Taking your big idea from dream to reality is exciting and challenging. But getting an idea to market requires worrying about so many details, it's easy to forget the most important steps to making a product succeed:
1. Perfect the product's design and prove it will sell.
2. Find a distribution network to sell the product in a limited market.
3. Establish widespread distribution.
Most people with ideas concentrate on the first step and overlook the other two, not realizing how crucial--and difficult--they are. The best way to generate quick success? Prepare for the final two steps early in the process by determining what distribution network you'll use to sell your product, developing contacts in those channels, and pre-selling your idea to the channel six months to a year before introducing it.
Step 1: Prove the product will sell.
Wendy Murphy, owner of W. Murphy Enterprises Inc. in Toronto, has made it through the first key step of profiting from an invention. Murphy is a medical research technician who has worked in several hospitals. After watching rescue workers on TV during the Mexico City earthquake of 1985, she realized there had to be a better way to evacuate infants from hospitals in an emergency.
In 1990, Murphy launched her product, a six-infant stretcher dubbed the WEEVAC 6. She went to conventions, made sales calls to children's hospitals and eventually sold about 200 units. So far, her best year has brought in sales of $89,000.
Murphy has proved her product will sell, but she can't break the $100,000 annual sales barrier. One person can only make so many sales calls, and Murphy hasn't found a distribution network to take on the sales burden. "It's extremely frustrating to have trouble finding distribution for a product I know will save babies' lives," says Murphy. Most people feel the same way when they find themselves stuck in a sales effort that can't build up enough momentum to take off.
Distribution refers to how a product moves to market. This might be through a sales agent, wholesaler, distributor, retail store or any other organization that gets a product to the consumer. A strong distribution system is the most important aspect of marketing a product. You should spend 10 percent to 30 percent of your time locating distribution channels and promoting your product to them.
To jump-start her distribution efforts, Murphy should:
1. List key elements of her selling situation: The product has a six-month to two-year sales cycle (the time needed to complete the sales process, from initial cold call to authorization, requisition and approval of the purchase), the target customers are hospital evacuation committees, and the average unit price is $1,000.
2. Read trade magazines and visit trade shows to find products with similar selling characteristics (price point, sales cycle, target market, etc.).
3. Learn how those products are distributed. (She can do this by talking to people who market or sell the similar products.)
4. Establish contacts in the distribution network by attending trade shows and directly contacting buyers and marketing people at key distributors, wholesalers or retailers. This isn't easy: You might have to contact 25 to 30 organizations before you find one willing to handle your product.
Step 2: Find a distribution network to sell the product in a limited market.
Selling to a distribution network is much harder than selling to consumers, who compare your product to competing products. The distribution network compares your product not only to competing products, but also to all the other noncompeting products it could potentially sell. Their goal: to earn the most money for the least effort.
The distribution network also considers factors consumers don't, such as minimum order size, terms, shelf space, promotional budgets, packaging appeal and pricing discounts. To work out such issues and build sales momentum, your next step is to get into a small distribution network.
John Mueller, owner of The Idea Factory in Menomonee Falls, Wisconsin, got a fast start selling his product, the Rinse Ace, thanks to home shopping network QVC. In 1995, the network aired a segment showcasing products from Wisconsin inventors--and Mueller's product was chosen as "Best of the Show." But that initial success didn't help in other distribution networks. "[Large retailers and distributors] won't talk to any new business until it's been around for a few years," says Mueller, 35.
The Rinse Ace is a valve that fits onto a shower arm right before the shower head. It has a nozzle that attaches to a hose and sprayer to spray the entire shower. The product is ideal for television because it offers a powerful demonstration. Unfortunately, most distribution channels want products that sell based on a package, not a demonstration, so Mueller had trouble getting hardware stores and mass merchants to carry Rinse Ace.
Instead, he concentrated on catalogs like Miles Kimball and Damark. Today, Rinse Ace is in more than 35 catalogs, and Mueller estimates 1998 sales at more than $1 million.
Catalog success got Rinse Ace into Menards, a Midwest home improvement chain; a few distributors; and scattered hardware stores nationwide, where it's selling well. This has established Rinse Ace's sales potential and generated the momentum needed for the next step: widespread distribution.
People often wonder why distributors won't give a new product a chance. Setting up paperwork and sales training for a new product is a lot of work, and distributors don't want to spend the time unless they're sure the product will sell.
