Royalties and Customer Service

I received an email inquiry from a student today...

John,

Two questions:

1) In Chapter 4, rather than worrying about the factory extending their run and selling "your" product to others, you suggest they simply agree to pay royalties. This is an appealing and simple arrangement.

***Yes, most recently I made a deal with the printer of the very book in question where they print as many as they like to sell to whomever they wish, with royalties to me. This being Hong Kong, the words were not even out of my mouth before the vendor said "of course...".***

Have you ever encountered resistance from otherwise suitable manufacturers?

***Yes, on the same trip as above the rep of a communist Chinese org resisted, insisting they would never sell my products out the back door... which is a common complaint, if unwarranted... I insisted I WANTED them to do so, with a royalty to me... they insisted they honor all IP treaties ...sigh... I praised them for that, and again said I wanted them to do otherwise. They maintained their scruples. Finally we agreed if and when the Chinese get an inquiry from elsewhere for my product we would talk...

And have you ever encountered resistance from the designers, who have agreed to work on a royalty basis?

***as to the designers, they get 20% of the 5%, or something like that...depending on what you agree to... the listserv site has a template royalty agreement.***

2) Business plan advisors suggest including how you intend to handle servicing your product. This would include returns, repairs, warranties, etc. I think going forward without considering this would bite me in the future. Will you cover this topic in your class?

***We have I think... recall getting the catalog and price list of our competitors, I think (hope) I mentioned this in the book at least... well, with the catalog and price list is something called "terms and conditions of sale..." this can be translated as "service and quality levels" ... so the trick is to lay out all of your competitors terms and conditions of sale, and adopt those as YOURS. So don't guess, adopt exactly what your competitors do... You do not get to decide what quality level and service level you will provide, the market has already established it... it is your job to learn it and adopt it exactly.

First question specialty buyers ask is "what is new?" Second question they ask is "What is your minimum?" Then they start looking for a reason NOT to buy from you. they have countless vendors they can buy from and do not need the headache of a vendor who has come up with something "clever" in the biz process. If working with you will in any way be different than working with anyone else they buy from, then they will decline to buy. and what is worse, they will give you a facile, bogus reason for not buying: "too expensive" "wrong designs" something not true but an easy out. then you will mistakenly respond to the false feedback, and fail to solve the real problem, and that is doing biz with you is a different process than dealing with others.

The only consideration your potential customer should face is "design." Everything else is the same.

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