Solving the Co-op Advertising Puzzle with Simple Math & Creativity
April 11, 2017 | Contributed by: Tim Brennan
How much co-op money is available in my market? What level of opportunity do I have with my local dealer of Brand X? What kind of revenue could I generate by focusing on Category Y? I get asked these questions fairly often and most can be answered pretty easily with basic math.
In fact, co-op advertising is all math-based. Generally these programs all provide a small percentage of purchases as the base funding mechanism for the dealer brand promotion budget. This percentage can vary from less than 1% to over 10% of the wholesale purchases dealers make for the brand inventory involved. And each manufacturer’s percentage will be a little different, which can become vexing for the local dealer trying to keep track of the monies involved.
Some manufacturers will take the entirety of the previous year’s business and apply the co-op accrual percentage to give the dealer a full budget for the plan’s performance period and these generally make it a bit easier for the players involved. This allocation can be planned for and included in a dealer’s advertising budget cycle as they work out their plan for the year.
Many other manufacturers however will base their co-op allotment on current year’s business, which adds to the co-op pool with every product order. These plans create a moving target for the dealer to try to keep up with and often lead to underutilized co-op budgets or completely untapped resources.
This is where the math comes in.
With any approach to a local brand dealer, you should bring whatever details are available for their brand’s co-op offering. When the plan lists that the co-op accrual varies or the plan is specially arranged through the manufacturer rep, simply work from a base average of 2-3% of wholesale volume.
If the dealer is unaware of how much co-op money might be available, just ask the very simple question of “about how much business have you done in Brand X this year?” With whatever ballpark number they give you, use the calculator on your phone and multiply it by the accrual percentage to get your answer. This will give you an idea of whether this is something to pursue and if so, connect with the manufacturer directly or their sales rep to nail down the exact figure.
Doing this you’ll soon figure out that your dealer needs to be moving more than $10,000 in product volume to make a dent in any decent advertising (i.e., $10,000 x 2% = $200 co-op). With some stores, you’ll find that $200 can definitely transform what they might be able to do with you.
Once you’ve used the left-brained analytics to sketch out the possible budget, add in your right-brained creativity to apply whatever ad materials you have for the brand to show the dealer how they could apply that to their advertising schedule. Co-op should rarely be the entirety of the advertiser’s spend with you, but with the right dealer and brands, this should really increase the exposure you can provide.
The LSA offers a variety of products and services intended to make co-op advertising a simple, revenue-driving strategy for your local media and marketing company. Learn more.