10 Steps to Bring a Product to Market – Licensing
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Preliminary Licensing Proposal
Licensing takes many different approaches and it is not nearly as straight forward as people believe. You need to prove your product will sell just as you do in every other step. This story of a successful licensing person give you a feel with what the licensing process is like.
Connections Smooth the Road to a License
Allen Kenner had a simple but very effective way to improve the normal ratcheting screwdriver: a rubber grip handle that spins freely in both directions, but when squeezed, it grips the screwdriver to make it the easiest and quickest to use hand screwdriver. He did not create this product in one try though. Once he made his first prototype, the friends he showed it to had just a ho-hum response. He continued to refine his idea until everyone he showed it to wanted to own one.
Kenner started meeting with successful business people and asked them for advice and through networking he was introduced to people who had worked in the hand tool industry. They gave him a lot of valuable information and reassured him of his product’s (the Grip-N-Drive) potential. Based on the feedback he received from his contacts Kenner decided to try to license his product to a company that could then sell it on a private label basis through Sears.
Kenner found a local company, Professional Tool Manufacturing LLC, that already sold one of its products through Sears. Instead of just approaching the company, Kenner asked a friend who had some connections with Professional Tool to help him set up a meeting with the owners. Professional Tool was interested in the product and signed a nondisclosure agreement with Kenner.
When Professional Tool approached Sears about the Grip-N-Drive, Sears was interested but requested a few product changes. Their changes drove up the estimated start-up costs and Professional Tool backed out. Luckily, Kenner had only signed a nondisclosure agreement with them and was able to take his product elsewhere with no legal hassle. By using Sears’ interest in the product, Kenner quickly found Pratt-Read, a leading private label supplier, to license his product and manufacture it for Sears.
After the Grip-N-Drive was introduced in some stores for test runs, Sears soon carried the product nationwide.
Kenner’s strategy and plan had several elements
- He wanted to sell to a major retailer to maximize his sales and royalties.
- He needed to work with a manufacturer of hand tools that was successful in selling to those retailers.
- Due to the price pressures from a major retailer Kenner knew he would probably receive a royalty on the low end of a typical 2% to 5 % royalty rate
- Kenner worked with the potential licensee to present his product to Sears before he signed the license deal.