Ari Magalhães: why you should invest (or increase your investment) in patents?

The Forgotten P

By Ari Magalhães

Who never heard about the Peter Druker’s 4 Ps of Marketing?

Just in case you were hiding inside an Afghan cave for the last decades, here they are: place, price, promotion and product.

In short, what Druker and other marketing scholars say is that in order to achieve success on sales, you must have a good product, an affordable price, great advertisement and great distribution. All of this is true. No one in the right mind would deny that those four "P" mean a lot when it comes to increasing the sales of a product.

A lot has been written about this subject and some authors even say there are in fact seven Ps of Marketing, adding to the Druker's list three other Ps: "people", "performance" and "physical environment".

What seems to be unprecedented or at least very seldomly seen, is the inclusion of the patent "P" among the other Ps.

For sure, your product will never sell unless it has an affordable price, a good distribution means, good advertisement, and of course, unless it aggregates some value to whoever acquires it. No entrepreneur should ignore the 4 Ps.

But when it comes to targeting the market share, when we are talking about increasing your slice of the pie, the four Druker’s Ps may do nothing but tickles on the competition’s slices. Think about that:

  • 10.000,00 USD invested in advertisement may buy you a small add on a internet blog or a local newspaper;

  • the same figure invested in distribution may take your product to another town or may allow you to display your goods on the best shelfs of the local supermarket for a couple of weeks;

  • investing the same sum of money to buy a better machine to manufacture your product's parts may make you able to deliver a better product to the market which in turn may also get you another tiny fraction of the market;

  • diminishing ten grand out of your current profit margin - to decrease the price of your goods and increase your sales - may increment the number of consumers for a while, but you really should not expect winning the game just by doing so;

The only tool we have at our disposal that is capable of leading us to a 100% market share of a product is a patent. For the same amount of money mentioned above, 10.000,00 USD, your company is able to obtain a patent application roughly anywhere in the world.

Someone might say that in order to obtain a patent we need a high qualified engineering team to work on the innovation and R&D. Another concern is that we also need to face a huge bureaucracy, a lot of paperwork and so forth in order to get this document granted.

First of all, big part of the innovations applied to products as a marketing strategy to differentiate them from to competition are patentable subject matter. Think about the Nespresso coffee capsules. Unmistakably a great idea, this product did not have to come from the mind of a nuclear physicist, a brain surgeon or anyone else with a similar background. Nestlé had the whole pie of the market alone for 20 years in a roll (patents expire after a 20 year period)!

Even now that their patents are no longer enforceable, when we think of coffee capsules we think about Nespresso. You cannot get them out of the consumer's head after 20 years of exclusivity. Even if Nestlé starts charging higher for their capsules then the average competition, they might still detain the biggest slice of the pie (note: no longer the whole pie but the biggest chunk of it).

Second, bureaucracy, paperwork, time demanding tasks and other minor distresses associated with the patent process may be all outsourced to a patent agent for a very affordable price when compared with the cost of fomenting any other marketing strategies.

Entrepreneurs in the so-called well-developed economies are much more familiar with patents than the entrepreneurs where I come from (Brazil). Anyhow, I do think the patent subject is a little bit underestimated and underdiscussed in business classes everywhere, not only here in Brazil. Being such a strong business tool, I wonder why a stronger spotlight is not directed towards it. If you have the opportunity to fight with the big “P” in your hands, why would you have to worry so much about the other little Ps?

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