Having an "introductory stage" when you sell to a limited market allows you to lavish extra attention and promotional efforts on that market. Promise promotions, demonstrations, extra-long payment terms, frequent restocking services, and any other service you can to get the distribution network to take your product and to help it sell. The initial momentum from your first distribution channel is crucial to lining up a larger network (Step 3). Another good reason to limit your market initially: You probably can't afford to launch a product in more than one market.
Step 3: Establish widespread distribution.
Having spent years in advertising and marketing, inventor Tony Loiacono, 42, knows the value of distribution. He follows a strategy I recommend: Start working with distribution networks at the earliest stages of the inventing process.
Loiacono's inventions, Kid Soap and Kid Soap Plus, are soaps shaped like animals and made without chemicals that are harmful to children. They come with a free toy; Kid Soap Plus also includes a background scene that wraps around the inside of the tub. (A lion-shaped soap, for instance, might come with a jungle background.)
Loiacono, owner of Heads & Tails in Bonsall, California, got his idea in January. He made models, took them to contacts in the distribution channel for feedback, then made the suggested changes. "Personal contacts in the distribution network are essential to introduce new products," he contends. "They allow [you] to minimize advertising expenses on a product launch." Getting feedback from contacts also helps perfect a product--and you'll almost always get orders from a buyer if you make changes based on his or her input.
Because Loiacono pre-sold the distribution network, his soaps went straight to broad distribution. Loiacono got orders from Wal-Mart, Kmart, Hallmark stores and Toys "R" Us, as well as distribution networks serving advertising specialty suppliers and small gift stores, and introduced his soaps in June--just six months after getting the idea.
Distribution is typically the last thing considered. People go to the time and expense of patenting their ideas, making prototypes and producing an initial volume of products without considering whether their product is worth pursuing or how it will be sold. They rarely get off the ground.
How do you know if your product is worth pursuing? There is no simple answer. More important than a good idea are your willingness to adjust to market needs and an ability to develop contacts in your distribution network. Here are five guidelines to help you determine whether your idea will be easy to introduce:
1. The product is easy to distribute. Look for markets where a distribution channel already exists and is receptive to new products from one-product manufacturers.
2. The technology is simple. Complicated products often require extensive product development costs beyond the resources of inventors.
3. The product is perceived to be unique. Most distribution networks don't like one-product companies because dealing with them is just as much work as buying 15 products from a larger vendor. To overcome this obstacle, your product must offer benefits not available elsewhere.
4. The benefit to consumers is obvious. Your product must sell itself in a few seconds.
5. The retail price is at least four times your manufacturing cost. Otherwise, you won't make any money after paying vendors, sales agents and overhead costs.
Most ideas don't meet all five criteria at first but require modification. If you can't answer the questions, find someone in your distribution network who can: a store manager, wholesaler's or distributor's salesperson, or a marketing person at a manufacturer in your industry.
What if you've got a good idea but don't want to handle all the steps yourself? One option is licensing (see "Inventions" on page 74 for more on this topic); another is an invention marketing firm. These firms have gotten a bad reputation as a result of media expos? of shady companies that promise huge payoffs, collect a huge fee??? but don't do anything to actually sell or license your invention. While there are some legitimate firms out there, be sure to get three things in writing before paying any firm promising to help you:
1. An itemized list of the work the company will perform. No firm can promise to make you money, but they should be able to prove they will provide promised services. Ask for and check references.
2. An explanation of what the work performed will accomplish. For example, from a patent attorney, do you simply want to get a patent--or a patent that prevents competition? Will a prototype be a rough representation of your product, or will it look just like the finished product?
3. An estimate of future costs. The company should detail any additional expenses to get to the final product. Ask the prototype shop what it costs to go from a rough model to one that looks like the finished product. Don't proceed with the first step if you can't afford additional steps.
As the entrepreneurs profiled here illustrate, you should start thinking about how to distribute your product right after you come up with your idea. This helps you create a more marketable product, develop it faster and generate more sales momentum from the beginning.
A prototype, or working model, is crucial to attract potential investors and make sure your invention really works. In the past, prototypes were built from scratch, from parts of existing products or by using a prototype shop.
A new development, rapid prototyping, makes the process easier. It uses a computer program to draw a 3-D version of the product, then uses computer-aided machinery to create a working model. The process can be started using rough sketches, rather than engineering drawings or rough models. The total cost can be 25 percent to 50 percent less than the cost of a traditional prototype.
You can find rapid prototype shops in the Yellow Pages under "Prototypes," "Computer Graphics," "Designers--Industrial," and related categories, as well as through invention magazines, your local Small Business Development Center and inventors' clubs. (See "Resources" on page 32 for contact information.)
