Selling Your Product Under a Private Label Agreement
How would you like a well-known company to sell your product under its own label? It might not be as hard as you think. While licensing seems to be a good option for inventors and entrepreneurs, it still remains difficult for many to make licensing agreements, but agreements for trademarks can be almost as beneficial and much easier to work out.
A trademark sale agreement is that you manufacture the product and then another company buys your product and sells it under its own brand. It happens all the time, most people just do not realize it. It is expensive for companies to develop new products. Instead of developing complementary products or products that are not millions, companies either license or sell them on a private label basis to save money on product development.
When selling through a private label arrangement, you must sell the product at a lower price as you add another middleman to the image: the private label company, which then sells to customers, retailers, or distributors. But private labeling is not about consumer marketing, your product is likely to reach a larger audience than you could sell, and your product will have additional credibility because it carries the brand and label of an established business. You can even sell your product on a private label basis to multiple companies, all of which resell the product under their own brand.
Not all products are good candidates for private label contracts. Because companies typically do not want to promote products that earn less money (trademarks and licensed products produce less profit than products that are developed within the company), the product itself must sell. This means that it can not be much different than the products that existed so far. Consumers need to know that they need it, and the product must meet a clearly defined need. The product does not need to attract media attention, instead people should see the product in its packaging, understand the product and its benefits, and buy the product.
Products that complement the company’s successful products have the best chance of being sold under a trademark agreement. This means that the attractiveness of the product should be comparable to the existing products already sold by the company. Ultimately, only mid- to high-priced items are doing well under the brand because the profits have to be shared among a larger number of people and if the product is too cheap, then there is not much profit to lower the price.
Private Labeling was not part of Michael Levin’s original schedule. The idea for his innovation, a transparent plastic dressing for broken fingernails, which is glued with a nail-friendly adhesive, came to Levin in 1989, when his then girlfriend cracked a nail. At the time she could not find a product to repair the nail – and she complained to Levin that cracked nails were a common problem in all women. When Levin saw an opportunity, he decided to hire a research firm to evaluate the market. The results were breathtaking. 42-year-old Levin reports that “60 percent of [women’s] women 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 with dozens of plastics and adhesives. But when Levin tried to sell the product directly to retailers, he faced a real test: Levin, with product retailing for only $ 3 to $ 4, noted that “drugstore chains were unwilling to add a low-cost, low-cost product from a single product provider. ”
That was when Levin considered all his options and decided to own the brand. “Lots of nickel are better than pennies,” says Levin. The most consistent of the three private label clients he worked with, Professional Solutions, was signed in 1994 and has since sold Levin’s product under the name Instant Nail Repair. The decision proved to be clever for Levin: Since 1995, his company Custom Solutions has sold approximately 1.5 million units of the instant nail repair product in Danville, California.
Setting up a private label deal
You can build successful relationships with private label buyers by:
Make it easy
Ask the buyer for an order and state that you are shipping the product in the buyer’s package or that you are adapting your package to the buyer’s specifications. If needed, you can also offer training to sellers of the buyer and even offer to maintain a website for the product. If you’re selling to a retailer, you may want to offer an ad, and you may even see a chart of the complementary products that your product should be displayed next to.
First class service
Offer marketing support, eg. For example, you can attend trade fairs, publish publications, actively edit a website, or offer layouts for advertisements or brochures. You can also provide customer service to troubleshoot product issues, take care of returning products, and suggest product enhancements.
Pay attention to the packaging of your product
Your private label buyer is unlikely to invest money in marketing. Potential buyers must therefore see your product and immediately recognize its benefits. If you have a consumer product, take time to pack your product so that it sells itself. The packaging and design of a product is extremely important if you conclude your trademark agreement with a retailer or dealer who sells to retailers.
Understand the competition
Companies take over private label products mainly for competitive reasons. To effectively sell the concept, you need to know the competitors of your target company and how your product will improve the company’s position relative to them. Getting to know the competition is also important if retail is the final destination in the targeted distribution channel.
One of the main reasons why companies adopt private label products is completing their product lines. Retailers do not like shopping at many different retailers. If a supplier has a more extensive product range, they will sometimes hire their current supplier in favor of the new provider. So if your product fills a gap in a company’s product range, it helps it attract more retailers into not just your product but all its products, which increases sales across the board.
Find potential private label partners
If you are looking for potential private label partners, search the internet for “private label”. Hundreds of companies market private label products in dozens of ways. Also visit the Private Label Manufacturers Association, which organizes trade shows and provides information to potential private label manufacturers.
Before signing up for a trademark agreement, make sure you’ve completed the following five steps:
Companies that buy private label products are generally not particularly worried about their patent status. However, there is a risk that the company will decide to make the product or that a competitor will quickly launch the same product. If you have enough money, you can apply for a patent before contacting the company. If your capital is limited and you intend to apply for a utility model, you can apply for a provisional patent. This will give you one year to apply for a utility model. Note, however, that you can not patent your product if you wait more than a year to apply for your utility model.
