Selling Your Product Under a Private Label Agreement
==== ====Tips about private label ,Check This Out:http://tinyurl.com/6ut95zb==== ====How would you like to have a big name company sell your product under their own label? It mightnot be as hard as you think. While licensing seems like a good option for inventors andentrepreneurs, landing that licensing deals remains elusive for many, but private labelarrangements can be almost as advantageous and are much easier to work out.A private label selling arrangement is when you manufacture the product and then anothercompany buys your product and sells it under their own label. This happens all the time, mostpeople just dont realize it. It is expensive for companies to develop new products, so often insteadof developing complimentary products, or products that wont make millions, companies eitherlicense them or sell them on a private label basis to save money on product development.When selling on a private label arrangement, you will need to sell the product for a lower price,because you are adding one more middle man into the picture: the private label company, whothen sells to customers, retailers or distributors. But with private labeling, you dont handleconsumer marketing, your product will probably reach a larger audience than you could sell to onyour own and your product will have added credibility because it bears the brand and label of anestablished company. You can even sell your product on a private label basis to multiplecompanies who will all resell the product under their own label.Not all products are good candidates for private label agreements. Since companies usually dontwant to promote products that dont make them as much money (private label and licensedproducts bring in less profit than products developed within the company), the product needs tosell itself. This means it cant be vastly different than products that have come before it,consumers must know they need it and the product must meet a clearly defined need. The productdoesnt need to garner any media attention, but instead people should see the product in itspackage, understand the product and its benefits and buy the product.Products that compliment the companys successful products have the best chance of being soldunder a private label agreement. This means that the products appeal should have a similarappeal to the existing products the company already sells. Finally, only mid- to high-priced itemsdo well under private labeling because the profits need to be split between a larger number ofpeople and if the product is too low priced, then there is not much profit to go around.Inventor StoryPrivate labeling wasnt part of Michael Levins initial game plan. The idea for his innovation, a clearplastic overlay for broken fingernails that adheres with a nail-friendly adhesive, first struck Levinback in 1989, when his then-girlfriend cracked a nail. At the time, she couldnt find a product torepair the nail--and she complained to Levin that cracked nails were a common problem among all
women. Levin, sensing an opportunity, decided to hire a market research firm to evaluate themarket. The results were staggering. Levin, now 42, reports that "60 percent of the women[surveyed] broke a nail once a month, and 35 percent broke a nail once a week."Levin perfected his clear plastic overlay design in 1992, after searching for and experimenting withdozens of plastics and adhesives. But when Levin tried selling the product directly to retailers, hewas in for quite a reality check: with the product retailing for just $3 to $4, Levin found that "drugstore chains werent willing to add a low-priced, low-volume item from a one-product vendor."Thats when Levin considered all his options and decided to private label. "Lots of nickels arebetter than a few dimes," Levin reasons. The most consistent of the three private label customershes worked with, Professional Solutions, signed on in 1994 and has since sold Levins productunder the name Instant Nail Repair. The decision proved to be a smart one for Levin: Since 1995,his Danville, California, company, Custom Solutions, has been selling about 1.5 million units of theinstant nail-repair product per year.Setting Up a Private Label DealYou can form successful relationships with private-label buyers by:Making things easyAsk the buyer for a purchase order, and state that youll supply the product in the buyers package,or that youll modify your package to the buyers specifications. If necessary, you can also offertraining to the buyers salespeople, and you can even offer to maintain a website for the product. Ifyou are selling to a retailer, you might want to offer a display, and you could even show a diagramof what complementary products your product should be displayed next to.Providing top-notch serviceProvide marketing support, such as attending trade shows, doing publicity releases, activelyworking a web page, or offering layouts for ads or brochures. You can also offer to providecustomer service for handling product problems, to take care of product returns, and to suggestproduct improvements.Paying attention to your products packagingYour private-label buyer is probably not going to invest any money in marketing. So potentialbuyers need to see your product and immediately realize its benefit. If you have a consumerproduct, take time to package your product so it sells itself. The packaging and design of a productare extremely important if your private-label agreement is with a retailer or with a distributor whosells to retailers.Understanding the competitionCompanies take on private label products primarily for competitive reasons. To sell the concepteffectively, you need to know your target companys competitors and how your product improvesthe companys position in relation to them. Being familiar with the competition is also important if
retailers are the final stop in the targeted distribution channel.One of the big reasons why companies take on private label products is to fill out their productlines. Retailers dont like to buy from many different suppliers, so sometimes if one supplier has amore complete product line, they will drop their current supplier in favor of the new one. So whenyour product fills a gap in a companys product line, it will help them get into more retailers with notjust your product, but with all their products, increasing sales across the board.Finding Potential Private Label PartnersTo find potential private label partners, do an Internet search for "private label," and youll findhundreds of companies that market private label products in dozens of ways. Also check out thePrivate Label Manufacturers Association, which hosts trade shows and offers information forpotential private label manufacturers.Before you approach a company for a private label contract, make sure youve taken these fivesteps:ProtectionCompanies buying private label products usually arent overly concerned about your patent status.But you do run the risk that the company might decide to make the product or that a competitormight quickly introduce the same product. If you have enough money, you can apply for a patentbefore approaching the company. If your funds are limited, and you plan on applying for a utilitypatent, you can apply for a provisional patent, which gives you a one-year leeway until you have toapply for a utility patent. Be aware though, if you wait more than a year to apply for your utilitypatent, you wont be able to patent your product.PrototypesInventors need a "looks like, works like" prototype before landing a private-label agreement. Acompany wants to not only see, but also to test your product before deciding to go ahead. If youcant make the prototype, you can get a contract manufacturer to make it for you at a low cost--provided you sign an agreement to give them the business if you get the sale.ResearchWhen you approach a company with a private label proposal, show them that their targetcustomers like and need your product. This can be shown by having surveys of potentialcustomers, or interviews or supporting letters from influential users.ManufacturingYoure responsible for providing the product in a private label agreement, either by making theproduct yourself or by having a contract manufacturer make it. No matter how low your margin is,start with a contract manufacturer to ensure the agreement gets off to a good start. You can switchto your own manufacturing operation once sales are secure. To make money in a private labelagreement, you may need to consider overseas manufacturing.
