The Nevada INVENTOR
Official newsletter of and by the Nevada Inventor's Association
Volume: XV No. 11 -Education, Assistance, and Networking for the Inventor- Nov. 2003
Next Meeting: November 22, 2003 9:00 AM Washoe Medical Center Room cr101
Our web site is 'www.nevadainventors.org' Founded in 1988
We are a 501(c)6 group under IRS rules.
The purpose of NIA is to educate inventors and potential inventors through whatever means available, including regular meeting, classes, seminars, workshops, and evaluations, within NIA or in cooperation with other persons or organizations. The education of inventors, or potential inventors, may also include the publishing of written materials, such as a regularly published newsletter, flyers, notices, or letters.
Additional goals of NIA are to inform its members of private, civic, governmental, and public resources which may be of assistance to inventors; to promote a positive public image of inventors; to provide for its members a referral/resource directory; and to furnish assistance to its members, whenever possible, by directing their efforts toward the successful development of their inventions.
THE RIGHT MIX by Paul Niemann from InventorsDigest
Marketers - which includes inventors- are always trying to figure out how to sell their products, and many assume that there's a magic formula that works every time. There is no magic formula, but there are tried and true rules that will increase your chance for Success.
In the advertising class that I teach at Quincy (Ill.) University, we discuss the importance of what marketers call the 'marketing mix," which is also known as the "4 P's of Marketing.' The 4 P's combine to make up the marketing equation of virtually every product that is on the market. They are:
Product
Place
Price
Promotion
If you're manufacturing and marketing your invention, it's vitally important that you learn and understand the 4P's, and make the right decisions about each. If your game plan involves licensing your invention to an existing manufacture, it's still important that you learn how your invention relates to the 4 P's of marketing.
Understanding these principles will enable you to be better able to discuss your product's profit potential with a licensee. The bottom line is that when you understand the marketing mix, you increase your chances of receiving a licensing agreement.
The 'product' concept includes the following: the actual product, plus the packaging, brand name, trademark and logo.
'Place' refers to the distribution channel, which is how your invention gets from the manufacturer to the consumer. The distribution channel will include all or some of the following: manufacturer, wholesaler, distributor and retailer. In some cases the distribution channel may consist only of the manufacturer and the retailer. One of the benefits of licensing your invention rather than assuming the responsibilities of manufacturing and selling is that the licensee will usually have an established distribution channel.
The
third 'P' of the marketing mix - price Can sometimes be the hardest element to determine as it is common to underprice
a product or service. If you price your invention too low, then you may lower the perceived value AND lower your
profit margins. On the other hand, setting the price too high will scare off some potential customers. To determine
the optimum price, it is usually necessary to research and test different price points before you set the final
price.
The final 'P' promotion consists of any or all of the following: personal selling, exhibiting at trade shows, advertising, direct marketing, telemarketing, public relations, brochures, sweepstakes and coupons.
Depending on the situation, any one of the 4 P's can be the most important element of the marketing mix, and any other one can be the least important. For example, for a commodity product like gasoline, the product is the least important of the four elements while the price is the most important.
Every marking plan must have the four elements: Product, Place, Price and Promotion. Omitting any one is a sure road to failure.
The CREATIVE MIX
The advertising Strategy used to get a product onto the market is the creative mix, and, like the marketing mix, it consists of four unique elements:
The target audience
The product concept
The communications media
The advertising message
The target audience refers to those at whom the marketing efforts are directed. It
includes potential customers as well as those who influence the purchase decision.
Over the years I have asked many inventors 
who will buy their product. Far too many times, the response is: "Everybody"
Unless you're selling water or air and have a monopoly on either, you don't have a product that everybody wants.
No product is designed for everybody. No product call be all things to all people.
Markets can be defined broadly, such as, consumer markets vs. business markets. You can also break your market down into more specific categories, Such as adult men, working women, teenage girls, parents with preschool children, etc. Each is a different market.
If your product could logically be targeted to several different markets, start out by selecting one or two of the best. There are several ways to do this. For example, you could target the biggest market and/or the market with the greatest profit potential and/or the market with the least competition.
The product concept is the Same in the creative mix as it is in the marketing mix: the actual product, plus the packaging, brand name, trademark and logo.
The communications media refers to how the buying public will learn about the product. The major media are TV and radio (also known as broadcast or electronic media), newspapers and magazines (also known as print media), direct mail, outdoor advertising (billboards, subway advertising and buses) and interactive advertising (web sites and e-mail).
Each medium has its own advantages and disadvantages. There's not enough room in this column to list them, but it's up to you to determine which medium (or combination) is best Suited to reach your target audience.
The advertising message is the set of promotional messages that you create for your target audience . . what you plan to say in your ads and how you Say it.
As you work to develop your invention, keep the Marketing Mix and the creative Mix in mind. Whether you plan to manufacture your product or license your rights to your invention, success depends on understanding the whole process of product development.
