Mastering the Approach
Q: I have a patent on a spark plug intended for use in internal combustion engines. In 1998, I found an overseas manufacturer, and I have working models. I've approached several spark plug manufacturers in the United States, but their response has been hostile. This is understandable since my spark plug would dent their profits. Perhaps auto manufacturers such as Chrysler, Ford or GM would be interested since it might help them sell more cars. Cold calls or letters, especially to automakers, aren't taken seriously or returned. How do I approach the right people or decision-makers in these companies?
A: Having put a couple of my inventions into the automotive industry, I'll be the first to say that you've tackled one of the toughest venues to earn an inventor's living. The auto market is hard to deal with simply because of its size, age and incredible bureaucracy. But it's not an impossible market to crack. Follow my directions here, and you'll be well-prepared to return to the hostile auto market-and succeed.
I'll start by saying that you need to spend the next few months becoming an expert in the industry (since you're already a spark plug product expert).
Here are a few points you may want to avoid making about your product when approaching potential contacts:
This spark plug offers many advantages over spark plugs currently found in the market today.
This really tells prospective licensees who have worked in the dirty spark plug manufacturing industry that "You don't know how to design or manufacture spark plugs as well as I do." This approach is what causes the NIH (not-invented-here) syndrome to kick in, and your hostile responses were the result.
Here's the tough perspective from the other side of your exchange:
It lasts up to 200,000 miles.
Translation by the spark plug company manager: This directly threatens the spark plug manufacturer's jobs (at least in their minds). Longer-lasting spark plugs mean longer time between plug changes. That means fewer plugs sold, and that means the manager might be "Enemy Number One" with the laborers' union and their laid-off friends in the small town they work in, and they might even lose their job. You threaten their retirement.
It increases combustion efficiency, which means less pollution.
Translation: "This guy must be crazy! We're living in a town with three EPA Superfund cleanup sites, and he thinks we give a darn about whether a spark plug put into a car in West Texas pollutes more or less? Besides, who buys spark plugs because it causes less pollution?"
Is this a selling point? Not in my book. It may be a marketing and public relations hook, good for a few press releases, but people buy plugs because they're cheap, reliable or make a car go faster. Learn the market.
It costs relatively less than the premium spark plugs sold on the market.
Translation: "Maybe the plug will cost a few cents less to manufacture, but we've just invested $40 million in a production equipment changeover, and we're not about to consider adopting a new product that requires us to change again. Besides, while we're shut down for production retooling, we'll lose about $25 million in gross sales. How does this guy think we're going to make that up before our fiscal year-end?"
From the perspective of the licensee, every point you cite as a benefit translates to a threat, a cost and a "Who cares?" This is all wrapped around the notion that you haven't got a clue about their business, and you don't care about their personal careers or income. Learning about a market really means learning about the people. Companies don't license products. People license low-risk, money-making opportunities that will enhance their careers. If nothing else, I hope I've rattled your wires and sparked a thinking process that will help you find a profitable home for your plug invention.
The Next Step
Now, what do you do? You can take the high road or the low road. The high road would be to try again for a big licensing deal. Remember, spark plugs are a commodity product, so your royalty rate will likely be in the one-tenth of 1 percent range. By contrast, specialty retail products can grab a 7 percent royalty. So your licensing deal will have to be with a billions-of-plugs-per-year manufacturer if you want to make $100,000 per year, and the deal will take about three to five years before it begins producing results. You just can't expect this old of an industry to move any faster than that.
The low road would be my choice. If you already have a manufacturer lined up and you can prove your plugs can outperform traditional plugs, then I'd suggest linking up with a successful infomercial company and bringing the product to market yourself. This is how many products that encounter industry resistance still manage to make it to the market.
Once the consumer benefits are proven and the reliability and performance are documented, it's likely that automotive buyers will then seek you out, making a big sales contract highly likely. Once you get a contract to sell 20 million plugs to GM, you can bet the plug manufacturer that lost the GM order will come knocking on your door.
If you have what it takes to play in the auto industry and you're convinced you have a winner, nothing will speak louder than your commitment to do it. Success isn't judged on what it could've been but rather on what it is. You're halfway there, so don't let the spark die now.
Andy Gibbs is president and CEO of PatentCafe.com Inc, a leading intellectual property information and resource Internet portal. He is an inventor with seven issued and pending patents, and an entrepreneur who has started seven companies ranging from product development to low-and high- technology product manufacturing. He speaks to inventors, entrepreneurs and venture capitalists on intellectual property, marketing research, competitive strategy and sales development. Visit http://www.patentcafe.com.
The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.