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Co-Op Funds — Use Them or Lose Them!

co-op.jpgHave you left any dollars on the table in 2016?

You have $5,000 in the bank that has earned $100 in interest. You give it back, right? Of course not, but many business owners across the country do just that with their co-op advertising funds. Tens of thousands of dollars go unused each year.Co-op funds are advertising dollars supplied to you by your vendors, because manufacturers want you to market and sell more of their product. These funds are usually based on the percentage of your total purchases you have made from your vendor. If you buy at least $5,000 of product with a vendor, it is worth understanding whether you have earned unspent co-op advertising money. Some retailers go as far as to only purchase from vendors that provide co-op programs.

You may be sitting on a bank of money yourself. As the year ends, check to see if you have free advertising money sitting in your vendor’s co-op bank, and if you don’t use it by Dec. 31 it is likely that you will lose it. Stop what you are doing and make certain you are not throwing away $100 or even thousands of dollars this year. 

If you have missed out on co-op dollars this year, this is the perfect time to develop a plan for 2017 and Swift Local Solutions will guide you through it. 

Sometimes, rather than coming directly from the manufacturer, co-op programs are handled by a middleman like a regional distributor. It is important to understand who controls your funds.

Formal co-op plans are very structured policies with specific requirements that are published annually. Typically, an accrual formula is used based on a percentage of your purchase from the manufacturer. The media types allowed with specific details of ad requirements are documented. The manufacturer will often provide materials for your digital, print, radio or TV advertising. All you have to do is drop in your business information.

Most manufacturers offer shared cost co-op programs, typically at 50 percent. As an example:

  • Your net purchase with a manufacturer = $50,000 annually
  • Your manufacturer offers a 3 percent accrual rate = $1,500
  • Your budget $1,500 to advertise the manufacturer’s product
  • The manufacturer pays $750
  • Your cost is $750 

Some manufacturers offer 100 percent co-op programs in which they will pay your entire advertising bill as long as you follow the requirements. As an example:

  • Your net purchase with a manufacturer = $50,000 annually
  • Your manufacturer offers a 3 percent accrual rate = $1,500
  • Your budget $1,500 to advertise the manufacturer’s product
  • The manufacturer pays $1,500
  • Your cost is $0 

A manufacturer may offer a “fixed” co-op plan to encourage you to advertise a specific product. In this case there is not an accrual tied to your purchases of the product. Here is an example:

  • Your net purchase with a manufacturer = $50,000 annually
  • No accrual needed
  • Your budget is $500 to advertise the manufacturer’s product
  • The manufacturer pays $500
  • Your cost is $0

“Unlimited” co-op plans may be offered to promote seasonal products or very specific promotions. Here is an example:

  • Your net purchase with a manufacturer = $50,000 annually
  • No accrual needed
  • Your budget is $2,000 to advertise the manufacturer’s product
  • Let’s say the manufacturer pays at a ratio of 70 percent to your 30 percent of the advertising investment, or $1,400 (70 percent)
  • Your cost is $600 (30 percent)

“Negotiable” co-op plans may be offered based on your specific needs. Sometimes these plans are referred to as “informal” or “arranged.” To generate this kind of advertising support, it is helpful if you develop a great relationship with you manufacture’s representative. Pitch your rep that your planned campaign will help you sell more of the product, allowing you more opportunity to make greater purchases from that vendor. Here is an example:

  • Your net purchase with a manufacturer = $50,000 annually
  • Your proposed advertising budget is $4,000 to advertise the manufacturer’s product
  • The manufacturer agrees to pay half, or $2,000
  • You pay the other half, $2,000

“Bonus” co-op plans may be offered by the manufacturer to introduce a new product line or season that must run during a smaller window of time. These plans may be run in conjunction with their regular plan.

Over half of the co-op funds are based on purchases you made during the prior year. Some manufactures look at purchases made during the current year, a rolling period of time or a fiscal year.

While it can be complex, you may have earned those accrued co-op funds. Like other media companies, our sellers at Swift Local Solutions can simplify the process. They are provided training and tools to help you utilize your co-op funds within the guidelines of each manufacturer. Just ask for help.

Here are a few links to some current programs:

If you have missed out on co-op dollars this year, this is the perfect time to develop a plan for 2017 and Swift Local Solutions will guide you through it. 

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Mike Bennett

Written by Mike Bennett

Bennett is a 42 year veteran with a variety of experiences working in markets from Trenton, NJ to Truckee, CA and 20 locations in between. Most recently he was the publisher, advertising director and columnist at the Glenwood Springs Post Independent. A lifetime student of marketing he is now focused on his passion as a digital business development manager at CMNM. His goal is to help his customers reach their goals through sound and efficient advertising and promotion practices.

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