Sell my Products on Television?
by Susie Love and Bonnie Griffin Kaake from InventorsDigest
INVENTORS
OF NEW PRODUCTS Often have the option of selling their products On television. Once your patent is issued, you
will be bombarded by Solicitations for putting your product on TV. Don't be overly flattered by the Sales pitches.
This is a business. There are many options for TV marketing of products. It is important that you do your homework
or Secure the expert advice of Someone familiar with the industry. This way you will know what is best for you
and Your product. Nevertheless, there are basically two types of television commercials available to you. How and
through whom you implement them are different matters and ones you need to explore.
"The two TV sales formats are infomercials and direct Response TV DRTV spots."
The two TV sales formats are infomercials and direct Response TV (DRTV spots). The purpose of either in your overall marketing plan is to dramatically drive retail Sales, generate thousands of qualified leads, Create brand name recognition and loyalty, and provide a targeted customer list for continuity and back-end Sales.
What is the difference?
A
DRTV spot is typically a short commercial that is designed to elicit an immediate response from the targeted viewing
audience. The Commercial contains a "call to action" that is asking for the order now and gives an 800
number for the viewers to call to order the product. The purpose of the spot is to Sell and assist in creating
recognition of the product.
The DRTV spot as an advertising venue is the forerunner to the infomercial (longer form). This short form of television advertising has been used since the introduction of the toll free telephone Services and credit cards. (Companies Offering a product for $ 39.95 or less or an Offer of free information have used these DRTV spots most effectively.
The DRTV spot offers Some advantages that an infomercial cannot provide. The production costs are relatively low. the short form commercial does not require as much production time, generally involves less talent cost and requires less editing time.
Depending on the script, the commercial can be produced and ready for testing in a relatively short period of time. This fast turn-around allows your product exposure to the market sooner.
Generally, it is the back-end setup of telemarketing services, fulfillment centers, merchant account acquisition, manufacturing of the product and the product offer that consumes the majority of the setup time.
The length of DRTV spots ranges from 30 to 120 seconds in increments of 30 seconds. Why is this a valuable advantage? This short format means that the commercials can be placed throughout the day. You have the ability to target your primary audience more efficiently. On the other hand, the 30-minute infomercial is restricted to limited airing hours by the stations that own the air time.
As an example, if you have a sports oriented product, you can air your 30 second spot within a sports oriented program. If your target market is a non-working individual who might be home during the day, you can buy time during the afternoon programs, generally, 30 minute air time for infomercials is not available for purchase during the day.
With
all the advantages of DRTV, why do an infomercial? A half-hour commercial provides the time you need to get customers'
attention and interest, fuel their desire and motivate them to pick up the phone and order. Many viewers are more
willing to buy after a half-hour product presentation versus a two minute commercial. The advantage of a long form
commercial is that you have now expanded your potential buying market.
Think of the DRTV spot as a quick "foot-in-the-door" product presentation while the 30-minute infomercial is a highly Structured, Compelling sit-down sales presentation in your viewer's living room. As a buyer which would you prefer?
There are also economic benefits to the 30-minute commercial. The cost for a 30 minute show is not 15 times the
cost of a two-minute spot rate. Because half hour time is purchased later in the day when rates are lower, the
cost per minute of a long form ad can be 15% -50% less than the cost per minute of a two minute spot.
"television will promote your product faster and to more Potential buyers in a shorter amount of time"
Another advantage of the 30-minute infomercial is that you are able to buy specific half-hour time periods in the day. Most DRTV spots are telecast on a R.O.S. ("Run of Station") basis, meaning you are never quite sure exactly when your commercial will run during the program you have bought your time in. An exact run time has a secondary benefit for your telemarketing Service The telemarkets are more prepared for the calls that come in from a 30-minute show then the random time that calls come in from spots.
Infomercials allow you more time to explain the story behind your product. They afford you the opportunity to demonstrate in depth your products value and uses. But by no means are all products suited for infomercials. If your product story can be told in a compelling fashion or is easily demonstrated and understood, the economics of lower production costs and air time dollars for spots may be your wiser investment choice.
DRTV spots and infomercials can be combined in your marketing campaign for your
product. DRTV spots always support and add power to the infomercial and vice versa. When tied in with an infomercial,
spots become an integral part of any DRTV marketing campaign. If economics were not a factor, the optimum marketing
of your product would be both infomercial and DRTV spot. Realistically, most new products begin with one or 
the other.
The type of product and available funds determine which road your television marketing campaign should take.
Marketing your product on television can be an exciting adventure. If you are considering this adventure for selling your product, remember, no matter which format you choose, television will promote your product faster and to more potential buyers in a shorter amount of time than any other all marketing venue.
An Alternative to Licensing:
Using other people's money
by Richard Shapiro from InventorsDigest
Richard Shapiro is an independent inventor and president of the Inventors Association of Arizona. a visiting instructor for the American Cash Flow Institute, Shapiro is the owner of Condor International Financial Services, a capital search and formation company, located at
4725 East Sunrise Drive, Suite 148, Tucson, AZ 85718.
He can be reached at phone number (520) 529-4960, fax number (520) 299-3450,
Email Condor1AZ@aol.com, www.condorfunding.com.
