We’ve all walked into retail store ABC and sat down to discuss advertising options. At the end of the meeting, we’re told by the prospect that although they would love to advertise in our newspaper, they just do not have any additional dollars to spend at this time. We walk out discouraged, knowing that we’re missing an opportunity to help a business achieve their sales goals with a targeted marketing campaign.
However, depending upon the products being sold by retailer ABC, there may be a pot of free advertising dollars waiting to be used that is not currently being tapped into. Whenever you are working with a retail client, make sure to inquire about possible “co-op funded advertising.”
Co-op funding is an agreement between a manufacturer and retailer to share advertising costs at a local level. By sharing the expense of advertising, the manufacturer and retailer can increase the volume of product sold at the lowest possible cost. The manufacturer provides funding to the retailer for the sole purpose of promoting a specific product…and increasing sales.
Every manufacturer co-op program is a bit different, but in general it works like this:
- Retailers accrue co-op dollars during an accrual period –or- have a fixed budget amount to spend
- Manufacturer co-op programs will likely cover between 25% to 100% of eligible advertising costs
- Retailers have a specific “performance period” in which to use accrued co-op dollars (or risk losing them)
- Manufacturers set specific guidelines for how adverting dollars are spent: publications, logo size, ad copy, minimum sizes, pricing policy, etc.
- Retailers run eligible advertising and then submit a request form for co-op reimbursement (usually accompanied by a tear sheet and affidavit)
Remember that all co-op programs run differently, so make sure to ask your retail prospect for the specifics of their manufacturer’s programs. You may be surprised at how many retailers are not even aware that co-op programs exist through some of their product vendors!
Co-op fund management can be an extremely profitable revenue source for you. As an example, years ago I worked with a hearing aid reseller based in Minneapolis. After a brief period of relationship building where I establish trusted and confidence from my client, they asked me to manage their co-op program with two hearing aid manufacturers they sold product for. I was responsible for all aspects of the program – from establishing accrual terms to media placement to the reimbursement procedure. I met with sales reps from the hearing aid manufacturers and together we developed ROP, pre-prints, direct mail and interactive strategies – in which the manufacturers were covering 75% of the total cost. As the number of units sold directly to the consumer increased, the percentage of reimbursement increased as well. At the end of two years, this hearing aid client went from spending $0 with my newspaper to over $100,000 annually – a majority of which was directly funded by the product manufacturers!
Don’t let co-op funding opportunities pass you by – at the very least make sure that you’re asking the question about co-op funding to every retail client on your list!
Have a terrific week,
Dan
If there are specific topics you’d like to see discussed in a future issue of The Sales Cycle, please contact me at (612) 278-0223 or dan@mna.org