In addition, imagine that he has a stack of 15 or 20 product submissions waiting for him on his desk. If yours has a picture on it, do you think he's more likely or less likely to remember it? And what if he doesn't have time to review them all? He'll learn more from a picture in 5 seconds than he will from reading a written description in 5 minutes.

If you'll make it easy for companies to understand what your product is by showing them a picture or illustration of your product, you'll increase your chances of success. You can read more about this subject in my next article in the next issue of Inventors' Digest (January / February 2002issue), entitled "A Picture is Worth a Thousand Words."

3.    ALWAYS follow up with a phone call after sending your information. There are a number of reasons why, but the three most important are: 

*    You can ensure that your information goes to the right person, 

*    You can ensure that he did in fact read it (and not mistake it for junk mail) since he may have forgotten about you by the time he receives it, and 

*    The only way you can explain and sell your product to him (and the benefits of licensing it from you) is to speak with him after he has had a chance to review it. 

Sometimes your contact will have forgotten about you by the time he receives your product information in the mail. One way to avoid this is to direct him to your web page when you call him instead of sending him the information in the mail, if you have a web page. If you don't have one, call me and I will help you get started. (It's not free, but it sure beats having your product information thrown away as junk mail or having him forget about you by the time you call to follow up. 

# # # #

Paul Niemann runs MarketLaunchers.com, which specializes in building web pages for inventors, and companies search the Invention Database at MarketLaunchers.com for new products to license in. Call (800) 337-5758 to order your own web page today.

************************************************************
************************************************************

Click here to read the September 2001 issue.