Sign a Licensing Deal How to sell more product with less effort

{Don Debelak’s new book, Turning Your Invention into Cash is now available on Amazon for $3.49. Go to Amazon.com and enter inventions Don Debelak to purchase. From the author of Entrepreneur Magazine’s Bringing Your Product to Market.}

By Don Debelak

How is the inventor doing today

Note:  Kalencomn Corp still has a full line of diaper bags.  I’m not sure if Cassie Quinn’s design is still in the product line, but they have a full line of compartmentalized diaper bags they are still selling.

January 31, 1999

This story first appeared in the February 1999 issue of Startups. To receive the magazine, click here to subscribe.

The Start of An Idea

Cassie Quinn was fed up. The 28-year-old mother of one was sick of digging through her diaper bag to find things. “Why can’t someone design a diaper bag so all the little items are easy to find?” she thought. Then she thought, “Why couldn’t that someone be me?”

The Spokane, Washington, inventor sketched her concept on paper, produced a prototype, enlisted the help of an invention marketing specialist, and ended up signing a licensing deal for her idea to Kalencom Corp., a New Orleans company that sells baby accessories. In late October 1998, Kalencom introduced Quinn’s product with much fanfare at the Juvenile Manufacturers Product Association convention in Dallas.

Juvenile Products Development Co., the marketing company that helped Quinn land her licensing deal, gets a 2 percent monthly royalty for its efforts. Quinn, who still works part time at a travel agency, collects a 5 percent monthly royalty. All in all, it’s a pretty good payoff for Quinn’s willingness to act on an idea thousands of other mothers have probably had.

Working as Partners

By signing a licensing deal your product to another company, you can profit from your idea with a minimum amount of work. How did Quinn do it? Her first step was to expand her idea into a product concept by fully defining the idea’s features and construction and producing a rough drawing. Quinn began by brainstorming the idea with her husband, Robie, and her stepfather-in-law, Steve Danzig, the president of Juvenile Products Development, a Spokane, Washington, firm that specializes in licensing ideas to manufacturers.

After a long brainstorming session, the three decided small drawers, like the ones used to hold nuts and bolts in a hardware organizer, would be perfect. The product would have a drawer compartment, with four large see-through drawers on the bottom and six small see-through drawers on top. A zippered flap would hold the plastic pullout drawers in; above the top drawers would be one or two larger compartments to hold diapers and other big objects.

Quinn was ecstatic as she moved forward into the product concept stage: “I was pumped up the moment the idea was finalized. I knew women with children would want it.”

With Danzig’s help, the Quinns started researching the market. They checked stores, the Internet and catalogs for compartmentalized diaper bags. They searched the U.S. Patent and Trademark Office’s Web site (http://www.uspto.gov) to see if any similar ideas had been patented. They didn’t find any similar products, but they had a formal patent search done by a patent attorney just to be sure there were no competitive products they had missed.

Next, Quinn set out to make a rough prototype. She bought two camcorder bags and sewed them together so they were the same size as a standard diaper bag. The camcorder bags had a small forward compartment that was ideal for drawers, and the two bags ended up functioning as larger compartments for big objects. Quinn bought some small drawers, altered them to fit into the front compartment, and sewed teddy-bear-print fabric on the outside of the bag. The prototype, though rough, worked great, and young parents interviewed as part of preliminary market research loved the idea.

With positive feedback in hand, it was time to prepare a presentation package and start talking to potential licensors. Quinn wasn’t sure how to go about it and gladly turned the project over to Danzig. He prepared a comprehensive report detailing their market research and took it to the Juvenile Products Manufacturing Show in October 1997.

Attending the trade show was a wise move: it’s far and away the best place to meet key industry people who might want to license your idea. When executives are in their own offices, they’re protected by a secretary and typically won’t take your calls–you’ll just be told to send in your idea. At a trade show, however, those same executives spend most of their time at the company booth to see if buyers like their new products. During much of the day, those key contacts stand alone in the booth and are usually happy to talk to you.

