Exclusive Marketing Rights Agreement
An exclusive marketing rights agreement is made between a company and a distributor which grants the distributor sale profits for selling company products.3 min read
Updated November 19, 2020:
An exclusive marketing rights agreement is made between a company and a distributor. The agreement grants the distributor a portion of the profits from the company's sales in exchange for promoting and selling the products. It is an exclusive agreement that gives only one distributor the authority to sell the company's products.
Overview of Exclusive Marketing Rights Agreements
With exclusivity as part of the agreement, partners are free to develop the market without worrying about competing resellers cashing in on the market they've invested in to create.
An option for vendors is granting exclusivity to their partner. Making it an exclusive offer can work in the vendor's favor by gaining more opportunities for a more beneficial commitment, more room to expand into the market, and the ability to build a sales pipeline for faster results and success.
A more in-depth commitment means both parties can work together, jointly, with the goal being a working team promoting marketing and sales while reducing costs and focusing on success.
For the optimum effectiveness in marketing while working within an exclusive partnership, vendors need to know that their potential partner has enough support, there is transparency, and the expectations are clear from the start.
While vendors may sell only locally, there is the option of reaching out to a wider marketplace. This is a time-consuming process and would require the help of a distributor.
The exclusive agreement has several clauses to cover. One of the first is specifying who the parties are and their responsibilities. Key employees, such as managers and department heads, may be listed along with the legal counsel involved in creating the exclusive agreement.
An agreement should include a list of the keywords used within the document as well as their definitions. For example, the company making the products is considered the manufacturer, and the distributor agreeing to sell those products is the wholesaler.
An exclusive marketing contract agreement clearly lays out the obligations of each party involved with the agreement and the portion of the profits each party is entitled to. Additional areas to consider for the agreement include:
- Marketing campaigns.
- Sales visibility.
- Direct-to-salesperson support.
- Coaching of salespersons.
A measurement system designed to track the progress of sales and marketing must be agreed upon by both parties. A tracking system within an agreement helps build a stronger relationship between the sales partners and helps each partner stay on track and focused on shared goals.
There is also the option for a vendor to revoke an exclusivity agreement based on the other partner's failure to meet set performance targets. In this case, this particular clause is beneficial since it serves as a deterrent for a partner not living up to their part of the agreement, resulting in loss of the agreement.
The sales and marketing financial implications are clearly defined within an agreement. This would include a breakdown of the costs of labor, distribution, and shipping. The vendor and wholesaler will set an agreed-upon sale price, and the vendor will also determine the percentage that the wholesaler is allowed in exchange for promoting the products. This figure can range from 10 to 80 percent depending on factors such as taxes, insurance, shipping costs, and other costs that the wholesaler has invested in marketing.
Also, the agreement may include an upfront fee or a guaranteed commitment regarding product order levels if the product is proven in the market.
It is imperative to clearly state within the exclusive marketing rights agreement that you, as the manufacturer and/or inventor of the product(s), will maintain the intellectual rights to the product(s).
An exclusive agreement will usually specify that the wholesaler has limited authority, such as using the product's logo and product name in marketing material, advertising, product branding, and other promotional activities. The copyright for the product(s), however, remains with the manufacturer.
The agreement should also specify to what extent the wholesaler can use product information without obtaining permission from the manufacturer.
A manufacturer can protect their product by applying for a trademark, copyright, or patent online from the United States Patent and Trademark Office.
If you need help with an exclusive marketing rights agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.