Co-op Advertising
 

 

 How can a small retailer or distributor maintain a high profile without spending lots of money? One answer is co-op advertising.

Co-op advertising is a cooperative advertising effort between suppliers and retailers—such as between a soda company and a convenience store that advertises the company’s products.

Both retailers and suppliers benefit: retailers because co-op advertising increases the amount of money they can spend on ads, and suppliers through increased local exposure and better sales.

Although each manufacturer or supplier that uses co-op advertising sets up its own individual program, all co-op programs run on the same basic premise. The retailer or distributor builds a fund (called accrual) based on the amount of purchases made from the supplier. Then, when the retailer or distributor places ads featuring that supplier’s products, the supplier reimburses all or part of the cost of the ad, up to the amount accrued.

To start using co-op advertising, begin by asking your suppliers what co-op programs they offer. Follow their rules carefully to be sure you get reimbursed. Some suppliers require that ads feature only their products, not any other supplier’s. Others simply ask that no competing products be included.

Though procedures may vary, there are three basic steps to filing a claim for reimbursement. First, show “proof of performance.” For print ads, this is just a copy of the ad exactly as it was printed. If you buy TV or radio ads, you’ll need a copy of the script with station affadavits of dates and times aired.

Next, document the cost of the advertising—usually with copies of applicable invoices from the publication or station where you ran the ad. Third, fill out and submit a claim form, which you can get from the supplier.

Other steps to make the most of co-op advertising:

 

Keep careful records of how much you’ve purchased from each supplier.
 

If you try something unusual, such as a sales video or a catalog, get prior approval from each vendor before proceeding.
 

If you’re preparing your own ads, work with an advertising professional to prepare an ad you think will appeal to the manufacturer. Keep in mind the image the manufacturer presents in its own ads.
 

Make sure your company’s name stands out in the ad. Your goal is not so much to sell the supplier’s product but to get customers into your store.
 

If there’s no established co-op program, pitch your ad campaign to the vendor anyway.
 

Expect vendors to help out. After all, you’re bringing them business. If your vendor doesn’t offer co-op money, look for someone who does.
 

Be sure to follow up. Money goes only to those who submit claims.

 

 Co-op-eration
By Sonya Castex, PPAI
Issue: 2004SEP

A lot can be achieved when you work and advertise together. Find out how co-op advertising can divide your advertising costs and multiply your successes.

Almost everyone in the promotional products industry has heard about co-op advertising, but do they use it? Surprisingly, the answer is no. “There are so many opportunities out there, so it’s hard to understand why more distributors aren’t taking advantage of them,” says Joel Schaffer, MAS, CEO of supplier Soundline (UPIC: SOUNDLN1). “Every manufacturer has some form of co-op advertising available.” But what exactly is this form of advertising that many believe is so important?

WHAT IS IT?
Co-op advertising occurs when ad costs are divided between two or more companies. Most people, however, only think of it as incentives offered by manufacturers to distributors or retailers to encourage advertising of particular products. It is also used for promotion—and that’s where promotional products can play an important role. “A retailer receives a certain percentage of the previous year’s sales from a supplier to advertise the supplier’s product. And if the money’s not spent, it’s lost,” says Schaffer. “Almost every manufacturer will allow a retailer to use that money for branded promotional products. There’s $50 billion in co-op money available, and half of it goes to waste!”

According to The Co-op Program Manual by Gerald B. Speen, MAS, and Dr. Dan S. Bagley III, CAS, some companies separate the promotional products co-op from their advertising co-op entirely. The types are endless, but many companies simply produce a catalog of products with a price list. They may even choose to subsidize the program by offering the items at a reduced price, or they may absorb some of the front-end cost. User acceptance of this type of program, however, will widely vary, depending on whether the dealer handles one or many brands on the producing policy of each sponsoring company.

In order to be a true co-op program, many believe the sponsoring company should have the following characteristics, but all of these will not apply in every case:
 

It wants to promote its name and identity and gain broad exposure to help promote sales of its products.
 

It wants its dealers to participate and assists in this effort, gaining benefits through increased sales as well.
 

It is willing to share the cost of the promotional products. In other words, there should be some co-op funds available—although this isn’t always the case.
 

It is willing to set up a program to make promotional products available to its dealers in reasonable quantities and at favorable prices.
 

It wants to control how its logo and name are used on promotional products and which products are used.

FORMS OF CO-OP PROGRAMS
The large number of variables involved in the construction of a co-op program makes it impossible to discuss each one. It is possible, however, to take a look at the most common, general forms of co-op programs.

Single Product
Probably the simplest form of co-op program is not really a co-op at all, but a form of blanket purchase without commitment or recourse. It is, however, a useful sales tool and, in most cases, is perfectly acceptable to suppliers. If a client uses a lot of a particular type of promotional product, you can set up a co-op purchase arrangement with the supplier to get favorable pricing and still allow small releases.

The Calendar Co-Op
In this type of program, the sponsoring company makes one or more calendars available to its dealers, resellers or other entities that in turn can be distributed to their clients, customers or others. The sponsoring company’s logo or other identity appears on the calendars along with the imprint of the user.

The Non-Stocking Co-Op
This approach is widely used as an entry-level approach to introducing a potential sponsor to the co-op concept. It requires no inventory and very little investment. As a result, a sponsoring company can offer a co-op program without the typical cost-sharing or financial obligations.

The Stocking Co-Op—Client Financed
An inventory of products bearing a generic company imprint is offered to the users. In most cases, the minimum purchase quantity is one, making it possible for people to use the program and try various products. In such programs, custom imprinted merchandise may also be offered on special orders, but this is not always allowed.

