Locally owned, hardware retailers saw a 3-10% increase in sales in 2017, with much of the credit due to utilizing available co op funding. These retailers purchase from hundreds of manufacturers that offer formal co-op funding, based on sales volume. Typically, the earned funding is based on the prior year's sales from their hardware distributor or wholesaler, like True Value or Ace Hardware.
With hundreds of brands represented, the funding process is streamlined by offering the retailer co-op funding based on total sales of all products in one lump sum, rather than breaking out individual products or manufacturers. This approach affords the retailer the freedom to feature any warehouse product in ads, eliminating the brand exclusivity generally required in co-op fund usage. Retailers can able capitalize on the co-op funding opportunities with products they purchase directly from the manufacturer, with products like barbeque grilles, hardscapes, lawn and garden power equipment, as well as fixed co-op plans for items like hand tools.
"MDF only come to those who ask."
Jeremy Stout, Marketing Director of LaValley's Middleton Building Supplies in Rutland, Vermont, consultants co-op funding is an integral part of both maintaining and increasing his marketing budget annually. Co-op funds comprise approximately 30% of LaValley's annual marketing budget across 10 retail hardware stores, several modular home companies, and their pine lumber mill. The largest co-op takeaway for Stout is that MDF (manufacturer development funds, or those funds over and above the formal co-op funds) only come to those who ask. He is constantly negotiating with manufacturer sales representatives for additional funding.
The key in successfully accessing these funds? Be prepared, have a marketing plan with a specific need and use for the additional funding. Stout finds that often times that lines are blurred on what co-op funding is. With many manufacturers using automatic rebates as a method of co-op reimbursements, those funds do not often make it back to the marketing bottom line. With all of their successes, LaValley's still estimates that 30 to 40% of available funding goes unused. Often, the accruals are simply not enough to offset the investment in a marketing campaign or they are simply unaware of the available funds. Stout focuses on brands with formal co-op programs with high margin, turn, or sales, in product categories such as Windows, Doors, Roofing, Decking, and Cabinetry.
Big Country's True Value owner, Adam Broughton, saw double-digit growth in 2017 sales, with co-op funding making up 35% of his overall annual marketing budget. Funds are primarily used for radio, television, inserts and direct mail. With the addition of Broughton's son to the business, they are now exploring digital marketing opportunities through social media marketing. True Value funds combine the bulk of their found co-op dollars with assistance from True Value using the print insert program 12 times a year. Direct marketing to True Value Rewards customers is incredibly effective for Broughton. With the rural location, Big Country has found its marketing niche by doing their own voiceover work on radio and television, and focusing on campaigns that feature brand-compliant advertising with a "Why Not the Big Box" message. Broughton carries an extensive line of outdoor power equipment, featuring the Cub Cadet line of mowers and tractors, with marketing support from the brand. Big Country has become the leading dealer in the region, and Broughton credits much of this success to their co-op marketing campaigns spread across direct mail, inserts, radio and television buys.
The co-op success cycle
Bottom line: co-op funds are an integral part of expanding marketing budgets, leading to increased sales. With manufacture co-op funds, hardware retailers have accomplished several goals. First, by having brand-compliant advertising materials, the retailer's local message marries the brand's national advertising message's look, fit and feel. Second, by advertising more with the support of co-op funding, the retailer has become part of the "Co-op Success Cycle". If you advertise more, you increase store traffic. Increased store traffic leads to increased sales. Increased sales lead to increased purchasing from the manufacturer, which then results in more co-op funding for more advertising!
Now is the time to reach out to your hardware retailers and talk about a strategic marketing plan that utilizes co-op funds, based on prior year's sales for their 2018 marketing. Spring is here and hardware retailers will be using those funds to offset the marketing investment with advertisements featuring Outdoor Power Equipment, Exterior Paint, Decking, Garden Tools and Accessories, Landscaping Materials, and more. Drop in on new prospects and close using the co-op value proposition. Schedule appointments with existing clients and double last year's sales by ensuring your customer is aware of all of the co-opportunities available to them.
We often meet with retailers and hear the reluctance, "We use all of our co-op funding." In my experience that is true, you do use all of the co-op funding-that you know about. Often, there are fund opportunities that have gone unexplored because the seller simply did not know the funding opportunity exhausted. By working with a media that has a full time Co-op Department, they will be able to explore all of the opportunities available and be able to share that information with the retailer. Additional accruals can be found with calls made directly to the manufacturer's co-op administrators. Content can be accessed, manufacturer pre-approvals can be obtained, and the administrators can assist with making sure the retailer has the appropriate documentation to claim reimbursements, like proof of performance, proof of payment, and any other required claim forms. With as many as 67% of manufacturers now accepting e-claims, filing a co-op claim can be as simple as attaching the document pdf and sending a single email.
The co-op opportunity is massive. Seize the dollars!