The Complete Guide To The Ways To Manufacture & Sell Your Products©
About the Author
Neil Siskind, author of The Complete Guide To The Ways To Manufacture & Sell Your Products©, has 20-plus years’ experience as an attorney and investor in the product manufacturing, trademark licensing, and product distribution industries. Mr. Siskind has advised manufacturers, brand owners, personalities, licensees, and distributors in all aspects of their respective product transactions, including the transaction-related IP, legal, manufacturing, sales, and operations issues. Mr. Siskind has also acquired his own Intellectual Property, including trademarks and patents, and licensed such IP for development into consumer products in the United States and Asia in the urban streetwear, high-end fashion, children’s, bed and bath, celebrity, and sportswear markets. Neil Siskind is the President of The Siskind Law Firm, located in Manhattan, New York. Neil Siskind is also the Founder of The Fatherhood Assignment, an organization that advocates for youths with absentee fathers and is the Conservator of The Neil S. Siskind Nature Preserve, located in New York’s Hudson Valley.
Neil S. Siskind, Esq.
Forward
The Complete Guide To The Ways To Manufacture & Sell Your Products© was written by Neil Siskind to offer active and aspiring product entrepreneurs- whether they be trademark owners, inventors, manufacturers, licensees, or distributors- a fundamental understanding of the method(s) available to them to produce their products and put their products into the stream of commerce. Once an entrepreneur has his or her product developed and legally protected (where possible), the business model to be implemented for the manufacture and sale of the product is the next most important decision. This decision will help determine marketing strategies and the necessary business operations structure, as well as the proper price-points and profit margin in order to achieve market acceptance and ultimate success.
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The Complete Guide To The Ways To Manufacture & Sell Your Products©
There are certain decisions to be made at the outset of a manufacturing program.
A company can manufacture domestically (in its country of incorporation), or in an overseas factory. This determination is based on a number of factors including timing needs, laws and regulations, duties, final product destination, process control, Intellectual Property control, and, of course, labor costs.
A manufacturer may own its own factory, rent a facility in which to operate its own factory, or pay a third party company (contract manufacturer) to manufacture its product on a cost per unit basis.
A manufacturer may obtain trademark, copyright, and/or patent protection for its product.
A manufacturer may manufacture product under it’s own proprietary trademark or license the trademark rights of another person or company.
There exist a variety of sales methods from which a manufacturer can select in order to get product from factory to end-user.
The business models for the manufacture and sales of products set-out and described in this Guide are the options available to a manufacturer based upon a manufacturer’s particular circumstance(s) and goal(s).
Manufacturing Models
Product manufacturers can use one or more of the following models to manufacture their products:
Manufacture under a proprietary trademark for wholesale product sales to distributors
Description: Product is manufactured and sold under a company’s proprietary trademark. Product is sold by the manufacturer to another company which, in turn, sells such product to retailers for ultimate sale to individual consumers.
Manufacture under a licensed trademark for wholesale product sales to distributors
Description: Product is manufactured and sold under a trademark that a company has licensed from the trademark owner. Product is sold by the manufacturer to another company which, in turn, sells such product to retailers for ultimate sale to individual consumers.
Manufacture under a proprietary trademark for product sales to retailers (brick and mortar and online retailers)
Description: Product is manufactured and sold under a company’s proprietary trademark. Product is sold directly to retailers for ultimate sale to individual consumers.
Manufacture under a licensed trademark for product sales to retailers (brick and mortar and online retailers)
Description: Product is manufactured and sold under a trademark a company licenses from the trademark owner. Product is sold directly to retailers for ultimate sale to individual consumers.
Manufacture under a proprietary trademark for product sales to individual consumers through catalogs
Description: Product is manufactured under a company’s proprietary trademark for direct sale to individual consumers via a physical, paper catalog. Normally, a trademark license would not be used under this scenario.
Manufacture under a proprietary trademark for direct product sales to individual consumers through catalogs of other companies
Description: Product is manufactured under a company’s proprietary trademark for sale to catalog companies at wholesale prices. Such product is sold by the catalog companies to individual consumers. Normally, a trademark license would not be used under this scenario.
Manufacture under a proprietary trademark for direct product sale to individual consumers through a company’s own website
Description: Product is manufactured and sold under a proprietary trademark to individual consumers through a company’s website. Normally, a trademark license would not be used under this scenario, though it may occur in the case of inexpensive, non-exclusive licenses.
Manufacture under a proprietary trademark for direct product sales through a television commercial or infomercial
Description: Product is manufactured under a company’s proprietary trademark to be sold direct to consumers through a television commercial or infomercial. Products may be sold wholesale to the TV commercial or TV network which takes orders through a telephone number or website and resells the products to the retail consumer, or the manufacturer may sell product on its own account and ship orders directly to consumers. In the latter case, companies either pay for the air time or pay a percentage of sales to the commercial or infomercial company. There are a variety of business models available. Normally, a trademark license would not be used under this scenario. Exceptions may exist in the cases of celebrity licenses.
