Send in the clones: will competitors' knockoffs destroy your products' edge? Not if you don't let them

Entrepreneur, Sept, 2003 by Don Debelak

THE ENTREPRENEUR: Jay Sorensen, 45 founder of Java Jacket in Portland, Oregon

THE PRODUCT: Sorensen's product, the Jay Jacket, is a patented, honeycombed insulating sleeve that slides over a paper cup filled with a hot beverage. Java Jackets ar used in coffeehouses, specialty stores and convenience stores nationwide. Sorensen's was the first insulating jacket on the market, and his first customer was Coffee People, a small chain of coffee shops in Portland, Oregon. Though Starbucks use another type of insulating sleeve made by a competitor, Sorensen's Java Jacket continues to dominate the market.

START-UP: $15,000 in 1993, which Sorensen used for product development and a production run of more than 100,000 unit

SALES: $12 million to $15 million projected for 2003

THE CHALLENGE: Establishing your in novative product in the market and not backing down when large and established competitors release their own variations of your product

DEVELOPING AN INNOVATIVE PRODUCT is every inventor's dream. Finding success selling that product is even better. But this kind of success often breeds emulation--from large corporations, no less. When you're still growing you business, how do you stand apart from the knockoffs released by big corporations? Is it possible to become--and stay--the market leader? The answer is a resounding "yes." Just ask Sorensen. He knows firsthand how to fight this fight, and here's what he's done to protect his place in the market:

Steps to Success

1. FIND AN ADVANTAGE PEOPLE WILL NOTICE. Sorensen first got his idea after spilling a hot cup of coffee. The cut was handed to him with a napkin around it, but it slipped out of his band He realized a cardboard or paper sleeve that could easily slide around the cup would be a great idea, but his unique advantage was in the design. "I went around Portland to a dozen paper suppliers to see what they carried," he says. "I found a supplier who had embossed paper [with] a honeycombed look to it. It had a quality image, and it was better than a simple sleeve."

2. CREATE A CATCHY NAME THAT STICKS IN CUSTOMERS' MINDS. Java Jacket is a perfect name. it describes what the product does, and it's a name customers remember. "Java Jacket has such a dominating market awareness that sometimes people who [meant] to call the competitor call us instead," Sorensen says. "The trademarked Java Jacket name is worth more than our patents."

3. FIND A FAST WAY TO REACH CUSTOMERS. In 1993, while waiting in his first customer's office for a check, Sorensen saw a trade magazine, Fresh Cup, on a table. "It listed [an upcoming] trade show in Chicago, and I called up and took a booth." At the show, he met hundreds of potential customers. "It was the most exciting three days I've experienced in business," he recalls. "I walked away with orders from more than 100 stores, and I had zoo customers by the end of 1993." When you don't have a lot of money, you need a way to get in front of customers at a minimum cost. Trade shows can be a great way to do just that.

4. KEEP OVERHEAD LOW. Things can turn against you when you compete with a big company, so minimize your investment and operating costs in order to quickly downsize if needed. With the Java jacket, Sorensen says, "We outsource all our production, and we only have six employees." That's low overhead when you're turning more than $12 million in sales.

5. PROMOTE YOUR BRAND IDENTITY RELENTLESSLY. "We attend eight to 10 trade shows per year, and we advertise regularly in all the industry trade magazines, including Fresh Cup, Specialty coffee Retailer and the Tea and Coffee Trade Journal," Sorensen says. He wants the Java Jacket name in front of prospects all the time.

6. DON'T IGNORE OPPORTUNITIES. A growing company needs to do whatever it can to prevent a competitor from getting a foothold in a new market. In the past few years, many convenience stores started offering specialty coffees--and Java Jacket made sure to be right there. "Much of our growth has come from convenience stores," he says. "They like the jackets because it stops people from double-clipping. A cup costs 6 cents vs. 3-5 cents for a Java Jacket." Convenience stores weren't Sorensen's original market, but he went after them anyway to stop competitors from gaining an easy market-entry point.

Lessons Learned

1. DON'T THINK ALL THE ADVANTAGES LIE WITH THE BIG GUYS. While it's true growing businesses have trouble breaking into a market established by big companies, they have plenty of breaks if they can get into a market first, Customers like supporting the small company that created the innovation, and they'll support that company as long as its pricing and delivery are right.

2. DRIVE CUSTOMERS TO DISTRIBUTORS. At one time, before he added distributors, Sorensen had more than 5,000 customers. That's too many customers for one small company to support. When customers call you direct, find out if their distributor will furnish the product to them. Tell customers that ordering will be easier if their distributor will carry a product. Distributors will add a product if they get enough requests for it. While distributors cut into your profit margin, they make up for it by stocking and delivering your product, and they can also help you rapidly expand your market.