Inventors need a prototype “looks like, works like” before they can make a trademark agreement. A company not only wants to see your product, but also wants to test it before deciding to proceed. If you can not make the prototype, you can hire a contract manufacturer to make it for you at a low cost – assuming you sign an agreement that will allow them to take over the business when you complete the sale.
When you approach a company with a private label offer, you show that your target customers like and need your product. This can be demonstrated through surveys of potential customers or through interviews or letters of support from influential users.
You are responsible for making the product available in a private label contract, either by making the product yourself or by having it manufactured by a contract manufacturer. No matter how low your margin is, start with a contract manufacturer to make sure the agreement has a good start. Once the sale is secured, you can switch to your own manufacturing. To make money with a trademark agreement, you may need to consider manufacturing overseas.
You need to talk to the end users or target customers, the more influential the better the companies you want to target for a private label business. You want to get to know influential people in the sales channel. Your support for your product can play an important role in securing a trademark agreement.
Other important contacts are people who put you in the door of your target customers. Salespeople, marketing staff, regional sales managers or top executives can help you. You can get to know these contacts by participating in trade fairs or association meetings. All you have to do is contact the booth visitors, tell them you have a new product, and ask them if they would share their opinion with you.
You can also request sales documents from companies you are interested in. Often, this literature contains the name and contact information of a salesperson. Call this person and ask them to talk about your product for lunch.
If people are positive about the idea, you can ask them if the product fits in well with their company’s product line. If you believe that, you can ask them with whom you should talk about a trademark agreement.
Addressing potential private label partners
When you’re ready to contact one or more companies to complete a private label business, ask your key contacts if they can help you arrange a meeting with the right people in the business. Use your research to prepare a presentation that shows how your product can improve its position over the competition, how consumers want your product, and what you are willing to do to help them sell the product. Not every company will agree, but not give up. Talk to more and more companies and improve your presentation until you find the right match. Do not forget these important points when approaching companies.
Important and clear advantage
Your company contacts, who can help you with the support of your product, can also help you with the coordination of your presentation. First, you want to understand the benefits that the company sees for their customers, and then design your presentation so that your product offers at least some of these benefits.
One of the dangers of private label marketing is putting your product in the corner. Offering your help free of charge ensures that the company will at least create a marketing plan for your product. Your company contact may also be prepared to create a better package, brochure, or sales manual when you do most of the work. When you sell to retailers, you offer to work with the buyer to provide a display for the sale of the product. This can be as simple as a small card hanging from a peg board or attached to the front of the rack. The buyer can put the product on the shelf without any assistance, unless you offer the delivery.
A written agreement
If you sell to retailers or retailers, you only need one order. If you are looking for an exclusive product for your business, you can send a letter informing you that you will only sell it for a specified period of time, usually for a year or two, provided the company reaches certain levels of revenue that you both agree to. You also have to include the buyer exclusive language in his order.
You need a more comprehensive agreement if you sell to another company that then markets the product under his own name. The agreement may cover all or most of these items:
Contract duration: You do not want the agreement to last forever as your business goals may change. Three years is the longest period you should agree.
2. General responsibilities of each party: You want to specify exactly who pays for packaging, brochures and other marketing material.
3. Conditions for terminating the contract: In general, non-performance by one of the parties is a reason for the termination of the contract.
4. Protection against price increases: The private label customer may want some protection that price increases are limited each year to a certain percentage. The entrepreneur may have a provision that increases above this limited percentage may increase if his costs increase beyond a certain amount.
5. Price Protection Policy: Customer may wish to specify that you can not charge more than another brand customer.
6. Exclusivity: This can be done by geographic market or territory or market segments. Exclusion clauses can also prevent you from selling to other private label customers, or you can not sell the product under your own name. They want to offer as little exclusivity as possible, while private customers want as much exclusivity as possible. If you offer exclusivity, you want strong performance clauses, meaning that the company has to buy a certain amount of products.
7. Provisions on product changes: This clause is intended to clarify what kind of changes you can make without the consent of your customer and which not.
8. Shipping and billing details: Who pays the freight, the minimum order quantity, how many free samples the customer receives and the terms of payment should all be included in the contract.
9. Product Ownership: The product and all subsequent variations are yours and no one else’s – even if the customer wishes to make major changes, provide technical assistance, or help manufacture the product. Entrepreneurs may agree not to sell a particular version of the product requested by the customer to third parties. However, you want to make it clear that all variations of your original product are yours.
A plan for the first year
You can not afford to rest on your laurels after signing a contract. You must create a first year plan to get your product up and running. You should include sales promotions, sales materials, customer visits, on-demand training, new product development, trade show participation, new product market research, an ongoing customer feedback system, and quarterly sales status reviews in your plans.
Your first year goals are to make sure your sales and marketing efforts are first-rate for your product, and to network with business contacts and influential end users. The success and perseverance of your agreement will increase as you become better acquainted with the people involved in the product.