In this article we are going to be talking about "Transactional Financing." We are going to set up three different situations in which inventors Without the use of Transactional financing, the inventor will be forced to give up control of his Product, possibly even his company...
often find themselves. In all three cases, the 
inventor is well along in the development of his invention. (NOTE: This type of financing is not available for research and development.) All three scenarios will very often lead the inventor to look for a licensee to take over for him. Without the use
of Transactional Financing, the inventor will he forced to give up control of his product, possibly even his company, and the lion's share of the profits. With Transactional Financing in place, the outcome is completely different.
In the first case, the inventor has been selling his product and increasing his
sales with time. Along with the delivery of goods, he is also producing invoices. These invoices may take up to
90 days to pay. Since most inventors have limited working capital, they could literally put themselves out of business
by being too successful. What I mean by this is they may have all of their money tied up in products they have
sold, but have not gotten paid for, and cannot pay their bills.
The solution here is called FACTORING.
Factoring is the selling of a company's accounts receivable or invoices, which give the company an infusion of cash literally overnight, allowing the company to run on a COD basis, while extending credit terms to its customers. This is a non-debt solution to a cash need. Funds are made available based on the credit worthiness of the customers and the volume of valid invoices with those Customers, not on the inventor's credit worthiness The more business produced, the more money is made available. This gives inventors with little, no, or tarnished credit histories access to "unlimited" amounts of cash.
Long-term contracts are not required. The inventor decides when and how much to factor. Credit reporting and collection services are often provided by the factor, freeing the inventor from these chores, allowing them to do what they do best: produce, sell, and deliver their goods and/or services. Best of all, the inventor maintains total control and ownership of his product and Company
The process is simple. The inventor submits an invoice to the factor for approval. Upon verification of the invoice, funds are made available to him. For example we will use a $1,000.00 invoice. Typically 70-80 percent or the invoice is advanced. In this case we will use the 70 percent figure. The inventor would receive $700.00 in 24-48 hours after verification. Let us say the factor Collects from the Customer 30) days later. A rebate of $250.00 would be given to the inventor, which is a net of $950.00 on the $1,000 transaction. The factor's fees would he 5%. (Fees vary and are based on a number of things, including but not limited to, the volume of the accounts, the size of the invoices, and the time it takes to collect.) If you had been forced into a licensing agreement, instead of getting 95% of this invoice you would most likely get 5-7% with the licensee getting the rest.
What happens if you have orders that are larger than what you can handle, so that you do not have the money to produce and deliver your products? The solution to that is called PURCHASE ORDER (PO) FINANCING.
PO Financing is provided to businesses that produce goods "in house" and
are having difficulty filling orders because of larger than anticipated demands. Financing will be provided based
on the amount needed to produce, insure and ship, not on the amount of the invoice. It will typically be no more
than 65 percent of the invoice. With PO Financing the credit worthiness of the inventor and her company will be
taken into account. In addition, she will have to show a record of being able to produce quality products in a
timely fashion. Fees tend to he higher than with factoring, as there is greater risk. These fees can sometimes
be off set by being able to negotiate better pricing from suppliers because of volume discounts and cash discounts.
Typically, there will be a factoring relationship in place to "take out" (pay off) the PO financing once
the product is delivered.
The
final situation is the one in which most independent inventors often find themselves. It is also an example of
the most powerful use of OPM. In this case the inventor has a working model of the product but no inventory. He
has been in contact with a company that can produce the goods, do the artwork and packaging, take orders, store
and ship the product and bill customers. In effect the inventor has a virtual company. He is working with a contract
manufacturer, sometimes called a "fulfillment house" Here you would use something called CONTRACT FINANCING.
Contract financing is provided to businesses that do not produce their own products
but rather contract out manufacture and fulfillment to another company, whether it is foreign or domestic. As an
example, let us say the inventor has been showing off his prototype at a trade show and is the hit of the show.
He receives a valid Purchase order from XYZ Company, a credit worthy customer, for 1,000 units @ $200.00/unit.
He informs his manufacturer that he will need 1,000 units delivered to XYZ Company by a certain date. The manufacturer
says he will need $120,000.00 to produce and deliver.
With contract financing in place, the money is provided to have the product produced,
insured and delivered directly to the customer, XYZ Company. (In some cases, I have seen where financing or the
molds as well as the actual order was taken care of with contract financing.) An added benefit of using contract
financing is that Letters of Credit (LC's) may be provided by the funding source. These LC's can be difficult and
expensive for an inventor to secure on his own. Again, there will he a factoring relationship in place to "take
out (pay off) the contract financing once the product is delivered. PLEASE NOTE: it is important to understand
that this type of financing is not for inventory build up, but is for fulfillment only. Once again, fees tend to
be higher and advances lower then with factoring, because of the greater risk to the investor.
There are a number of ways independent inventors can use Other Peoples Money successfully
and profitably, to avoid a licensing agreement. You might be the next!
Be good to yourselves and fair with each other.
Page done by Vince Chemist.
Created on November 14 2003
Updated on November 29, 2005