The Stocking Co-Op—Distributor Financed
The only difference between this type of program and one financed by the client is that, in this situation, the distributor must come up with the funds necessary to buy the inventory, produce the catalog and pay the start-up costs.

WHAT CAN CO-OP ADVERTISING DO FOR YOU?
Co-op advertising dollars are like money in the bank—they help expand retailers’ promotional budgets and allow them to increase the frequency of their advertising. “Ask your clients if they get co-op advertising money,” says Schaffer. “Ask from which companies the money comes and if they use 100 percent of their annual allowances. With a little research into who can share the cost of a promotional product, you’ll be on your way.”

And co-op advertising also works for promotional products suppliers, too. “It’s worked very well for us,” says Christine Bordonaro, marketing coordinator of supplier Charles River Apparel (UPIC: CRA). “It encourages our PPDs to increase their advertising of our products in everything from catalogs to advertisements, even billboards and radio ads. It’s great to be able to see where our product is being shown as well as the quality of promotional pieces in which we are being featured.”

Diane Johnson, president of New Age Concepts (UPIC: NEWAG965) even co-opted the $1,000 cost of her booth at The PPAI Expo 2003 with a client. “For a small company, that amount of money is huge, so we split it and shared the booth with one of our customers for $500. It was one of the best advertising venues we ever did!”

You should try to sell a co-op program to a company when:
 

The company is repeatedly buying the same product over and over.
 

Many operations within the company are buying the same products.
 

Several departments of the company are buying promotional products.
 

The company frequently sponsors community or employee events.
 

The company has a large internal sales force.
 

The company sells through dealers, distributors or wholesalers.
 

The company has many retail outlets.
 

The company has—or would like to have—an employee store.

Remember the following points when selling co-op programs:
 

Many clients do not understand them.
 

They can be set up in many ways, even with no cost to the client.
 

They can be set up to require a minimum effort by the client.
 

The term “co-op” can repel or turn people off because they think they will have to pay for the products.
 

They can be very profitable or big losers depending on how they are set up, so use caution.
 

Some clients can be so demanding that the program may not be worth doing.
 

Co-ops can be set up to satisfy almost any set of client requirements, but it may not be worth it.

Sonya Castex is an associate editor for PPB.

Learn more about co-op advertising. The Co-op Program Manual, Module 3 of The Program Selling Series, is available in the PPAI Bookstore for $25 for PPAI members and $35 for nonmembers. E-mail Bookstore@ppa.org or call June Peters at 972-258-3087. Ask for item number PS4013.

Find out which companies use co-op advertising in the two-volume Co-Op Advertising Programs Sourcebook™, also available in the PPAI Bookstore for $550 for PPAI members and $675 for nonmembers. Ask for item number PS4040 .
____________________________________________________________________

A DISTRIBUTOR’S POINT OF VIEW
By Dave Oglesby

As businesses and corporations vary in size and promotional advertising needs, so do their co-op programs. I manage several of Bankers Advertising Company’s (UPIC: BACADV) larger corporate co-op programs. With some, the marketing is done solely through a printed piece. Others market through the company’s Web site or have an online company store. And some use a combination of both forms.

Some distributors offer only “cookie cutter” types of co-op program to clients. These types offer the same promotional products selection for all programs, and the item’s logo is the only thing that changes. No two companies are alike, however, and each opportunity to develop a co-op program should not be created to fit into a mold. Each should be treated with a fresh approach that allows the client to stand out above the competition. If a distributor develops a dull program, end users may associate this same dullness with the customer’s product.

Several obstacles and challenges can arise in the development and maintenance of co-op programs. These can be avoided, however, through experience and careful planning. Four key elements must be addressed with the potential clients to avoid unnecessary complications and pitfalls when developing and maintaining a co-op program.

1. Do your homework.
First, when analyzing the opportunity to develop a co-op program with a client, it is vital to do your homework because each is unique. And what may be right for one may not be appropriate for another. Study the customer’s Web site. A wealth of knowledge—such as the names of branch heads—can often be located. Ask questions, questions and more questions. When the opportunity to institute a new program arises, it’s easy to get excited and perhaps a bit overexcited. It’s critical, however, to always stay levelheaded and focused on the program options that will best suit the client. Although unseen obstacles will pop up, gathering as much knowledge as you can before making your proposal will help you avoid many pitfalls.

2. Determine the client’s target audience.
Second, determine the client’s target audience, which can go by many names such as salesperson, dealer, branch, agent, distributor, local office, etc. And be sure to look deep enough to determine if the dealer, for example, is the real audience. Are the dealers buying the products for themselves, or are they gifting these items to their clients? If so, who are those clients? This becomes most important when selecting program items. What ones will be most appreciated and valued by the end user? It may be different from what is valued by the corporate office and/or the dealer.

3. Decide how many products to offer.
Next, decide the number products to offer in a program for a given client, but this can be a challenge. More often than not, a client wishes to have a large number of products in the program because it helps the client appear larger in the market. Selection is difficult due to the tremendous number of promotional products available that would be wonderful to offer in a given program. The danger is that offering too large a selection for a given program can lead to program overkill. Even though there is no set rule of thumb regarding the number of products a program should carry in relation to the number of potential buyers, both the salesperson and client must keep perspective during product selection as to what the client and its audience can support. This is stressed even greater when some or all of the products are being considered for warehousing and fulfillment.

4. Create a written program agreement.
And finally, a written program agreement must be established between the distributor and corporate office. Depending on the client’s situation, the agreement, or contract, can vary in detail. We have found that at least a two-year commitment to a program from the corporate client is of most benefit to all parties. Commitment from corporate may include marketing costs associated with brochure development, mailings, online store development, inventory purchase at the beginning or at the end of the two-year program, etc. This agreement protects both parties from the other defaulting on program obligations for one reason or another.