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Key Characteristics of a Licensing Target
- They are a company with less than 15 % market share. Companies with large market shares don’t want to cannibalize their own products with a licensed product, and they typically won’t take on a licensed product where they need to pay a royalty.
- Companies who lag the industry in new product development, often because they lack product development departments. The companies are looking for new ideas.
- Companies that have licensed products before.
- Companies where the marketing and sales departments have major management influence. You almost never license by convincing the product development group you have a good product, after all you are their competitor. You license by having a good response from marketing and sales
- If your product is inexpensive to introduce, often a company with limited resources will want to introduce it. Be sure you license to a company with the resources to promote your product.
You need two types of contacts. The first are people who will convince a potential licensee that your product is ideal for the market. These would be key users, key people in the distribution channel, or key retailers. The second type of contact is someone who can push your product inside the company toward a license agreement. This could be a company executive, a regional or national sales manager, a marketing person, or sometimes the R&D director.
Of the two, your most important contact is someone inside the company. This person can help you fine-tune your proposal, tell you whom you have to convince, and then after your presentation, offer you insights into what you need to do to get the deal done. To meet these contacts, you need to get out and attend trade shows, industry events, and association meetings.
Making these contacts improves your chances of licensing a product at least 100 percent. Without a helpful contact, you may never make it past the company’s product submission policy to make a presentation.
Often the first person to help you license a product is the local sales person or rep. They have a lot to gain by helping you as they will look like real go-getters to their company. You can often find them just by choosing potential target companies, calling them up for literature and asking who the local salesperson is. Then meet with them for coffee or lunch and see if they like your idea.