Manufacture under a proprietary trademark for drop-ship sales of product orders taken from individual consumers through a 3rd party website
Description: Product is manufactured under a company’s proprietary trademark and advertised and sold through the website of another company. Such product is sold to the retail consumer and shipped directly from the manufacture’s factory or warehouse to the consumer after receipt of payment from the website company. The website bills the customer who made the order on the website and then, in turn, pays the manufacturer prior to shipping. The website owner makes a profit on the spread between what the consumer paid and what the website owner pays to the manufacturer.
Manufacture of generic products without regard to the trademark attached
Description: Product is manufactured for distribution to wholesalers or retailers of such products, such as tourist items (ex: towels, key chains, hats), blank t-shirts (for use by other manufacturers or retail stores to create a finished t-shirt with their images and logos) or hardware (nails, screws). The sale, however, is not about the trademark, it is about the item (ex: a shirt that says “Florida” or generic screws for a hardware store).
Sales of these types of items are less about the trademark attached and more about sales efforts and relationships with customers using the manufacturer as a supplier of such generic items.
Manufacturers of these products often operate their own factories- as opposed to using contract manufacturers.
Generic product customization (promotional products)
Description: Product is manufactured for use as a marketing product containing imprints or embroideries of other companies’ trademarks and logos for use in such other companies’ special events and marketing initiatives. Such products are ordered by companies (or their respective marketing/sales intermediary or agent) describing the items on which it wants their logo and trademark imprinted. Such products also may be ordered by retailers who do the imprinting or embroidery themselves. The items may be generic items, such as baseball caps, or they may be patented items which the owner of the patent sells as a promotional item.
Manufacture under a proprietary trademark for direct product sales to businesses as end-users through a company’s own website
Description: Product is manufactured under a company’s proprietary trademark to be sold through a company’s website to businesses as end-users.
Manufacture under a proprietary trademark for sale of products through suppliers and wholesalers to businesses for use in their operations (such as machinery, equipment and supplies) and that are not intended for resale to consumers
Description: Product is manufactured to be sold under a company’s proprietary trademark. Such product is sold to businesses by suppliers and can either be shipped by the manufacturer to suppliers at wholesale/supplier prices for their resale to the end-user business, or, upon receipt of a supplier’s order and payment, product is shipped directly to the end-user business. Suppliers use catalogs and websites to show and sell product.
Manufacture product components under a proprietary trademark for sale to other manufacturers for use in their finished products
Description: Product is manufactured to be sold under the manufacturer’s own trademark to other businesses for their use as a part of a finished product (ex: buttons for jeans, brake systems for automobiles, chips for computers).
Manufacture/preparation of commodities for use by manufactures in final products
Description: Preparation of commodity products (ex: cotton) for sale to other manufacturers for use in other products such as textiles and fabrics.
Recycling of used materials for use as final products
Description: Purchase and preparation of used materials (ex: old tires) for re-purposing as final products (ex: rubber as landscaping mulch).
Preparing food recipes for preparation and sale
Description: Preparation of a proprietary recipe for sale to an authorized packager that uses the recipe in a final product which is packaged for sale to distributors or retailers under either the recipe owner’s or the packager’s trademark, depending on the agreement between the parties (ex: Coca Cola selling its formula to bottlers that bottle the formula along with a liquid substance for consumption as a beverage).
Bottlers and packagers
Description: Buying the packaged recipe of another company and mixing that recipe into a completed formula and packaging the final product for sale to wholesalers and retailers under either the recipe owner’s or the packager’s trademark, depending on the agreement between the parties (ex: see Coca Cola example above).
Manufacture products under a patent (design or utility) or copyright
Description: Manufacturing, in any of the above circumstances, a product which has a function or design protected by a patent, or using designs or images or names protected by copyright. These Intellectual Property protections would be in addition to any trademark protection held by a company on a name of such products.
Manufacture products using a patented process
Description: Manufacturing in any of the above circumstances using a patent owned by the company or licensed by the company on the manufacturing process itself- as opposed to patent protection on the final product.
Contract manufacture by/for other companies
Under the above business models, a manufacturer may elect to not handle its own manufacturing and production, but, rather, pay a third-party production facility owner (contract manufacturer) to actually produce the goods in such contract manufacturer’s own factory. This is probably the most common method of manufacturing used. Payment is usually made to the contract manufacturer on a cost per unit basis. Contract manufactures own (or lease) a factory and produce product, while the manufacturer who owns the product engages in designing, warehousing, marketing and selling the goods.
Contract manufacturers may be located in a manufacturer-client’s domestic market or in a market that is foreign to the customer’s principal office. Production of goods may be done for a company under its own proprietary trademark or under a licensed trademark, and/or using a company’s patent.
