Co-op advertising is a joint venture between a manufacturer and a retailer to share the cost of advertising the manufacturer’s products locally. By offering co-op advertising opportunities to their retailers, manufacturers are able to increase sales volume dramatically.
Co-op money is offered to retailers either directly or through wholesale intermediaries. Generally, the amount of the allocation is relative to the retailer’s purchase of the manufacturer’s products. Some plans, however, have no bearing on purchases. Instead the manufacturer agrees to share the cost of advertising up to a given number of ads, inches or dollars.
Regardless of the details of the plan, it is vital to remember that the co-op concept will increase product movement, sales volume and profit margin for everyone involved.
Contact your account executive if you have any questions.
Types of Co-op
- Manufacturer/Retailer - The retailer receives co-op money directly from the manufacturer, regardless of whether product is purchased from the manufacturer or from the distributor.
- Manufacturer/Distributor - Co-op money is provided to the distributor and must be claimed through the distributor by the retailer. The distributor may release the funds directly to the retailer, invite retailers to participate in dealer listing ads or create his/her own co-op plan. Distributors may also use co-op funds for non-media promotion (displays, T-shirts, catalogs, etc.) in some co-op plans.
- Ingredient/Product - The manufacturer of an ingredient and the manufacturer of the end product provide co-op funds jointly. For example: Stainmaster is an ingredient carpet manufacturers use to prevent staining. Stainmaster, the carpet manufacturer and the retailer will share in the cost of the ad.
Basic Co-op Plans
The 100% Plan
The manufacturer pays the total cost of the retailer’s ad. The money comes from the retailer’s co-op accrual funds, which are generally based on a percentage of net purchases.
For example: Apple computer Inc. offers a 100% plan based on a 5% allowance of the net purchases of computer products. Merlyn Computer Store has purchased $40,000 of Apple products, which would earn an accrual of $2,000 (5% of $40,000). If Merlyn runs one $2,000 ad, Apple will reimburse for it, but the accrual fund will be totally depleted. On the other hand, if Merlyn runs a $1,000 ad, it will still be paid 100% by apple, but there will be another $1,000 to spend on a second ad.
The Shared Plan
The manufacturer and the retailer each pay a portion of the ad cost. The ratio is decided upon by the manufacturer and could be 50/50, 75/25 or any other predetermined arrangement.
For example: John Deere Power Equipment offers to pay 50% of a retailer’s ad cost, based on an allowance of 3% of net purchases. Since Greenwood Lawn & Garden has bought $10,000 of mowers, its accrual amount of $300. If Greenwood runs a $600 ad, John Deere will pay $300 (50% of the ad cost). If Greenwood runs a $1,000 ad, John Deere will still pay only $300 because the manufacturer’s share can never exceed the amount of the retailer’s accrual.
The Unlimited Plan or Open-End Plan
This plan is often offered on seasonal items or for specific promotions, though some manufacturers offer it as their standard plan. Accrual is not tied to purchases in this plan; instead the manufacturer contributes a stated percentage of the cost of each ad. In some cases, this percentage is paid regardless of cost or frequency, whereas in other cases, the total accrual may be limited to a given number of ads or a maximum dollar amount.
The Fixed Plan or Bonus Plan
This type of plan is usually offered for a specific product and time period. Bonus plans are usually in addition to a manufacturer’s regular co-op plan.
The Negotiable Plan (informal or arranged)
There may be no specific manufacturer co-op program, however, funds are provided on an individual needs basis. Funds are provided only if the dealer asks for them. Also knows as “The squeaky wheel gets the grease.”
For example: Dealer purchases $60,000 of products and proposes a $1,200 ad budget. Manufacturer agrees to a shared cost of $600. Dealer pays $600 out of pocket for the ad cost.
Elements of Co-op
This is the amount of co-op money available for advertising. It may be based on a percentage of purchases or it may be a fixed amount. Before initiating an advertising program, the co-op department should always research the accrual.
Depending on the plan, the manufacturer’s share of the cost of advertising can range from 20% to 100% or more.
The rules set forth by the plan must be followed to qualify for co-op reimbursement. If the rules are not followed precisely, a claim may be rejected. Among the most common requirements are:
- Illustration of the product in the ad. It may also be mandatory to use the manufacturer’s ad slicks and/or certain copy.
- Logo. Use and size of the logo may be specified.
- Prior approval of the ad may be required before running.
- Competing products. A manufacturer may refuse to reimburse ads in which competing products appear. Competing products require prior approval from the manufacturer.
Term or Timing
This refers to the time period in which a co-op plan is in effect. Generally the term is the calendar year, or the manufacturer’s fiscal year. There are also plans of shorter duration with specified starting and stopping dates. Adherence to the term of the plan will prevent loss of co-op funds, since funds are unavailable to the retailer after the expiration date of the plan.
Request for reimbursement from the manufacturer or distributor, filed by the retailer. Each plan specifies information, which must be submitted for a claim to be processed. Commonly requested items include:
- Invoice showing date, size and rate for the ad
- Tear sheet
- Claim form
- Address where claim is to be sent for processing
Filing period. Most claims must be filed within 30, 60 or 90 days after an ad runs. Claims filed after this stated period would usually not be honored.
Frequently Asked Questions
What if I don’t know which vendors offer co-op?
We can research this for you. We’ll show you what products offer assistance, what the program requirements are and when you need to use the funds before they expire. We just need a lit bit of information about your top-selling brands on our co-op discovery form and authorization to get started.
What if I don’t know how much money I have to spend?
We can research this for you. We just need a little bit of information about you top-selling brands on our co-op discovery form and authorization to get started. With your cooperation we can research just how much has been set aside for your use.
What if I don’t like the ads I have to run to get reimbursed?
Many manufacturers allow you to alter their pre-approved ads to fit your needs, or we can build an ad around several different required elements. Also, by inserting co-op funded ads into your regular scheduled ad campaign, you are establishing more name recognition and increasing ad frequency, getting more bang for your buck. You still have complete control over your regular ad campaign.
How do I get reimbursed?
Our co-op department is there to help by making sure your ad schedule complies with program guidelines. We will also obtain approval for your ad in advance, and will provide you with an addressed claim packet. You mail the completed claim packet to the manufacturer or distributor for reimbursement.
How long does it take to get reimbursed?
Claim processing time varies for every manufacturer, but we can help minimize the turnaround time by providing you with a memo bill and a claim packet immediately, so you don’t have to wait for your regular statement to submit your claim for reimbursement.
Why do you need to have my customer numbers?
Please know that all information you provide to our co-op department is strictly confidential. The reason we ask for your customer numbers is so when we contact your manufacturer or distributor they have the best possible way to correctly identify your account information.