Contacting inventors' clubs is a good idea no matter what. These organizations are set up to help people who lack manufacturing experience. If you have an idea, take the time to contact inventors' groups and get feedback on how to proceed.
Even if you thought of it first, you don't legally own a product, idea, name or slogan unless you have a patent, trademark or copyright. You can obtain a patent for any new and useful process or machine, or any new and useful improvement to a process or machine. A trademark protects any word, name or symbol used to distinguish a product or service from other products. A copyright protects literary, dramatic, musical and artistic works.
Patents are expensive, often costing more than $10,000. Another drawback: A patent covers only a specific design. After you get a patent, you may find your design needs adjustments to fit market needs??? adjustments that call for a new patent. But waiting until your product is perfected is risky, too, since federal "first to file" patent laws mean someone else could beat you to the punch by patenting your product while you're still perfecting it.
Patents and trademarks are obtained from the U.S. Patent and Trademark Office, Department of Commerce, Washington, DC, (800) 786-9199, http://www.uspto.gov Copyrights are obtained from the Register of Copyrights, Library of Congress, Washington, DC 20559, (202) 707-3000, http://lcweb.loc.gov/copyright
Made To Order
Chances are, you'll need to find an established company to manufacture your product--either for a fee or in a joint venture relationship. For simple products with a one- or two-step manufacturing process, you can find manufacturers in a state manufacturing directory. Each state has such a directory, available in larger libraries, where you'll also find the Thomas Register of American Manufacturers (http://www.thomasregister.com), a directory of manufacturers nationwide.
Another way to find manufacturers for simple products is to locate distributors of the equipment used to make your product; they can refer you to manufacturers they sell to.
It's harder to find manufacturers for products that involve many different manufacturing processes. Some manufacturers advertise in trade magazines; Gale's Directory of Publications and Broadcast Media (at your local library) lists most trade magazines.
You can also contact distributors of parts you need and ask them what manufacturers might work with an inventor. If distributors in your town can't help, call ones in large nearby cities.
Here are some resources to help you in the inventing process:
- http://www.uspto.gov : the U.S. Patent and Trademark Office's Web site, where you can conduct a patent search
- http://www.donmoyer.com : an inventor's resources Web site that lists other helpful sites, including prototype sources
- http://www.ibm.com : another site where you can conduct patent searches
- http://www.tscentral.com : a listing of trade shows for most industries
- The Catalog of Catalogs V: The Complete Mail-Order Directory (Woodbine House, $24.95, 800-843-7323)
- Dream Merchant: bimonthly magazine for inventors and small-business owners. For a subscription ($15.95 per year), write to 2309 Torrance Blvd., #104, Torrance, CA 90501 or call (310) 328-1925.
- Gale's Directory of Publications and Broadcast Media and Encyclopedia of Associations (Gale Research Corp., 800-877-GALE): directories that list industry trade magazines and industry trade associations, respectively. Both are available at larger libraries and are good resources for learning about an industry and finding people to help you.
- Job Shop Technology: This quarterly publication lists trade shows where contract manufacturers exhibit; it also includes helpful articles and sources for specific products. For a subscription ($20 per year), write to Edwards Publishing Co., 16 Waterbury Rd., Prospect, CT 06712 or call (203)?58-4474.
Inventor's Digest: This bimonthly magazine features low-cost sources of patents, prototypes and other services for inventors. For a subscription ($22 per year), write to 310 Franklin St., #24, Boston, MA 02110 or call (800) 838-8808.
- Manufacturers' Agents National Association: This association of manufacturers' representatives publishes both a Directory of Manufacturers' Sales Agencies (available in many libraries) and a monthly magazine, Agency Sales (subscriptions are $49 per year), with advertisements from sales representatives looking for new product lines. Write to P.O. Box 3467, Laguna Hills, CA 92654 or call (949)?59-4040.
- Small Business Development Centers (SBDCs): Funded by the Small Business Administration (SBA), these centers are located in every state and can help you find prototype shops, contract manufacturers and state technology assistance programs. Find an SBDC by calling the SBA phone number listed in the government pages of your phone book.
- United Inventors Association of the USA: For $10, this group provides a list of inventors' organizations nationwide and other helpful resources. Write to P.O. Box 23447, Rochester, NY 14692 or call (716) 359-9310.
Heads & Tails, (760) 732-1222
Idea Factory Inc., W140 N5080 Lilly Rd., Menomonee Falls, WI 53051, (800) 867-4673, (414) 790-1087
W. Murphy Enterprises Inc., (416) 467-5348, fax: (416) 425-1665