The type of manufacturing handled by contract manufactures include:
Any of the manufacturing discussed above
Private label manufacturing for retailers-
Description: Product is manufactured for a retailer under such retailer’s own proprietary trademark for sale exclusively in the retailer’s store(s).
Co-packing
Description: Preparation and packaging of a food or beverage for the product owner on a cost per unit basis in accordance with the recipe and instructions of the recipe owner and using the trademark of such owner.
Sales Methods
Manufacturers can use one or more of the following strategies to sell their products:
Sales by an internal sales force
Description: Use of a company’s own employees to sell product to wholesalers, retailers, or end-user companies. Such salespeople are paid either on salary, on commission, or a mix of both.
Sales by use of an independent salesperson(s) or independent sales agency
Description: The use of a salesperson(s) or sales agency to sell your products to wholesalers, or retailers, or end-user companies. Payment to such salespeople are on a commission basis.
Sales through a company catalog
Description: The use of a physical, paper catalog containing photographs and description of products. Such catalogs may be sent to retail customers at their homes or to companies at their offices, depending on if products are for consumers or businesses. In either case, the catalog is sent through the mail. Orders are taken by phone or through a company website.
Sales to or through third party catalogs
Description: The use of other companies’ catalogs to show and sell products. Such companies would buy product on a wholesale basis and sell to retail consumers or end-user companies through a catalog sent through the mail. Alternatively, direct-ship relationships with manufactures can be arranged.
Sales through a company website
Description: The use of a website to show and describe product for sale to either retail consumers or business end-users, depending on the product. Customers order product through the website, or, if offered, over the telephone.
Sales to third party websites
Such companies would buy product from the manufacturer on a wholesale basis and sell to individual consumers or companies through their own websites.
Sales using a third party websites for drop-ship to consumers
The use of other companies’ websites to show and sell product. Such companies would take an order from a customer, the customer pays for the product and the website company, in turn, buys the product from the manufacturer who ships the product to the customer.
Sales through brick and mortar stores
Description: The use of a store located in a neighborhood where customers can walk in and buy product off the shelf or rack. Retailers can manufacture their own product for sale in their own stores.
Sales at trade shows
Description: Attending trade shows set up for specific industries to sell product to interested wholesalers or retailers. Even if no actual sales occur, a company can get exposure to potential customers.
Sales using mass media (television, radio, magazines)
Description: The use of advertising to entice and attract customers to a manufacturer’s website or stores, or to a manufacturer’s retail customer’s stores or website.
Sales using trade publications (for business to business products)
Description: The use of industry publication to advertise products or services to the target business customers.
Sales resulting from Internet advertising
Description: The paying of other websites to place advertisements on their websites; the payment to search engines to have product ads show up in their search results for select key words; and email advertising by sending emails to clients.
Sales from social media marketing
Description: The use of websites used by the general public to communicate with each other for social purposes as a way to advertise product, stores or websites as either a targeted or non-targeted ad. One can also send messages to people in their groups and share company information to people in their groups. A company can provide ways for followers to participate in conversations and respond to company marketing or news.
Sales through the use of commercials and infomercials
Description: The use of television commercials or infomercials to display, describe and encourage audiences to purchase product. Viewers can call or email through a website to place orders.
Ways for Product and Intellectual Property Owners to Get Products into the Stream of Commerce Without Being Directly Involved in the Manufacturing Process
Joint Ventures and Partnerships
Companies often enter into relationships in which one party or person handles certain product manufacturing duties while the other party handles duties related to product marketing and sales. This may be done via a joint venture between a company with manufacturing capabilities and facilities and another company who has trademark rights and/or a sales infrastructure. Likewise, there may be two people in a partnership, one whom has manufacturing experience and who handles the production process and another who has sales experience and who handles the distribution process. The profits made and expenses incurred by a joint venture or partnership can be handled under a variety of financial structures.
Intellectual Property Licensing
Manufacturing options for trademark, copyright and patent owners (design and utility patents) include the option to license to another company the right to manufacture products using their respective Intellectual Property. In this scenario, a company does not handle any production, selling, storage or transport of product. It is all handled by a “licensee” who pays the Intellectual Property owner (the “licensor”) a royalty on sales. There are various structures for royalty payments. In some cases, depending on the terms of a license agreement, trademark owners may be required to engage in marketing and advertising of the licensed trademark. Licenses of trademarks are usually for products intended, ultimately, for sale to individual consumers. Patents may be licensed by companies that manufacture product for sale to individual consumers or for products sold to businesses for uses related to their business operations, or for the manufacture of components to be used in another company’s finished products.
The Complete Guide To The Ways To Manufacture & Sell Your Products Copyright © 2015 Neil S. Siskind