Play Your Cards Right Presenting a case study in striking the best deals to launch your own great product on a limited budget
By Don Debelak
Opinions expressed by Entrepreneur contributors are their own.
The entrepreneur: JamesTiscione, 49, and Anthony Tiscione, 79, founders of ACM Enterprises inTucson, Arizona
Product description: TheAuto Card Manager (ACM), a thin metal case that holds adriver's license and up to five credit cards. When users pushone of the six buttons on the case, the selected credit card isdispensed.
Start-up: $50,000 in 2000and 2001, to pay for the first production run of 25,000 units
Sales: $1.8 million in2002
The challenge: bringing anew product to market with a limited marketing budget
James Tiscione didn't have a lot of money when he launchedhis business, but that didn't stop him from finding a way tobring his unusual product to market. Here are the steps hefollowed:
Steps toSuccess
1. Obtain a patent. Tiscionestarted by visiting www.uspto.gov, the official Web site ofthe U.S. Patent and Trademark Office, to look for similar patents."I looked at over 1,000 patents and found only two that wereeven remotely similar to mine," he says. "Only aftercompleting the search did I go to a patent attorney." Doingsome research on his own did more than just save Tiscione money:"I was trying to hedge my bets before investing dollars inattorney fees, engineering design and prototypes. I also wanted tosee what other ideas were out there. I was surprised no one elseever had the idea." Before long, Tiscione applied for aprovisional patent, which doesn't give inventors patentprotection, but does allow them to show their ideas to people."It is an inexpensive way of protection that allows inventorsone year for research and development," Tiscione says. In2001, he applied for his utility patent.
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2. Decide what help youneed. Because Tiscione had never developed a productbefore, he felt he lacked the experience he needed to launch theidea. He asked his father, Anthony, an inventor, for help infinalizing his product design. Tiscione also approached StevePagac, a marketing whiz who owned a real estate and investmentfirm. Says Tiscione, "Steve invested sweat equity in ourventure, and he is responsible for lining up all ourcustomers."
3. Make a prototype.Tiscione knew people wouldn't understand the ACM without tryingit, so he made a prototype. Tiscione ended up choosing a prototypesupplier in California. Once he began using the prototype, peoplestarted asking where they could buy one. The positive feedbackplayed a major role in moving the business ahead.
4. Locate a productionsource. Tiscione's first stop was the Hong KongChamber of Commerce, which has an office in San Francisco."They sent me a list of companies I e-mailed," he says.He narrowed it down to one-but only signed the final agreementafter visiting the company several times and viewing a few trialproduction pieces.
5. Explore all possibilities to finddistribution outlets. Tiscione and Pagac weren'tsure which retailers would want to buy their product, so theystarted by approaching catalogs and stores such as Brookstone, TheSharper Image and Things Remembered. "While the storesdidn't bite, one promotional company did-AMG of Plymouth,Wisconsin," Tiscione says. "AMG signed an exclusiveagreement with us for the promotional products market in2001."
Tiscione and Pagac also approached SkyMall, a specialty retailerthat produces a cost-sharing catalog targeting in-flight airlinepassengers. "After two quarters ending in September,"says Tiscione, "SkyMall reported that the ACM was the No. 1-selling product in [the catalog], and they agreed to carry theproduct through March."
Tiscione and Pagac also contacted MJ Media, a TV marketer inPhoenix that signed a nonexclusive agreement to sell the ACMthrough TV ads. "We revamped our original agreement with MJMedia to include a broader base of distribution," Tiscionesays. "Originally, the contract was for TV advertising only.Since then, MJ Media has expanded into Internet sales and masterdistribution to small distributors." Now, Tiscione has a broadrange of customers selling his products. As a bonus, TaylorGifts, a major consumer catalog, picked up the ACM for the 2002Christmas season.
6. Sign deals that maximize marketingexposure but limit financial risk. Advertising andmarketing expenses can kill a product-but Tiscione avoided theseexpenses by signing contracts with limited risk. Both AMG and MJMedia signed agreements to purchase the product from ACM andpromote it themselves. Also, Tiscione's deal with SkyMall wascooperative. Tiscione paid nothing to be listed in SkyMall, but allthe sales went to SkyMall up to a certain sales level. Once thatlevel was reached, sales were split equally between SkyMall andACM. At press time, ACM switched to a standard contract, whichrequires them to pay for the ad but allows them to retain allsales.
LessonsLearned
1. Unique and novel products farebetter. Inventors face challenges when launching theirproducts because retailers, distributors and catalogs don'tlike one-product companies. But the reality is, people in anymarket are always looking for new and interesting products, andinventors will usually find sellers if their products are unique.But remember, developing a product that's simply an improvementon existing products usually isn't enough to overcome marketresistance.
| Independentinventors looking for trademark protection received a boost fromthe Department of Justice Reauthorization Act, which passed inOctober 2002. The bill permits the United States to join the MadridProtocol, an agreement that allows a U.S. trademark owner to filefor registration in more than 65 member countries with just onestandardized application (in English) at the U.S. Patent andTrademark Office. Visit www.uspto.gov for moredetails. |
2. You don't need as much money asyou think. It seems as if products with broad appealrequire cash outlays that most inventors can't afford. Butdon't let that deter you. If you proceed cautiously, one stepat a time, you should be able to get your product developed farenough to either attract outside investors or get help fromcompanies anxious to introduce your product. If you can't gethelp, it's probably a sign you should reconsider whether yourproduct is truly novel.
3. Sweat equity doesn't mean youneed to quit your job. No matter how great an idea is,there is still considerable risk in successfully introducing it.The good news is that many of the early stages of development-suchas obtaining patents, developing early prototypes and producing asmall initial sales run-can all be done before you quit your job.Even if you can afford to quit, don't. You might find it takestwo or three times as long as you expected to launch your product,and you might need your current income.
Don Debelak is theauthor of Think Big: Make Millions From Your Ideas.
