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Management Perspectives: Optimizing Co-op Ad Dollars

Jun 1, 2006 12:00 PM, By Don Kreski

As traditional co-op funds shrink, big money is still available.


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A mailer created using Crestron’s co-op funds.

“It's a lot trickier than what people realize,” says Jerry Gale, vice president of marketing for Columbus, Md.-based SPL Integrated Systems, referring to marketing monies AV equipment manufacturers offer to their dealers. “You have co-op funds, marketing development funds, giveaways, free training programs, demo programs, product discounts, and hidden funds controlled by the territory manager. Some of them are only available if you ask for them.”

Managing co-op funds is “a pain in the neck” according to Gale, but it can be quite rewarding for your dealership. When I was director of marketing at two Chicago AV dealers, we pulled in just less than 1 percent of our gross revenue in co-op and other funds targeted specifically to our marketing programs. We used those funds — well over $100,000 at each firm — to double the marketing money we were able to spend. “I think those numbers are high today,” says Gale, “but we are still able to add about 25 percent to our marketing budget.”

THE NEED TO STAY FLEXIBLE

The first thing to realize if you're managing a dealership's marketing program is that there's a lot more money available than what is obvious.

John Fuchs, senior vice president at InfoComm Information Resources, says “While most manufacturers are eliminating their co-op programs, what they're eliminating is the global use and application of co-op. They still do a lot of dealer funding.” For example, Dan Gibson, vice president of video accessory manufacturer TV One, reports that the firm does not have a formal co-op program, but it tries to encourage its larger dealers to include its products in catalogs, shows, and direct mail pieces. To do so, TV One offers the dealers two to three percent of their gross sales in marketing funds. I asked Gibson what he would do if a new or smaller dealer came in with a good promotional idea. “If everything checks out in regards to the idea and the market they address, we will do that, as well,” he says.

Such flexibility can help manufacturers by allowing them to fund creative and aggressive dealers who bring in good ideas. “Honestly,” says Fuchs, “it's much more meaningful and purposeful than what they did in the past. Today if a dealer wants to access funds from a manufacturer, they actually have to go to them with a true business plan with some valuable reason why they should let go of some funds.”

Assuming you're an aggressive dealer and you have marketing ideas you want funded, then the obvious message is to go after these monies.

NEGOTIATING OBSTACLES

This is not to say you should go after every dollar offered, or that it's even possible to do so.

Gina Lauria, director of marketing at Crestron, says, “When I was at a dealership, it seemed that a lot of manufacturers threw up a lot of roadblocks, and it just wasn't worth the effort.”

Gale agrees, saying, “The problem is that these programs are all different. They all have different rules and different procedures. When faced with the difficulties of getting reimbursed, a lot of dealers will say it's easiest not to worry about it or just work it with one or two vendors.”

The usual sequence for securing funds is pre-approval, performance, and claim. For any fund, it helps to be organized or to delegate to someone who is. When you make your claim, you generally need to include a copy of your pre-approval; illustration of the activity (which may be a copy of the printed piece, a tear sheet of an ad, or a photo of your trade show booth); and copies of all the invoices you paid to make the activity happen. It helps to follow up your claims periodically with some vendors, to make sure they pay, and you absolutely need to keep copies of all the supporting paperwork.

The rules and regulations, according to Kristin Wuest, channel marketing manager at NEC Visual Systems, are there to help dealers who are not necessarily experts in marketing. “We put the guidelines in place because we've had some people spend the money where we don't see any ROI. We want to stick with trade shows, ad placements, and other basic turnkey marketing materials.”

Pre-approval, whether required or not, can help cut through some of the confusion inherent in using multiple funds, and it offers a means to step outside the program standards. Tom Tyson, channel marketing specialist for NEC, says that he frequently approves ideas not included within the guidelines. “Some of our customers go outside the box and do pretty creative things and we're open to that.”

Lauria says Crestron has made major changes to its program over the last two years. “I think we were finding that a lot of the dealers left a lot of money on the table, and a lot of people were leaving the advertising portion on the table, putting in huge orders for shirts and pens and coffee cups.” Crestron, according to Lauria, reacted by simplifying the claim process. “We want to give our dealers some incentive to purchase from Crestron and then use that money to grow their business.”

WHERE THE FUNDS CAN HELP

No matter how a particular program is structured, you can use these funds for a wide variety of activities, including your own customer shows, mail and email campaigns, photographs of customer installations, booths at trade shows, advertising, and giveaways. It gets a little stickier if you're trying to fund your website, because some vendors don't want to pay for something they feel you will do anyway. But selling them some special feature on the site, such as a banner ad, is often easier.

Selling a marketing idea to a vendor is like selling anything else. You need, first of all, an idea that will create value for both parties — that is, an activity that truly will help move that vendor's products. If you have that, most vendors will bend the rules to fund your idea. If you don't — if you're trying to get them to pay for something that may help you, but not them — then they're just not going to buy. As with other customers, if you're consistent, trustworthy, and if you follow through on your promises, you'll find ongoing funding requests a lot easier to secure than if you're not.

You may need to be flexible in how you take your payment. “When I had my dealership,” says Fuchs, “I found that, even with manufacturers who didn't have co-op, I could always get some specific discount on a specific purchase if I had a specific plan. And really, what did I care if I got a check or a 15 percent discount off of an invoice?”

Fuchs says flexibility and proactivity are still the keys today. “Come up with a valuable plan where both parties win and guess what? They'll be happy to help with the cost of it.”



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