At the show he attended, Danzig met a wide variety of manufacturers and discussed Quinn’s idea to see if he could strike a deal. Several showed interest, but none more than Monica Kalozdi, who, with her husband, Geno, owns Kalencom Corp., a midsized manufacturer and marketer of children’s accessories. The company’s product line includes baby-carrier covers, car-seat covers, carriage and stroller pads, and bottle holders. In the end, Kalencom Corp. was Quinn and Danzig’s first choice in striking a licensing deal because Kalozdi was so excited about the product and its potential.

The next move was Kalencom’s. Kalodzi made some product modifications: She added a few more pockets to the side of the bag, and switched the teddy-bear fabric to a more neutral design so men would be willing to carry the bag. She then arranged for overseas manufacturing of Baby’s First Travel Bag to ensure a low price, set up product distribution, and launched a marketing and advertising campaign.

Quinn was fortunate to have a relative in the industry because she didn’t have time to develop the product herself. Invention developers are hard to find; they can handle only five to 10 products a year, and most get plenty of ideas from inventors they already know.

But you don’t need an invention developer to succeed. The steps Danzig took are ones you can take, too. Create a unique idea, do your research, build a prototype, prepare an information package, and get out to meet the key people who might want to license your product.

Cassie Quinn wanted a product that met her needs–but couldn’t find one. All she did was ask “Why not me?” Isn’t it time you hit the marketplace with your ideas?

Cover Your Bases

Steve Danzig’s market evaluation was a key factor in Kalencom Corp.’s decision to license the compartmentalized diaper bag. Look at the areas Danzig’s report covered, and adapt them to your product:

• A market analysis of both the industry and the product, including trends, growth and other general market factors.
• Shelf space allocated to the product category at major retailer groups likely to sell the product, including:

– Discount mass merchandisers such as Wal-Mart and Kmart – Mid-range retailers like JC Penny and Sears – Drugstore chains such as Rite Aid and Walgreen’s – Juvenile products specialty stores such as Treasure Island.

The amount of shelf space allocated to a product category is an indication of how well the product sells. You might want to also include shelf space of other well-known product categories as a comparison.

• Competition (how many brands are in the market, and who are the market leaders?).
• Total sales dollars of the product category along with past and future sales growth.
• Analysis of why the market leaders have that position. Were they the first established brands? Do they have a superior distribution network? Do they have the best-quality products?
• Significant points of interest in the market as they relate to the new product.
• Explanation of how the product will be positioned in the market (who its target customers are, the product’s price range, what makes it unique and why people will buy it).
• Results of focus group sessions with parents and grandparents of young children.

Pass Or Fail

Monica Kalozdi, vice president of Kalencom Corp., reviews hundreds of inventors’ ideas every year but rarely licenses an idea. Why don’t most ideas pass her scrutiny?

• The product doesn’t have enough unique features or isn’t a big enough idea.
• The product doesn’t function well or as expected.
• The product is not feasible because of production or marketing complexities.

Kalozdi liked Cassie Quinn’s idea because it was innovative, served a distinct purpose and had a good price point. Your price point should be close to the price at which most of the market’s volume is sold. For example, if most diaper bags sell for $29.99, a good price point would be $19.99 to $39.99. You’ll have a hard time selling a product that’s too far from the average price point.

Fan Club

Cassie Quinn’s husband, Robie, was involved with her invention from the start. He thought her idea was great, helped her do research and went with her to meetings.

Inventors need support from family and friends to succeed. Launching a product is a roller-coaster ride, and it’s easy to lose faith in your idea without a support system that encourages you to keep moving forward.

Be proactive and create your own support group. Get friends and family to help you find competitive products. Ask for their opinions. Most of all, share your ups and downs with them so they can help you stay focused when things don’t work out as expected.

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