Key ContactsYou need to talk to the end users or target customers, the more influential the better, of thecompanies you will be approaching for a private label deal. You want to know influential people inthe distribution channel. Their support for your product can play a major role in securing a privatelabel agreement.Other key contacts include people who get you in the door of your target customers. Salespeople,marketing personnel, regional sales managers, or top executives are all people who can help you.You can meet these contacts by attending industry trade shows or association meetings. All youneed to do is approach the people in the booth, explain that you have a new product, and ask iftheyd share their opinion of it with you.You can also request sales literature from companies you are interested in. Often that literaturecomes with the name and contact information of a salesperson. Call that person up and ask totake out to lunch to talk about your product.If the people are positive about the idea, you can ask them if they feel the product would be agood fit in their companys product line. If they think it would, you can ask them whom you shouldtalk to about a private label agreement.Approaching Potential Private Label PartnersOnce you are ready to approach one or more companies about a private label deal, ask your keycontacts if they could help set up a meeting with the right people inside the company. Use yourresearch to prepare a presentation, showing how your product could improve their position againstthe competition, how consumers want your product and discuss what you are willing to do to helpthe product sell. Not every company will agree, but dont give up. Keep on approaching morecompanies and hone your presentation until you find the right match. When approachingcompanies, dont forget these important points.Important and clear benefitYour company contacts who are helping support your product can also help you coordinate yourpresentation. You want to learn first what the company feels are important benefits for itscustomers, and then gear your presentation so that your product provides at least some of thosebenefits.Cooperative marketing effortOne of the dangers of private label marketing is that your product will be shuffled off to the corner.Offering your help for no charge ensures that the company will at least have a marketing plan inplace for your product. Your company contact might also be willing to prepare a better package,brochure, or sales manual if you are doing most of the work. If you are selling to retailers, offer towork with the buyer to provide a display to help sell the product. This could be as simple as asmall card that hangs on a pegboard or that attaches to the front of the shelf. The buyer may endup placing the product on the shelf without any support at all unless you offer to supply it.
An agreement in writingIf you are selling to distributors or retailers, all you really need is a purchase order. If they want anexclusive on your product, you can give them a letter saying that you will sell to them exclusivelyfor a fixed period, usually one or two years as long as the company hits certain sales levels thatyou both agree to. You also have the buyer include exclusive language in its purchase order.You need a more extensive agreement if you are selling to another company who is thenmarketing the product under its own name. The agreement can cover all or most of these points:1. Period of agreement: You dont want the agreement to continue forever, as your business goalsmay change. Three years is the longest period you should agree to.2. General responsibilities of each party: You want to be specific regarding who will pay forpackaging, brochures, and other marketing materials.3. Conditions for terminating the agreement: Typically, lack of performance by either party is causefor terminating the agreement.4. Price-increase protection: The private label customer may want some protection that priceincreases will be limited to a certain percentage every year. The entrepreneur may have aprovision that increases can go above that limited percentage if its costs increase over a specifiedamount.5. Price-protection provision: The customer may want to specify that you cant charge it more thanyou charge another private label customer.6. Exclusivity: This could be by geographic market or territory or by market segment. Exclusivityclauses might also stop you from selling to other private label customers or prevent you fromselling the product under your own name. You want to offer as little exclusivity as possible, whilethe private customer wants as much exclusivity as possible. If you offer exclusivity, you wantstrong performance clauses, that is, the company has to purchase a certain quantity of product.7. Product change provisions: This clause should make it clear what type of changes you can andcannot make without your customers approval.8. Shipping and billing details: Who will pay the freight, the minimum order quantities, how manyfree samples the customer will get, and the payment terms should all be included in the contract.9. Product ownership: The product, and all its subsequent variations, belongs to you and no oneelse-even if the customer requests extensive changes, provides engineering support, or helps getthe product produced. Entrepreneurs might agree not to sell to anyone else a specific version ofthe product requested by the customer, but you want to make it clear that all variations of yourinitial product belong to you.A First-Year Plan
You cant afford to rest on your laurels after signing a deal. You need to write a first-year plan toget your product off and running. You should include in your plans sales promotions, salesmaterials, visits to customer locations, training as required, new product development, attendingtrade shows, market research for new products, an ongoing system of customer feedback, andquarterly reviews of sales status.Your goals in the first year are, one, to be sure the sales and marketing effort for your product isfirst class and, two, to network with company contacts and with influential end users. The successand staying power of your agreement will increase as you become better known to peopleinvolved with the product.Eric Debelak is part of the team at the One Stop Invention Shop, http://onestopinventionshop.net.The One Stop Invention Shop provides great services and lots of free information to help inventorssucceed.Article Source:http://EzineArticles.com/?expert=Eric_Debelak==== ====Tips about private label ,Check This Out:http://tinyurl.com/6ut95zb==== ====