Plan on Licensing? Keep Your Product Life Cycle in Mind When Negotiating Royalties

Many small businesses, entrepreneurs, inventors, designers etc. want to go the route of licensing because it potentially brings profits without having some of the traditional accompanying headaches, like manufacturing. Or, it can bring in additional income if manufacturing arrangements are already in place.

But you need to understand that there’s a Product Life Cycle. Your royalty rate (that is the fee your get for licensing your product, brand, etc.) is influenced by where your product is in that cycle.

All products have a limited life. At each stage the product passes through during its life, there are different challenges and opportunities that affect your royalties. Here’s an overview of four main stages of Product Life Cycle:

STAGE 1: Development/Market Introduction Stage
This is where your costs are very high, there’s virtually no sales volumes to start, there’s a lot of market uncertainty – product price, competition, market acceptance to name a few. No $$ is being generated at this stage.

STAGE 2: Growth Stage
Your costs are reduced due to economies of scale. Public awareness increases. Your sales volume increases significantly. Profits rise. For a short time. Risks rise because of increased competition. Increased competition leads to price decreases.

STAGE 3: Maturity Stage
Sales volume peaks and the market becomes saturated. In order to maintain and grow market share, branding and marketing comes into play (the brand has to be differentiated, feature differences have to be emphasized). Commodity-like returns are seen. There’s a fairly long duration of profitability.

STAGE 4: Saturation and Decline Stage
Sales may stabilize or decrease. Prices and profitability shrink. Profit becomes more a production/distribution efficiency question than increased sales. This stage is riskier than the mature stage.

Keep in mind that this model has limitations and exceptions. But you should be aware of the Four Stages when negotiating a licensing agreement so you can understand why royalties vary.

Sandra Holtzman teaches CEO 035: Licensing.

Befriend Trends

INSIDE IMAGE CONSULTING

I love the title.  But to be fair, I cannot take the credit. It was the name of another fabulous workshop that was given at the AICI conference by west coast image expert Brenda Kinsel.  Brenda opened the workshop up with a conversation about our love/hate relationship with trends.  (Isn’t it the truth?) She offered that we may love them because they offer choices for us (and our clients) and solutions to a case of the wardrobe blahs.  And, we may hate them because they can seem irrelevant to our (and our clients’) lifestyle and needs.

Each season designers give us a potpourri of new trends – color, style, and silhouette – that we can say ‘yay’ or ‘nay’ to.  (Ahhh, the power!) And, as image consultants, it is important that we first have our own point of view.   With each trend, we want to consider the following:  What do we like?  What is a good buy – that will maybe work past the season?  What is a splurge item?

We then need to interpret the trends for our particular clientele.  This involves understanding our individual clients’ goals, preferences, and lifestyle as well as things like their age, shape and personality.  We must remember that with trends, sometimes too much of a good thing, is well…too much.  Take graphic prints, for example.  We all know some people who can pull them off from top to toe and others who are better suited with just a touch in a scarf or blouse.

I often gauge if a trend works (or not), by how my client stands in the dressing room when trying something new.  Does she stand tall, look me in the eye, maybe even have a bit of ‘tude?  Or, does she look like she just borrowed something from a friend and it just isn’t her?

Regardless of the client, each season I encourage her to try one or two new trends – even if she’s not trendy, per se.  Just the very act of trying a trend on can keep someone current and open to new possibilities.

By the way, Brenda shared some wonderful broadcast, print, and online media trend resources.  Some of her picks (and mine) include:

E! Entertainment’s:  Fashion Police

www.fashiontrendsetter.com

www.polyvore.com

www.style.com

www.whowhatweardaily.com

People magazine

This season, move yourself and your clients ‘fashion forward’ by embracing some of the newest, latest and greatest.

 

Carol Davidson teaches SXF 810: Color for Wardrobe Planning, SXI 100: Introduction to Image Consulting, SXI 110: Image Consulting Confidential.

12 WAYS TO THINKING CREATIVELY IN COLOR

THE COLOR CORNER

#1. A good way to feel creative is to ask a question that has many correct answers.

# 2. If you’re stuck, try to find a way to refresh your perception – look at colors around you.

# 3. Break the rules, especially the ones that are conventional and that you use on a daily basis.

# 4. Make sure you are not emotionally involved with certain concepts. If you use only emotions you will often not see the benefits of other results. Think about colors that depict your emotions.

# 5. Reinvent your ideas. Challenge yourself by asking hard questions and use the new answers to create new ideas.

# 6. Allow the world to work for you. Look at the world and create ways of defining it in positive new ideas.

# 7. Be sure to take risks. Train for risks – like working out in a gym, taking a walk on the beach or in a stroll in the park. Be sure to take a risk several times a week.

# 8. Making mistakes lead to new ideas. Don’t be a perfectionist.

# 9. Try working in creative collaboration with others, the results will be rewarding.

# 10. Try looking at art continually to discover new outlets for your energy and color theories. The creative person has confidence that their ideas will lead to something good.

# 11. Try to think differently each day and not create any patterns of behavior. Your mind should run free to work creatively.

# 12. Do something good for someone else. Your creative juices will flow.

Barbara Arlen teaches SXC 100: Color Theory and Culture, SXC 110: Color Discovery Interactive Workshop, SXC 260:Color Painting Studio, and SXF 840: Career Opportunities for Working with Color.

Advance your career. Pursue your passion.